Simplified issue whole life insurance

There are several types of simplified issue whole life products, including traditional, final expense/burial, and guaranteed issue. The product that is best for you depends on your age and health history.
Author: Brian Greenberg CEO of True Blue Life Insurance
Last updated: June 29, 2021

What is simplified whole issue life insurance?

Simplified whole life insurance is a whole life insurance policy that does not have a medical exam requirement in order to get approved. Whole life insurance policies have level premiums with either a level or increasing death benefit, depending on how the cash value is used.  Some of the premium goes into an investment vehicle that earns a guaranteed interest rate. This is where the cash value builds up. When whole life insurance is called simplified, it refers to the application or underwriting process. The main thing you can expect from any policy that is classified as simplified is there is no medical exam needed to get a policy.

https://www.consumerreports.org/cro/news/2015/04/is-whole-life-insurance-right-for-you/index.htm

Who should consider a simplified issue whole life policy?

Simplified issue whole life policies are for those wanting to cover their final expenses and leave some money to family or charity. These are not policies built for investment purposes.

  • Over 50 years old
  • Insufficient savings to pay for burial
  • Insufficient savings to pay debts
  • Wanting to leave tax-free money to family or charity
  • In average to below-average health
  • Does not have a will or trust setup (benefits avoid probate)
  • Want to fund wishes in a will or trust
  • Do not want to take a medical exam for insurance
  • Want coverage quickly and easily

The positives of simplified issue whole life insurance

Don’t expire.

These are permanent policies that pay your beneficiaries no matter how long you live.

Short applications

Applications are 2 – 10 pages with the exception of traditional simplified issue whole life with coverage amounts over $100,000. Final expense insurance applications range from 4 – 10 pages,  depending on the company, while group and guaranteed acceptance applications are just 2-3 pages long.

No medical exam

Options for any health status

Guaranteed acceptance options available

Benefits are tax-free

Benefits avoid probate

Options to apply over the phone

Options to apply online

Fast approvals

Which simplified issue whole life policy is right for you?

1. Simplified issue final expense whole life insurance

2. Guaranteed issue whole life insurance

3. Traditional simplified issue whole life insurance

More about simplified issue final expense whole life insurance

If you’re looking for final expense insurance, your health is crucial to the policy’s benefits.

Different types of policies have different payouts at varying time points:

  • Level/Immediate policies provide full coverage on day 1.
  • Graded policies pay only a percentage of the full benefit amount during the first year or two.
  • Modified policies pay a return of premium plus 6% – 10% of the full benefit amount during the first 2 years.

Important to understand: No matter whether the policy is level, graded, modified, or guaranteed issue, it will pay the full benefit amount immediately if death is due to an accident.

Features of a simplified issue final expense policy:

If you’re looking for final expense insurance, your health is crucial to the policy’s benefits. Different types of policies have different payouts at varying time points:

  • Short applications. Applications are 2 – 3 pages and take about 15 minutes to complete.
  • Low coverage amounts. The coverage amount maxes out at $50,000.
  • Age restrictions. Policies are for people over 40 years of age. The standard for final expense policies is 50 years of age.
  • Fast. Policies are approved in 1 10 days.
  • Builds cash value. The product does build a little bit of cash value, though it is not meant to be an investment.
  • Difficult to find the right policy. Underwriting is primarily based on how you answer the health questions on the application. Companies have slightly different health questions, so a person who is approved for same-day coverage at one company might be declined at another.
  • Coverage up to $50,000
  • Eligibility starts at age 40
  • Short applications (2 – 4 pages)
  • Few medical questions
  • No medical exam
  • No phone interview*
  • No request for medical records*
  • There may be a waiting period*

*Depending on the company and product.

Simplified issue final expense whole life insurance is a good option for people who:

  • Are over 50 years of age
  • Have mortgages and/or other debt
  • Want coverage amounts under $40,000

More about guaranteed issue whole life insurance

Guaranteed issue life insurance is a type of modified life insurance policy. What that means is the benefit is modified to pay only a return of premium plus 6% of the full benefit amount on non-accidental deaths during the first few years.
Guaranteed issue policies often get a bad rap for being expensive. They are designed to cover burial and final expenses, so when you look at the cost of a $25,000 policy, it will probably shock you. But when you look at the cost of a $10,000 policy, it will probably make sense.

While policies vary from one insurance company to the next, the following is true for the majority of guaranteed issue policies:

  • They pay a return of premium plus 6% – 10% of the full benefit amount for the first few years (depending on the company).
  • There are no health questions, so you are guaranteed to be accepted.
  • They get expensive as the coverage amount increases.

Features of a guaranteed issue whole life insurance policy:

  • No health questions. You are guaranteed to be accepted for a guaranteed issue policy. As you might hear on TV, “nobody is turned down.”
  • Short applications. Applications are 1 – 3 pages and take about 10 minutes to complete.
  • Low coverage amounts. Most policies max out at $25,000.
  • Age restrictions. Policies are for people who are over 50. A few companies will issue policies for those over 40.
  • Fast. Policies are active as soon as the paperwork and payment are processed.
  • Builds cash value. The product does build a little bit of cash value, though it is not meant to be an investment.
  • Coverage up to $40,000
  • Eligibility starts at age 40
  • Short applications (1 – 3 pages)
  • No medical questions
  • No medical exam
  • No phone interview
  • No request for medical records
  • There is a waiting period for non-accidental death policies

Guaranteed issue insurance is a good option for people who:

  • Are over 50 years of age
  • Are ineligible for policies with health questions
  • Want to ease the burden of burial expenses

Important note:
Don’t assume you need a policy with no health questions. Policies offered on TV and by funeral homes are expensive. You can often find better-priced policies with much better benefits by comparing several companies and talking with an independent broker.

