Final Expense Insurance: Level, Graded, Modified, and GI (2nd Edition)

Final Expense, Level, Graded, Modified

If you're considering getting into Final Expense sales, we’re going to cover the basics.

There’s no doubt that there’s money to be made in final expense sales. Try typing “final expense insurance” into YouTube’s search engine and see what you find.

  • “How I made $21,566 in 2 weeks selling final expense insurance!”
  • “Final Expense Insurance Agent Makes $60,000 in 4 weeks of personal sales!”
  • This Agent Sold Over $1,000,000 in Final Expense Insurance | Learn How”

While it’s great to be rewarded for your hard work, we need to stop and remember why we do this: We care about helping people.

And final expense plans can genuinely help your clients by taking away the financial burdens the family will feel upon death.

So, to get started, there are 4 main types of final expense policies:

  1. Level,
  2. Graded,
  3. Modified, and
  4. Guaranteed Issue (GI).

Here’s a snapshot at how they’re different:

  Level Graded Modified GI
Applicant Health Excellent Minor health conditions(s) Serious health condition(s) N/A
Benefits Eligibility Immediately after death 2-year waiting period 2-year waiting period 2-year waiting period
Cost Lowest Medium High Highest

To give you an idea of what “minor” health conditions are compared to “serious” health conditions, here are some examples. This is not all-inclusive by any means, and this will vary from carrier to carrier, but here is just a small sample to give you the big picture idea:

Minor Health Conditions Serious Health Conditions
Diabetes with minimal insulin Alzheimer’s Disease
Heart attack, but not recent AIDS
Internal cancer, but not recent HIV+
COPD, but not recent Lou Gehrig’s Disease (ALS)

Since Final Expense insurance is a form of life insurance, there cannot be any rate increases. Let your clients know that when they lock in their rate, that rate won’t change.

It can be a huge selling point to call on your customers right before their next birthday — make sure they understand that their rate will only go up with age, but if they lock it in now, they’ll stay at that rate for the life of the policy.

When we did our recent short-term care training launch, we released a bundle of training and roleplay videos, and Jeff Sams explained how to use birthdays to close. Take a look:

Also, note that final expense benefits are also generally tax-deferred. The beneficiary is not required (according to current tax law) to pay any taxes on the received benefit.

Finally, this product is made to cover the following types of expenses:

  • Funeral expenses
    • Casket/cremation urn
    • Embalming
    • Ceremony
    • Transportation
    • Burial vault/liner
    • Burial clothing
    • Floral arrangements
    • Cemetery property
  • Unpaid hospital/medical bills
  • Travel expenses for family
  • Unpaid credit card debt
  • Estate taxes

Please note that the average funeral costs $7,045.

It can be really important to sit down with your prospects and figure out how much they expect to need upon death. It’s a touchy subject, but it needs to be discussed.

Foresters, KSKJ, Gleaner, and Royal Neighbors of America offer need estimation checklists in their brochures. You can use these to help your client determine how much their death benefit should be.

Let’s take a closer look at the options you have when it comes to choosing the best final expense policy for your clients.

Level Policies

Applicant Health Excellent
Benefits Eligibility Immediately after death
Cost Lowest

Level policy benefits are given to applicants in excellent health. If they’ve had any surgeries, are on any prescriptions, or have any health conditions, check with your carriers of choice to see if they might pass through underwriting.

This kind of policy offers the full death benefit immediately after death occurs. This is the only type of final expense policy that will immediately and fully cover your client.

The premiums for this type of policy are also a little bit less than the graded or modified policies, which we’ll go over next.

Graded Policies

Applicant Health Minor health conditions(s)
Benefits Eligibility 2-year waiting period
Cost Medium

Health conditions vary by carrier, but as an example, having Parkinson's, systemic lupus, liver disease, or COPD might place your client in a graded plan.

Graded policy benefits usually have a 2-year waiting period before the entire death benefit can be paid to a beneficiary. While this is usually the case, you need to cross-check this with your carrier of choice. For example, Equitable doesn’t pay out a full death benefit on the graded policy until the 4th year.

If non-accidental death occurs before two years, the policy will only pay a percentage of the death benefit.

For example:

  1. If death happens in year one, perhaps only 30% of the death benefit will be paid.
  2. If non-accidental death occurs in year two, 70% of the death benefit will be paid.
  3. Death in year three or later will pay 100% of the death benefit.

In case you were wondering, here are some examples of “accidental death”:

  • Car accident
  • Falls
  • Poisoning
  • Drowning
  • Fire-related death
  • Suffocation
  • Firearms (excludes acts of war and suicide)
  • Industrial accidents
  • General accidents (medical professional mistakes, falling objects, air transport injury, etc.)

“Non-accidental deaths” include:

  • Illnesses
  • Old age
  • Suicide

Modified Policies

Applicant Health Serious health condition(s)
Benefits Eligibility 2-year waiting period
Cost High

Like graded plans, carriers have health conditions that would place your client into a Modified plan, such as alcoholism, angina, stroke, aneurysm, or cancer.

Modified policy benefits usually have a 2-year waiting period before the entire death benefit is paid to a beneficiary. If non-accidental death occurs before two years, the policy will only pay a return of premiums plus a percentage.

For example:

  1. If death (non-accidental) happens in year one, the premiums will be returned plus 10% will be paid.
  2. If non-accidental death occurs in year two, premiums paid are returned plus 20%.
  3. Death in year three or later will pay 100% of the death benefit.

Guaranteed Issue (GI) Policies

Applicant Health N/A
Benefits Eligibility 2-year waiting period
Cost Highest

GI policy benefits are very similar to a modified policy, but more expensive since there is no health underwriting.

GI has a 2-year waiting period before the entire death benefit can be paid to a beneficiary. If death (non-accidental) occurs before two years, the policy will only pay a return of premiums plus a percentage.

For example:

  1. If non-accidental death happens in year one, all premiums paid will be returned plus 20%.
  2. If non-accidental death occurs in year two, all premiums paid are returned plus 20%.
  3. Death in year three or later will pay the full benefit.

The conditions and percentages shown above are only examples, and they vary by carrier and plan. But with most insurance products, the healthiest clients pay the lowest rates.

Recommended Carriers

We currently represent 9 carriers.

The carriers we recommend the most are:

  • KSKJ Life
  • Foresters
  • Sentinel Security Life
  • AIG (guaranteed issue)
  • Gerber Life (guaranteed issue)

However, we also are contracted with:

  • Aetna
  • Equitable
  • Federal Life
  • Gleaner
  • Royal Neighbors of America

Our two most recommended carriers are KSKJ and Foresters. They both offer extensive fraternal benefits, KSKJ typically has the best rate, and Foresters is in every state.

If you're ready to get started selling Final Expense insurance, please reach out to me (Kirk Sarff) for details, sales tips, and carrier contracts.

Get Appointed Now


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