Dementia is a syndrome of a progressive nature caused by a variety of brain illnesses. It affects your memory, thinking, and ability to perform daily activities. Pre-existing conditions like Dementia can affect your chances of getting insurance. But it does not imply there is no way out. Here we have shared a few tips to find the best insurance for final expense for people with Dementia.
Know the Different Types of Policy Issue
The burial insurance policies fall into two categories. They are simplified issue policies and guaranteed issue policies.
Simplified Issue Policies – These policies are issued without any medical exams. However, the applicant has to answer specific medical questions asked by the consultant. While reviewing these policy applications, the insurance companies rely on prescription checks, and Medical Information Bureau reports. Some insurance companies use a combination of MIB reports and interviews. As per recent studies, 90% of final expense insurance policies are simplified issues.
Guaranteed Issue Policies – These policies are issued without the need for medical questions. There are certain age restrictions on such policy issuing. For example, the applicant should be aged 40 to 80 years. The coverage of these policies is capped at $25,000. Guaranteed issue policies may not distinguish between smokers and non-smokers. Simplified issue policies do.
Check What the Final Expense Insurance Policy Covers
Covering the funeral cost is the main reason for taking the final expense insurance policy. If the expenses of a funeral exceed $10,000, it is a significant concern for many people. But there are several other bills to be paid after the person passes away. Some expenses include:
- Medical bills
- Credit card bills
- Professional fees for managing the estate
- Household and other costs of living
- Cost of clearing out the household
You need to ensure the final expense policies cover all the costs mentioned above. If you ignore this, the decedent family has to bear an unnecessary financial burden.
How Do Insurers Pay Death Benefits?
The payment of death benefits relies on the type of insurance for the final expense policy.
- Level Benefits Policies
The level of benefits policy pays full death benefit from Day one. It does not matter how the person died – natural causes or an accident. The death benefit is the face amount of the policy. The approval of Level Benefit Policy depends on the answers to the medical questions.
If the applicant gives unfavorable answers to specific medical questions, the insurance company may disqualify the application. In some policies, you may even have to pay higher premiums or limit the amount of the coverage to get the application approved. Most Level Benefit policies are available for people aged between 18 and 85.
- Modified Benefit Policies
There are many types of modified benefit policies. One common thing between them is a different “restriction period.” In simple words, the death benefit is reduced for some time after the policy issue, generally 2 to 3 years.
The reduced death benefit applies to death due to natural causes during the restriction period. But, accidental death during the restriction period qualifies for full death benefits. These types of final expense policies can be a guaranteed issue or simplified issue.
- Graded Benefit Policies
This is one of the types of modified benefit policies. In this policy, the death benefit is reduced by a set percentage during the restriction period. Assume the graded benefit policy has a 30/70/100 death benefit payout, and the restriction period is two years from the date of policy issued. The death benefit amount is $10,000. In this case,
- If the insured person dies in an accident, the beneficiary will get the full death benefit of $10,000.
- If the insured person dies a natural death, the beneficiary will get 30% of the death benefit equivalent to $3,000.
- If the insured person does in the 2nd year of the policy, the beneficiary will get 70% of the death benefit equivalent to $7,000.
- After the restriction period mentioned in the policy document ends and the insured person dies due to natural causes, the beneficiary will get a full $10,000 as assured.
Return of Premium Policies
It is a simple final expense policy where the death benefit is the cumulative amount of insurance premiums paid plus interest. This death benefit rule is applicable during the restriction period. Let’s assume you have taken insurance that has a 10% simple 24-month ROP.
In this case, the death benefit payout would be 100% in an accidental death, even during the restriction period. But if the death occurs within two years after the policy is issued, the insurance company will only pay death benefit equivalent to cumulative premium paid plus interest. For example, the person had paid 5 installments of 100. In that case, the death benefit would be 500 + 50, resulting in $550.
These are some crucial aspects to look at while selecting a final expense policy for people with dementia. Now that you know the essential factors in burial insurance, start comparing quotes from different insurance companies.