How to get Life Insurance when you have a Major Illness
How do you secure life insurance when you have cancer? What about diabetes, a heart condition, or you have had a stroke? In working with our many senior clients in Indiana, this is something we come across every day. In our world of incredible medicine, people are living longer. They are overcoming horrible illnesses that, in the past, would have ended their lives in a matter of weeks or months. On the other side of this equation, our population is living longer with these illnesses.
For the concerned senior, who is building life insurance into their retirement plan, this poses a common problem. The cost of final expenses is not going down. In fact, the cost of funeral arrangements themselves is one of the fastest-increasing costs that we face today. According to the Consumer Federal Trade Commission the cost of an average funeral ranges between $7,000 and $10,000. This does not even factor in the remainder of expenses that a spouse or children may need to contend with after a loved one passes away.
The list of final expenses is very different from person to person, but some of them we all have in common. Think of just the normal things we pay for on a monthly basis.
Mortgage or rent
Medical bills
Insurance coverage
Groceries
Debt payments, such as loans or credit cards
Gas or other travel costs
Prescription drugs
The list goes on. Now, for seniors living on a fixed income these expenses do not go away just because one half of a married couple passes away. For that matter, many of these expenses remain even after both spouses are gone, leaving their heirs to pay these costs. For example, a child may need to take on the mortgage payment while the parent's home is being sold. In short, the need for life insurance has not diminished in the world of the internet and cell phones. If anything, it is even more important than ever.
For someone who may be chronically ill, living with cancer, diabetes, heart, kidney, lung disorders, or other medical conditions, securing life insurance to help alleviate these expenses for their loved ones can seem like an impossible hill to climb. But, that is not the case. I can not tell you the number of times I have heard, "I'm not insurable," from a prospective client. Fortunately, that is rarely, if ever, the case. Even if you have a terminal condition, life insurance is available for you. There are, simply, some things that need to be understood about how to get it.
First, anyone beginning the search for life insurance coverage has all of the tools at their fingertips on the internet to learn everything they need to know. However, making sense of it on your own can take a great deal of time. Having a licensed professional research your options for you can save a great deal of time and help you to select the right type of insurance to use. Additionally, they may understand more about how individual companies underwrite for various health risks or lifestyle risks, and have relationships with those companies that can ensure the process goes more smoothly or your case is issued without the need for further information or interviews. Life insurance comes in dozens of different variations, but three basic forms. They are:
Term Life
Whole Life
Universal Life
For the purposes of obtaining life insurance with a major illness, though, we are going to focus on whole life. This is because whole life is the quickest, and most flexible to obtain when the insured person has a major illness. There are a few things you need to know about any whole life policy:
It is permanent. As long as the premiums are paid, it will stay active.
If the premiums are not paid, it can be converted into a paid-up policy with a reduced benefit, or surrendered for its accumulated value. Some whole life policies can be converted into extended term insurance, in which the policy's cash value pays the premiums for a certain period.
Whole life has a level premium, meaning it will not increase over time, or because you got older.
When insuring someone with a serious illness or health condition, whole life is (usually) the go-to tool. This is where we need to understand that there will be limitations on the death benefit payout of the policy. Most serious health complications will require a life insurance policy with a graded death benefit. The graded benefit has a two-year waiting period on the full face amount (payout) of the policy. This means that the benefit will be lower in the first two years, and then become fully available after this period.
For example:
Full death benefit: $10,000
Year one benefit: Equal to one year of premiums paid + 10%
Year two benefit: Equal to two years of premiums paid + 20%
Year 3 and beyond: Full benefits
In every case, though, the policy will pay out more than was put into it. This way, even if the insured passes away in the first two years of the policy, the beneficiaries will receive more than was paid toward the policy. When it comes time to choose your coverage, you will have a few different options.
Graded Death Benefit
Modified Death Benefit
Guaranteed Issue
If your health condition is terminal or very complicated, a guaranteed issue policy may be the direction to go. However, a knowledgeable advisor will be able to assist you in knowing which option will be the most beneficial for your health condition. In many cases, we have seen clients take out policies with graded benefit periods when it was not necessary to do so. These folks could have easily qualified for policies with immediate benefits, but they simply weren't aware of all the options available.
Hopefully, this guide will give you some of the knowledge you'll need to make an informed decision about selecting your coverage. The overall point is that, no matter what your health condition, there are options available for you to help protect your family from financial hardship when you are no longer with them. If you need further information, reach out to us and ask. It is what we are here for.
