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

If you're considering getting into Final Expense sales, we’re going to cover the basics, including the types of final expense, some sales tips, and our recommended final expense carriers.

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

Types of Final Expense

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:

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:

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.

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

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

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

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

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.

Final Expense Sales Tips

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.

What Final Expense Insurance Covers

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.

Our final expense client leave behind can help you break down the costs of a funeral with your clients.

Recommended Final Expense Carriers

We represent many fantastic carriers. The current carriers that we highly recommend include:

• Accendo/CVS Health
• KSKJ Life
• Foresters
• Sentinel Security Life
• AIG
• Gerber Life

These carriers are also highlighted in our Final Expense Tip Sheets.

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.