Final Expense Insurance Sales

As a Medicare agent working to build your book of business, you already know how cross-selling ancillary products can help you leverage your already existing client base and build year-round revenue opportunities. It also benefits your clients by helping to identify gaps in coverage that could leave them at risk financially.

For some of your clients, this financial risk could come in the form of funeral expenses. According to the National Funeral Directors Association, the median cost of a funeral in Texas is $7,912 for a traditional burial, or $5,890 for cremation. Final Expense Insurance can help cover these costs and give your clients the security and peace of mind knowing they will not burden their families with these expenses when they die.

What is Final Expense Insurance

Sometimes known as funeral or burial insurance, final expense insurance is a type of permanent life insurance policy intended to help pay the final expenses of the insured after they die. It is typically used to pay for funeral costs, hospital bills, or credit card debt, but there are no restrictions on how the money can be spent, unless the beneficiary of the policy is the funeral home. In this case the money would go directly to them to pay funeral expenses.

Final expense policies provide guaranteed coverage, meaning there is no medical exam like there is with most life insurance policies. Final expense insurance is more expensive than life insurance when compared on a dollar-for-dollar basis, but the lower coverage amount makes it more affordable. The premium stays the same for the life of the policy as long as the insured stays current with premium payments. The policy cannot be cancelled if health issues develop after the policy is issued. The application process is simpler and usually has a quick turnaround time.

There are two types of policies, and the application process differs for each one:

Guaranteed Issue – coverage under this policy is guaranteed without completing a health questionnaire or medical exam. The applicant cannot be turned down for coverage. Coverage amounts are usually lower than simplified issue policies and premiums are generally higher because the insurer is taking on unknown risks.
Simplified Issue – the applicant may need to fill out a brief health questionnaire. Applicants with serious health issues can be charged higher premiums or denied coverage. Simplified issue policies generally cost less than guaranteed issue policies and usually have a higher death benefit.

Policy details will vary depending on the insurance company, but most policies are available to those between the ages of 45 and 85. Monthly premiums average between $30-$70 per month. Other factors that can be used to determine premiums are:

Age – premiums tend to be higher for older applicants.
Gender – men typically pay a higher premium than women.
Amount of coverage/death benefit – a higher death benefit will result in a higher premium. Death benefits vary by insurer and policy, but usually range from $2,000 to $50,000.

Some policies accrue a cash value that allows the insured to borrow money from the policy before they die. If the loan is not paid back before their death, the death benefit payout will be decreased by the amount of the loan.

Most policies have a waiting period before coverage begins, usually one to three years. If the insured dies before the waiting period is up, the beneficiary will receive a refund on the premiums paid instead of the full death benefit.

Some insurers may offer riders on their final expense policies. Adding a rider will increase the monthly premium.

Accidental Health Benefit Rider – pays an additional benefit if the insured dies by accident within a certain time period.
Accelerated Death Benefit Rider – in the event the insured is diagnosed with a qualifying terminal illness, a partial or full death benefit can be paid in advance directly to the insured. This will reduce the amount the beneficiaries receive after the insured dies.

Which Clients are the Best Prospects for Final Expense Insurance

Final expense policies can be beneficial for certain clients, including those who already have life insurance. These potential prospects include:

Individuals who did not take out a life insurance policy when they were younger, and now find life insurance to be too expensive.
Individuals with serious health conditions who might be denied life insurance coverage based on the required medical exam or find the premiums unaffordable due to those health conditions.
Individuals who wish to supplement their already existing life insurance. A final expense policy can be a backup plan, especially for those with a term life insurance policy that might end before they die. Final expense policies usually pay out quickly and can provide quick cash on hand for burial expenses while waiting for a life insurance policy payout. A final expense policy can also be used to name a separate beneficiary not covered under a life insurance policy.

Commissions

Commissions are determined by the insurance company that issues the policy and the initial commission rate is usually a percentage of the annual premium paid by the policyholder in the first year. Agents earn residual commission income every year the policy renews.

Stay Compliant with CMS Guidelines for Cross-Selling

Remember to follow CMS rules whenever you are selling ancillary products to your clients. You cannot sell non-health related products, such as final expense insurance, at a Medicare meeting. You can let your clients know what other products you offer but you need to schedule a separate meeting if your client wants more information.