Senior life, guaranteed life, funeral insurance and burial policies all mean essentially the same thing. Each is a type of whole life insurance that covers end-of-life expenses. Investing in senior life insurance isn’t the same as investing in traditional whole life insurance. Senior life insurance plans work according to a different set of rules and offer different benefits.
Your family can expect to pay about $6,600 for a traditional funeral according to the most recent data from the National Funeral Directors Association. Senior life insurance offers individuals from about 45 years of age an option to purchase insurance with a face value of about $10,000 to $30,000 for the purpose of paying funeral costs, hospitals bills and other end-of-life expenses. Although insurers may request a copy of an applicant’s medical records, senior life insurance most often offers guaranteed acceptance as it doesn’t require a health exam as part of the application process.
Senior life insurance has guaranteed premiums that make it a low investment risk. Because it’s a form of whole life insurance, it also has cash value that builds over time, but the low face value of the policy means its cash value is minimal. This leads many to purchase a senior life policy not for the benefits it provides personally but rather for the benefits it provides family members. Senior life pays out quickly and can ease the financial burden your family may experience when paying for your funeral and other final expenses before your estate is settled.
Family members don’t always receive the full face value of the policy. This happens because senior life insurance has a waiting period that applies to anyone not in excellent health at the time the application is submitted. Depending on the current health status of the applicant, there can be a graded waiting period of 24 months to 36 months during which time the payout slowly increases until it reaches its full face value. Very ill persons may not even technically qualify for senior life, but instead may be offered a guaranteed issue policy. Guaranteed issue policies function similar to senior life insurance but have a full waiting period of up to 36 months.
Most senior life insurance policies immediately pay the full face value if you die due to injuries received in an accident, regardless of whether you qualify for full face value payment or are subject to a waiting period. If you should die before a graded or full waiting period ends, most insurers will return to your family all monthly premium payments you paid. Some insurers may also add and pay any accrued interest your payments gained during the waiting period.
Byron Udell, CEO and co-founder of AccuQuote.com, said in a 2011 Bankrate.com article that because of the ease of qualifying, burial insurance can cost "as much as 20 times more than a fully underwritten term life policy.” For example, where a person 50 years of age might pay $3 for each $1,000 worth of coverage for a 20-year term life policy, or $150 a year for $50,000 worth of coverage, the same person could pay as much as $20 or $30 per $1,000 for a senior life, or $100 to $150 a year for $5,000 in coverage. Because of its high cost, Udell doesn’t recommend senior life insurance to financially sound investors.
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