I wrote a post yesterday on final expense life insurance and as often happens, I woke up today with something from that post bothering me, a lot.
Toward the end of the post I made mention of a company, Equita Final Expense Services, that made the claim that, unlike traditional insurance companies which “which may take 3 to 6 months to pay out”, “most of final expense policies pay the beneficiary within 24 hours of your death”. First, while they may pay quickly, unless the beneficiary is waiting for your last breath in order to call the company, there is no way that the above statement is true. Even if they are waiting to dial the claim department and even if the company eft’s the money to the beneficiary, do you suppose they may want some proof of death?
Traditional life insurance companies require an original copy of the death certificate which, in my own experience and the experience of a lot of client’s families, takes at least two weeks. Now final expense companies may not require an original death certificate, but you won’t get any death certificate to copy for at least two weeks. They may accept an obituary, but at best that will be 2-3 days after the death. They may even just accept a note from the attending physician, but really, do you believe for even a minute that a grieving spouse’s first priority after your death is going to be to try to file a claim for a $10,000 life insurance policy within a day?
The truth about traditional life insurance? Unless the policy is still less than two years in force, claims processing will generally take about a week after the death certificate is sent to the company. If the policy is less than two years in force and therefore in the contestability period, it can take a few months to get paid. 3 to 6 months would be a very rare and very complicated situation surrounding the death. Can it happen? Sure. Is it the norm? Absolutely not. No life insurance company wants a reputation of paying slowly and it’s been my experience that they pay very fast considering the prudence you would expect any company to use that is about to pay out hundreds of thousands, if not millions of dollars.
Don’t get caught up in paying for overpriced final expense senior life insurance because they claim quick payouts. The last few points made on the Equita website are all about conjuring up a misrepresented notion of traditional life insurance.
Another important aspect of this type of policy is how quickly the policy pays out. Unlike a traditional life insurance policy, which can take a few months to pay its death benefit, most of the final expense policies pay the beneficiary within 24 hours of your death. This may or may not matter to your loved ones. If your loved ones will need to have the funds from such a policy to pay for your funeral expenses, waiting months for the policy’s waiting period to expire may not be an option. If they have to wait, they may have to pay excessive fees. There is no waiting period with final expense policies.
Do You Need Both?
The goal of final expenses life insurance is to protect your family from having to pay for the costs associated with burial and those final expenses that they need to have the funds for right away. That is not to say that these funds cannot be in use for other things. For example, it may take three to six months for a traditional life insurance policy to pay out. During that time, there may be three to six months worth of mortgage payments your family needs to make.
Even if you already have life insurance, it may be important to your family’s financial future to have final expense life insurance. Consider how this type of policy could provide the protection your family needs from financial devastation. It’s fast payment may be just what they need in a difficult time like this.”
Bottom line. Even if “most final expense policies pay the beneficiary within 24 hours of your death”, which again I think is patently nonsense, traditional insurance companies will almost always get a check to you quicker than you get the claim and death certificate to them.