In this podcast I’m going to be discussing avoid these 5 worst burial insurance policies. Number one, in our opinion, anyway, is those pre need funeral insurance plans. Now those are the ones that funeral homes often sell you. And there’s two types of policies that they will typically try to sell you. One is a true pre need, where you are basically paying in advance.
And if you’re old enough to remember layaway plans, that’s like, in the old days, when you bought something and didn’t didn’t have money, you could like say, hey, I want this television, and you put some money down and they take it and they put it back in the warehouse and put it on the shelf. And then you come in and make payments on it. And you keep making payments until it’s paid off. And when you make that last payment, you’re able to take the television home and finally enjoy, watch some TV. But nowadays, we have credit cards. And as we know, most of America is in debt from credit cards.
So I think probably the old layaway plan was a better way to go. But not necessarily with pre need funeral funeral insurance. Because what that means is, if you if a burial costs $10,000, today, you would have to like pay $10,000 upfront all in one lump sum, to have total protection that would cover you know and protect your family and loved ones and children from the very first day.
The challenge is, is most people are so busy thinking about life, they don’t think about death until it’s too late. And then they don’t have $10,000. To do that. To be honest, that’s why people look at the the insurance that we help people with, because they don’t have that total total big chunk of change. But what that means is the funeral home would have to divide that $10,000 over a specific period of time, and you’ve got to make these payments every single month until it’s paid off. And that’s just difficult for a lot of people number one because they can try to condense that time period.
So it’s very expensive. Or the kind of the biggest disadvantage is, let’s say they want you to pay $100 a month, and you die one month later, well, you’ve only put $100 into the plan into the pre need. And the funeral is going to cost $10,000. So your family is going to be responsible for the difference the other $9,900. So pre need funeral insurance is not first day coverage.
You know, you just got to kind of hope and pray that you don’t die anytime soon. And then the other type of policy that you’ll see offered at funeral homes is actually graded to your waiting period plans. And it’s actually a life insurance product. But you know, the people down at the funeral home, their specialty is Funeral Home stuff, not insurance stuff, not underwriting, not getting people approved for first day coverage.
So what they do is they sell plants that ask no health questions, and you might go, oh, that’s exactly what I’m looking for. I don’t want to answer any health questions. Well, that’s not true. You do want to answer health questions, unless you’re just in absolute, terrible health. Because when you answer health questions, you get a better policy at lower pricing. And that lower pricing is so important. Because if you can get a policy for $40 a month, instead of $70 a month you’ve saved, what $30 A month. So it’s $360 a year that you will have saved after 10 years you will have saved $3,600 So it’s really important to have somebody help you get first day coverage.
That’s what we specialize in it funeral funds in America first day coverage or benefits. We don’t even we don’t even offer or help people with two year waiting period plans. So you never worry about us selling you one of those. But yeah, the reason is, is the underwriting is very tricky. It’s, you know, for the average person, it’s very difficult to understand all the different insurance companies and what specifically you qualify for what medications are okay, what medications are not okay.
You know, if you’ve had an illness, how long has it been since that illness that you can actually get approved for first day coverage? And funeral home people just don’t know that. So they just get the policies that don’t ask any health questions, but they’re not going to pay out for a full two years. And you know, lordy Doherty, we just don’t know what’s going to happen five minutes from now much less two years ago, two years from now, right.
So, yeah, we just recommend you avoid those, if you’ve got $10,000, just sitting in your bank account, and you can just pay one lump sum for your pre need funeral insurance, that would be a viable option, we’ve got nothing negative to say about that, the only thing you have to watch about that is, I guess I do have something negative to say about that.
The only thing you gotta watch about that is if it’s just an individual funeral home, what happens if they go out of business? What happens if the company or the bank or wherever they’re investing your $10,000, in what happens if they lose the money, or they’re not liquid, or they go out of business, or they make bad investments, and it’s not enough to pay for So, but some really serious concerns. And I guess that’s the one thing about the life insurance industry, it’s so regulated, that, you know, and we choose, we choose plans from companies that are in business for 6080 100 plus years.
So really solid companies. And get I mean, you do occasionally read in the newspaper, where a funeral home took people’s money, and they made bad investments, or it was embezzled or something like that. And now people are left out on the hook. So the insurance companies are really nice, because there’s so many regulations to prevent that.