More about traditional whole life insurance

Traditional whole life products normally require a medical exam, but a few companies will waive the exam for policies with lower coverage amounts — typically under $400,000. Even if the product is marketed as a simplified issue policy, you may still have to take a medical exam if the company decides it is necessary.

Features of a traditional simplified issue whole life insurance policy:

  • Long applications. These are the same applications used for fully underwritten products that require medical exams. They typically take about 45 minutes to complete.
  • Lower coverage amounts. The majority of traditional simplified issue whole life policies provide up to $100,000 in coverage.
  • Expensive. Whole life insurance is about 15 – 20 times more expensive than term life insurance.
  • Builds cash value. Depending on the policy you choose, cash values are either guaranteed or subject to market fluctuations.
  • Tax benefits. Cash values can be borrowed against, and funds inside a whole life policy compound tax-free, similar to a Roth IRA.
  • Coverage up to $400,000
  • Eligibility starts at birth
  • Standard length applications (10 – 40 pages)
  • Full medical history required
  • A medical exam may be required
  • A phone interview may be required
  • Medical records may be requested
  • Immediate 1st-day full coverage.

Traditional simplified issue whole life insurance is a good option for people who:

  • Have children who are older than 22
  • Have a mortgage and/or other debt
  • Want coverage amounts under $100,000

FAQs

Do simplified issue whole life insurance applications have health questions?

Most do. Only applications for guaranteed issue whole life policies have no medical questions. These are modified policies that pay only a return of premium plus 6% of the full benefit amount for a non-accidental death in the first few years.

Do all simplified issue whole life insurance policies have waiting periods?

While graded and modified policies have waiting periods, you may be able to get full, first-day coverage with a level whole life or traditional whole life policy, depending on your health history. If you haven’t had any serious medical conditions in the past 3 years, you have a good chance of getting a policy with first-day coverage.

Do simplified issue whole life insurance policies build cash value?

Yes. All simplified issue whole life policies build cash value. Traditional whole life policies have features that allow you to borrow against the cash value. They also offer tax benefits, as the cash value compounds tax-free. Bear in mind that while level, graded, modified, and guaranteed issue whole life policies all build cash value, the amounts are typically only available if you choose to cancel the policy.

How do I find the best simplified issue whole life policy?

Applications for simplified issue whole life policies are all different. This means it is very important to find the policy that offers the best benefits for your situation. You may be able to get first-day coverage if you choose the right company. Compare applications for several companies or find a knowledgeable independent agent who can help you. Some insurance agents specialize in final expense insurance policies.

Do simplified issue whole life insurance policies require medical exams?

Typically, no. If you are required to take a medical exam, the product isn’t really simplified. You may need to have a phone interview with an underwriter to provide additional information. In some cases, records could be requested from your doctor.

Is simplified issue whole life insurance worth it?

If you already have a will and a living trust, and you have ample funds set aside to pay for your final expenses, then no. But there are some reasons that make simplified issue whole life insurance policies worthwhile. hey offer, at the very worst, a 6% return on your money if you die from natural causes during the first few years. The money is tax-free to your beneficiaries. And, the policy acts as a contract that circumvents probate, so a check is issued quickly.

What do you need to qualify for simplified issue whole life insurance?

You are guaranteed to qualify for some type of simplified issue whole life policy. The question is what kind of policy. For level-benefit policies that offer first-day full coverage, you need to have been in good health for about 3 years. For graded policies, the standard is a history of good health for about 2 years. If you have had a serious health condition that was treated or diagnosed within the past year, you are likely to qualify only for a modified or guaranteed policy that has a waiting period for full benefits.

What is the difference between simplified issue term insurance and whole life insurance?

Term life insurance and whole life insurance are different animals. Only about 3% of all term life insurance policies are paid out to beneficiaries. For the rest of the policies, the owner either outlived the term of the policy or let the policy lapse.
Whole life insurance builds cash value and never expires. The risk for insurance companies is much greater with whole life insurance, so only smaller coverage amounts are available for simplified issue whole life policies. Most policies provide up to $25,000 in coverage. If you’re in great health, you may be able to get up to $400,000 in coverage.

Conclusion

Simplified issue whole life insurance policies are not cheap. They typically cost 15 – 20 times more than term life insurance. Simplified issue whole life insurance is best for people over the age of 50 who want to leave money to their families and pay for final expenses. Expect to be surprised by the cost if you are looking for higher coverage amounts. That being said, whole life insurance is a great option for helping your family with the transition of assets. Whole life insurance has the advantage of avoiding probate, so beneficiaries receive a check quickly.

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About the author
Brian Greenberg author
Brian Greenberg
Founder and CEO
Brian is licensed to sell life, health, annuities, and property and casualty insurance in all 50 U.S. states. He is the author of The Salesman Who Doesn't Sell and is a member of the Million Dollar Round Table, an organization that consists of the top 1% of financial advisors worldwide.

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