Comparing Life Insurance Products
One of the most common issues that faces people as they age is this question: how can I provide for them after I am gone? The answer for many has historically been by purchasing a life insurance policy. For many beneficiaries as they age, they take comfort in the knowledge that their families will receive a sum of money to cover things like funeral costs, any outstanding debts, and even life essentials like groceries while they are mourning. Agents need to be well versed in all the different options for life insurance in order to present their clients with a cohesive picture of their options.
Much of the time, people think of life insurance as two-fold: people are either able to purchase term life insurance or whole life (permanent) insurance. However, there are three different options for the type of policy that is available. The following presents a comparison of these three types: fully underwritten, simplified, and guaranteed issue life insurance policies. Each one has their benefits and drawbacks.
What are the Three Types?
Fully Underwritten – Comparing Life Insurance Products
Fully underwritten policies are typically for term life insurance, meaning that coverage is for a certain time frame, such as ten years, and then the beneficiary has to reinstate the coverage when that time is up. This is a policy in which the beneficiary’s medical history is completely disclosed, and most often requires a visit from a doctor, nurse, or other healthcare professional in order to have the application accepted. The approval process for fully underwritten policies is the longest; it can take up to several weeks to get approved. However, there is no specified maximum coverage amount. These policies are recommended for individuals in good health. They have no complex medical history.
Simplified Issue – Comparing Life Insurance Products
Simplified issue policies are also typically for term life insurance. The largest difference in the application process between simplified issue and fully underwritten is that the simplified issue application has far less medical history disclosure required. There is no visit or exam necessary by the medical professional, and, as a result, the premiums are often higher than fully underwritten policies. Approval of applications is quicker because of this, as well, with approvals in several hours to several days. The maximum amount of coverage differs by carrier, but is typically up to a million dollars in coverage.
Guaranteed Issue – Comparing Life Insurance Products
Guaranteed issue life insurance policies are for whole life, or permanent, policies. These are the most expensive premiums by far. No medical questions. (Hence the “guaranteed” part.) Approvals can come within a few hours. Because of the guaranteed aspect of the policy, the coverage is usually limited to between $25,000 and $50,000 per policy. These policies work best for people with a complex medical history. These individuals may not receive coverage otherwise.
Knowing the basics of which situations require which policies can help agents successfully enroll more clients and maintain more working relationships.
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