What Exactly Is Modified Burial Insurance?

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Final expense plans (also called burial insurance, modified whole life insurance, and funeral insurance) are issued through insurance companies specializing in that particular field.

These plans are great if you need extra coverage, are looking to cover a funeral, and/or have been rejected by life insurance.

Burial insurance policies have underlying rules that no matter what policy or carrier you choose to go with, will always be true. Prices, or premiums, will never increase, coverage will never decrease, cash value increases that you can borrow from, and policies will never expire.

What’s great about these particular policies is that the amount covered is given in a lump sum: a tax-free check to do with as you see fit.

You can cover all final expenses and possibly any remaining hospital bills or debt if there is enough. It is possible you could leave a financial legacy to your chosen beneficiaries.

This in and of itself is enough reason to choose a funeral insurance policy over prepaid plans; however, let’s go through the details of acquiring a burial insurance plan and why they may be the better option for you.

Burial insurance plans are usually divided into three categories within companies:

*There is a fourth option called modified plans, which most insurance agencies will strongly advise you against. We will go into greater detail as to why later.

Level benefit plans are excellent if you do not have any complicated or severe health risks and are looking to cover burial expenses.

These plans are essentially the best available, offering full coverage and benefits from day one at standard rates (the cheapest you can expect from any carrier).  

Graded plans are available to you if you have health risks/conditions that are mostly controlled and not considered severe or high risk by a carrier.

Usually, there’s a two-year waiting period before full benefits with these plans, and the rates can be a little more expensive depending on the company. Coverage increases with each passing year until the two-year timeframe is met.

Guaranteed issue policies are for anyone with severe and/or multiple health risks that most insurance companies wouldn’t be willing to accept. There is no underwriting process required; if you’re able to sign a legal contract, you’ll qualify for these plans.

These policies have a two-year waiting period and cover a less percentage than graded plans.

If the insured person passes away within the two years, the beneficiaries will receive a refund on their monthly premiums plus 10%. Accidental deaths are also covered from the moment you sign, which can be very important depending on what particular illness you may have.

Insurance companies usually have two factors they consider when deciding what policy and premium you qualify for: underwriting and prescription history.

Medical underwriting is essentially a series of health questions that determine what conditions/illnesses you have and the possible seriousness and complications of said conditions.

These questions range from simple questions like your height, weight, alcohol/tobacco usage, to more detailed queries like if you’ve ever been diagnosed with HIV or experienced an insulin shock.

An insurance company will also look at your prescription history to determine your policy. This is how the carrier validates your responses to the underwriting procedure. There is no extra work required on behalf of the insured; it’s a quick process done electronically via your pharmacy.

Note: No medical exam or physical is ever required.

It is possible that if you have health risks or do not qualify for a level benefit or graded plan, you’ll hear about modifiedplans.

There are many reasons why most agencies will strongly urge you against these plans and deem them worthless. It’s important to understand exactly what this plan is and why it’s professionally inadvisable.

Modified plans, like graded and guarantee issue policies, have a two-three year waiting period; however, it’ll only refund your payments plus interest.

The amount of interest paid varies by company and your particular premiums, not the death benefit itself. This range of interest varies as low as 8% to as high as 30%, but most of the time the amount paid will be 10%.

Say the insured person passes away during the waiting period before full benefits are granted, and the carrier pays the usual 10% interest. If $1000 was paid overall, the beneficiaries of the insured person would receive a tax-free check for $1100.

Normally this plan is offered to those with serious health risks because there’s limited or no medical underwriting required, just like guarantee issue. However, these plans have premiums that can be incredibly expensive because the carrier doesn’t know how much risk they’re taking on.

Modified plans and guarantee issue plans have many similarities, but guarantee issue, as we’ve stated, covers accidental death from day one.

You could be paying the same amount, but have at least some form of immediate coverage. With modified plans, you have no immediate coverage.

When it comes to insurance, you want to get more bang for your buck, to put it bluntly, and a guarantee issue plan offers you more than a modified plan would.

What is more, even if you have a high-risk condition, you may be able to qualify for better than modified or guarantee issue plans.

This is true for diverticulitis, cholesterol issues, blood clots, asthma, Crohn’s disease, arterial fibrillation, bipolar disorder, type 1 diabetes, cancer (over two years ago), type 2 diabetes, heart attacks over one year ago, diabetic neuropathy, and many more. 

The policy you end up with and the premiums you pay all depends on the agency you work with and the company you choose.

With that being said, let’s go through how to pick the right agency and company if you decide a burial insurance policy is right for you over a prepaid plan.

Most final expense companies will not speak directly with you – they’ll require an agent to mediate the process. This stipulation works in your favor because an agent’s sole job is to find the best and cheapest plan for you, no matter your circumstances or conditions.

When selecting an insurance agent, they must specialize in burial insurance policy. This way, they will be familiar with the companies that would work with you even if you’re what’s considered ‘higher risk.’

Never let an agent tell you there are no options available to you because it simply isn’t true. The reason there are guarantee issue plans is because if your situation is considered dire or very high risk, you can still get coverage.

The premiums are higher, yes, but you do have some benefits and a form of coverage. You could be on dialysis, on stage 5 kidney disease, or have recently been treated for cancer (conditions most companies wouldn’t accept), and qualify for a great guarantee issue plan. 

Gerber Life and Sons of Norway are final expense companies well-known for its guarantee issue policies.

There are many options when deciding how to financially handle a funeral or cremation after you or a loved one passes on. For many people, a final expense insurance policy through an agency and carrier is the path to take.

There are many insurance options no matter the circumstance that can offer you a form of coverage – remember, the beneficiaries receive a check to do with as they wish, so it could take care of any additional unexpected expenses. Always do your research before choosing, and make sure your agent is well-versed in the industry.

About Al Kushner
Al Kushner
He is a recognized financial educator, best-selling author, speaker, underwriting specialist and the founder & CEO of Superior Mutual, an independent insurance agency. He has helped families and individuals preserve, protect, and pass on a legacy since 1986. His mission is helping hard working seniors keep more of what they have worked a lifetime to save.
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