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When I sold my first final expense (burial) life insurance policy nearly 30 years ago, it had a face amount or death benefit of $7000. It was certainly, at that time, adequate to properly bury someone and even have a little left over to host a wake.

I still get 10-20 requests every week from people that “don’t want much, just a final expense policy”. When I ask how much they are considering it is always somewhere between $3000 and $10,000. I understand that the reason for asking for a small amount of insurance is always cost. The hope is that the smaller the policy, the smaller the cost. Unfortunately the logic doesn’t hold true.

For a little help with illustrating this I went to Colonial Penn. I believe, after a lot of study, that Colonial Penn is the best company in the business of writing small policies between $5000 and $25,000. This is a truly unbiased opinion. They don’t use agents. Everything is written directly through the company. I can’t sell it and can’t make anything from recommending it. Their products and pricing as so much better than the AARP policies written through New York Life, that AARP should really take a month off and just write letters of apology to all of us members.

OK. Now that I have put AARP in their place again, let’s look at a few examples of what Colonial Penn offers and what the alternatives are. For this example let’s assume a 65 year old man in pretty good health looking for $10,000 in life insurance. A little high blood pressure, a few new knees, but nothing serious. Colonial Penn offers a whole life policy, so we go to their website and get the quotes. All you have to do is type in the state, age and sex and hit submit. These are not guaranteed issue prices, so if our guy is hiding a few health problems they will likely show up on his medical information bureau report which could lead to a decline. But for now let’s assume good health.

Ok, let’s assume a 62 year wife, in comparable health, wants coverage as well. After all, properly burying you and not her is, well, just not proper. Use the same procedure to run quotes for her.

So, for $10,000 of coverage this couple would pay a total of $166 per month. If they wanted $25,000 it would run them $245 per month…..if they stuck with Colonial Penn. If they found an independent agent and asked them to find the best value for them, the results would be substantially different.

First I would have to explain that we are going to ask health questions and they will have an exam, at not cost to them, done in their home at their convenience. I would also have to explain that we don’t offer policies under $25,000, but if price is the issue, there’s good news. To write $25,000 on each of them, approved at preferred rates (not superman rates), their total monthly cost would be $93.39.

Keep in mind that whether through Colonial Penn or Genworth Life and Annuity (the company I quoted), these rates are guaranteed level and payable for life. So, if the reason for only wanting $10,000 is cost, wouldn’t it make more sense for you and your spouse, to have $25,000 in coverage for $70 less per month. More coverage? Less money? There’s no trick to this. Two things drive this out of balance scenario. Colonial Penn offers simplified issue which means no exam. So they are accepting the risk of not having lab results. That coupled with the fact that they are pushing cash value policies where they are simply not needed increases the cost. You’re buying life insurance, right? Take that extra $70 a month and throw it into an annuity if you need the cash, or gift it to your grandchildren if you don’t need it.

Bottom line. What appears to be the easy route, and yes, even appears to be the logical route can lead to higher prices for less insurance. Use your good health to your advantage. Take the physical and get the most bang for your buck. Don’t need that extra $15,000 in life insurance? Leave it to your grandchildren, or your church.