The number two worst burial insurance policy is accidental death policies. So what that means is, it would only pay out if you died of an accidental death, like a car accident, slip trip, fall something catastrophic. It won’t pay, if you had a heart attack, or a stroke, or a brain aneurysm, or you had cancer or anything like that.
So accidental pop death policies, they’re nice for often for younger people, just in case, the worst happens, you know, like a truck driver, accidental death policies are great, but they should be in addition to a guaranteed payout policy to. So they’re very affordable, the cost is super low on them. The disadvantage of them is as we get older, is a lot of those accidental death policies, and at age 60. So if you’re older than 60, they’re not going to covered, there’s one company out there that goes up to 70.
But yeah, just as we get older, the real risk is not of us dying of an accident, but have, you know, some sort of medical reason. And then the other thing is, you know, some of the plants out there, they’ve got a specific period of time, you have to die from the accident in. So let’s say, You slipped in, you fell, your head fell on your head, and you had some brain injury, that you didn’t die until 120 days from now, there’s policies out there that you have to die in the first 90 days. And there’s also policies out there that if you die within the first 180 days, it would be okay. And it would pay out.
But then then there’s kind of that whole definition, did you die of the the original trip or fall that you banged your head? Or did you die from things that resulted from medical care in the next 180 days? So accidental death policies, you know, great for the right demographic, if you’ve got the extra money to do it, often for people in hazardous jobs, or hazardous? You know, they do hazardous things or, you know, they’re just like truck drivers and stuff like that, that are exposed to a lot of risk.
So though they might be good, they’re the fifth worst type of burial insurance policy to avoid is guaranteed issue policy. We talked about this a little bit in pre need. But yeah, those policies with two year waiting periods.
So as I mentioned, you want to answer health questions. Most people qualify for first day coverage. Most people do not qualify for all companies that offer first day coverage. And the reason is, is most people have some very unique health issues. So let’s say that you had had a heart problem and you had a stent implanted 20 months ago, with most insurance companies, that would not be a good thing.
You would have to default to one of our first day benefit plans or a two year waiting period plan. But if that stent were placed 25 months ago, that would be okay because most of the insurance companies just asked about heart problems or surgeries or heart surgeries or circulation. surgeries in the last 24 months with our first day coverage plans, high blood pressure, cholesterol, diabetes, all of those are non issues. First day covers kind of the normal stuff that we get as we get older, you’re going to qualify for first day coverage. If you’re on medications, in most cases, it’s fine.
The insurance companies actually want you to be on medications, because medications extend life, if you’ve got high blood pressure, and you don’t take your high blood pressure medication, it’s a silent killer, you will die sooner than later.
Statistically, if you’re not taking your medication, so the insurance companies like you taking medications, really, the only reason you wouldn’t qualify for first day coverage or benefits is if you waited too long, and you had some significant health issues, like you had a terminal illness, and you’re going to pass away in the next 12 months, or you had dementia or you’re on dialysis, or you’re in a hospital or you’re in a nursing home.
So in those cases, it’s going to be difficult to get first day coverage. So always get this insurance before you need it. The worst time to start shopping for insurance is like oh, yeah, I had a heart attack last week, I better get this insurance. Now, that’s going to be that’s going to be a tough challenge.
The fifth worst burial insurance policy to avoid is modified whole life, hoochie mama, these policies here, you got to watch out for these? Well, generally, what you’ll see is there’s two types of life insurance agents out there, there is captive agents where they work for one company only and non captive agents, which that’s what I would be at funeral funds of America because I work with and represent multiple different insurance companies.
Now when I say represent, it doesn’t mean I work for them, because I actually work for you. I’m trying to get you the best and lowest pricing. And I just go and it’s kind of like a bow and arrow, I’ve got a quiver with different arrows in it. And those arrows are different insurance policy, different insurance companies. And I just choose which one’s best for you, that’s going to get you the best coverage for state coverage and lowest pricing. What you’ll see with captive agents, they can only offer one policy their own, right. So you don’t have a lot of flexibility.
So if you have a health issue, that doesn’t meet their requirements for first day coverage, they will often be forced to put you into what’s called a modified whole life insurance plan. And what that means in many cases, is it’s going to pay out over a period of years, so generally three years. So that would be a lot of cases that would be they would pay out 30%. If you dive in died of any reason, in the first year, they would pay out 70% In with the second year. And then after the third year, they would finally pay out 100%. So in this case, in this specific example, that’s a three year waiting period plan.
Now you might go wow, I don’t plan on dying anytime soon, well, you’re only getting offered this plan because you got some significant health issues. And the other thing is, in so many cases, the premiums on a modified whole life insurance plan are punishing, they are so much higher. It’s almost as if the insurance company says Your health is so bad, I don’t want your business. But if we’re going to do your business, we’re going to make it worth our while and we’re going to jack the prices up.
So, you know, if in that case, why would you do that? Why would you not just go with a two year waiting period plan. I mean, it’s true, you’re gonna get 30% and 70%. But financially, it’s so much more expensive. We do, we’ll have one option, where in most cases, we can get 50% coverage in that first year. And then after the second year, it’s got 100% coverage. So that is massively better than a 37 year 103 year waiting period plan and the pricings a lot lower, but we always, always, always go for first day coverage or benefits. And that’s why we work with so many different insurance companies. So we can work with you to get you the lowest pricing and the best coverage.
The fifth type of worst burial insurance policy to avoid is term life insurance. Now, term life insurance is a good option for younger people. And you know, a good example is a young couple or middle aged couple just bought a house and they got to you know $250,000 mortgage and they put $50,000 down and they got to $200,000 outstanding, it would make reasonable sense if they had a 20 year mortgage to get a $20,000 policy for $200,000 on each of them. And that way, if either one of them passed away, the the home would be paid for.
And also, what it does is it’s a $200,000 policy for under $200,000 mortgage, but over that 20 years that that that mortgage is going to be paid down. So let’s say, you know, 10 years from now, it’s paid down halfway. So they paid off 100,000, but still owe 100,000, they’ve still got a $200,000 term life insurance policy. So if something happened, they could pay the mortgage off that $100,000 That’s left and have another $100,000 in a reserve emergency fund to replace income or pay medical bills or anything like that. works really great for that.
Now, here’s the challenge, when we’re talking about people that are older, most of those term life insurance policies are going to end at age 80. So if you were, if you were age 65, you couldn’t get a 20 year policy, because that would put you up to age 85, you’d be restricted to a 50 or a 15 year plan. The other challenge is that when we’re looking at this for burial, cremation, final expense insurance, is most of the companies out there are going to start at $100,000 coverage, what you don’t need $100,000 coverage for a burial or cremation.
The other challenge is Term Life Insurance underwriting is so much more stringent than whole life insurance for burial. So we can get so much more approved on a whole life plan for burial than we can for a term life insurance plan. So Term Life has some serious disadvantages. And then there’s the companies out there that do offer lower coverage amounts, so say up to $25,000. They’re what they’re going to do. And you see these advertised once in a while, you’ll see they’ll say, Hey, your first premium is only $1, big red flag, big red flag, that’s going to mean term life insurance.
And the challenge with those those plans also is their five year age band. And what that means is your prices are going to go up every five years, typically when your birthday ends with a one or a six. So you know, age 71, age 76, your prices going to go up. And those companies out there, they try to bait you in with a teaser rate, a teaser rate is that $1 It’s really meant to get your information so that they can get you in their marketing funnel and start calling you and trying to sell you insurance. And then after that one month, your premium goes up.
Now, the term life insurance will be less expensive than the whole life insurance initially. But as time goes on, your rate gets jacked up every five years. And what ends up happening is the premiums end up getting so expensive over time that people have to cancel the policy because they can’t afford it anymore. And therefore, it’s been nothing but profit to the insurance company. They keep all the money, you paid all that money, you didn’t die, thankfully. But you don’t get the benefit of keeping that insurance and having that in place for when you do pass away.
The other disadvantage is eventually those policies will end typically after age 80. And then the policy ends, the insurance company keeps all your money, it’s been all profit. And when you pass away, they’re not going to have to pay any death benefit at all. So we don’t recommend term life insurance. Why would you ever buy a temporary policy for a permanent need? And we know that we’re going to die some point that is a permanent need. So yeah, there’s just a lot of kind of, I don’t know kind of tricks out there. And there’s a certain amount of nuance understanding what’s going to be the best policy and what’s going to work best in your specific situation. So I hope this podcast has been helpful to you.
NOTE: Show notes are AI transcribed, so there may be some spelling or grammatical errors.