According to the Mayo Clinic, there are 3 million new cases of Alzheimer’s disease each year. This condition is tough on families and loved ones. If you or a family member have Alzheimer’s disease, you probably think that you can’t obtain burial insurance. That is simply not true. Sure, there might be life insurance carriers that decline you, but there others that won’t. You just need to know where to look and the right type. Whether you were just diagnosed with dementia or Alzheimer’s disease, or you are looking for someone else, burial insurance is available.
In this article, we discuss affordable burial insurance for people with Alzheimer’s disease or dementia. We first discuss burial insurance underwriting and then discuss your options for burial insurance if you have Alzheimer’s.
Burial Insurance Underwriting
If you did not know, burial insurance is a whole life insurance with a relatively small face amount up to $25,000 or $50,000. It is designed to help pay for your funeral and burial expenses, and leave some money to loved ones, if you wish.
Before we get into burial insurance for people with Alzheimer’s disease, let’s talk about underwriting. Underwriting for burial insurance is much different than that for term life insurance, IUL, and even large-case whole life insurance.
With burial insurance, the carrier doesn’t care about a paramedical exam or ordering your doctor’s records. They just want to know if you have Alzheimer’s disease or not.
That’s right. No blood test, urine sample, etc., etc…
They simply have you fill out a questionnaire. A “yes or no” question application. That is it.
Burial Insurance Underwriting Health Questions Related To Alzheimer’s Disease
As we discussed, a typical burial insurance application asks you “yes or no” questions. For questions related to Alzheimer’s disease, the questions are structured like this:
Has the proposed insured ever been diagnosed with, treated for, given medical advice by a member of the medical profession for Alzheimer’s Disease, dementia,…?
Truthfully, having Alzheimer’s is a knock out condition. What does this mean? It is a condition that “knocks you out” of obtaining different types of burial insurance options, namely those with a “level” or immediate death benefit. It doesn’t matter if you or your loved one is healthy every other way. We’ll explain what this means in a minute.
Every carrier asks the Alzheimer’s or dementia question. It is one of the first questions on the application. It is always a “knock out” question. If “yes”, your choices become limited.
Not to worry, however, because these choices are, in our opinion, affordable. We discuss those options next.
Burial Insurance For People With Alzheimer’s Disease
There are a few types of burial insurance. They are:
(1) level benefit – those that provide an immediate benefit starting the first day of coverage. If you have level benefit coverage, and die the next day, the carrier pays the death benefit. People who qualify for level benefit usually are healthy with common, mild health conditions.
(2) graded benefit – this burial insurance type will either pay out a percentage of the death benefit or have a waiting period for the death benefit. An example will make this clear. Let’s say you have a graded benefit burial insurance policy that pays 15% if death occurs the first year and 75% if death occurs the second year of the policy. The carrier pays 100% of the death benefit beyond year 2. If you have a $10,000 policy and die in the first year, your beneficiaries will receive $1,500.
Additionally, some carriers have a “waiting period” on the death benefit. They may state that the waiting period is the first 2 years of the policy’s start date. If you die within the first 2 years of the policy, the carrier pays your beneficiary the premiums back plus interest. After 2 years, the carrier pays the death benefit 100% in full.
As you can tell, people with moderate to severe health conditions usually fall into the graded benefit burial insurance option.
Only One Type Of Burial Insurance For People With Alzheimer’s Disease Available
Honestly, only one type of burial insurance exists for people with Alzheimer’s disease. Guaranteed issue life insurance is the type of burial insurance. No carrier will cover people with Alzheimer’s with level or graded benefit. The reason is that life expectancy for those diagnosed with Alzheimer’s or dementia is low. That’s why the condition is a “knockout” as we described earlier.
Guaranteed issue means just as it sounds: you, or your loved one, automatically receive coverage. Just fill out an application. Next, answer a few non-health questions. After that, send in the application with the premium draft information. You now have life insurance. The carrier does not run your background through the MIB or prescription drug history. We will talk about that more in a minute.
Like graded benefit, guaranteed-issue coverage contains a “waiting period” death benefit, usually 2 years. We work with a few different guaranteed-issue carriers. Are these, graded benefit and guaranteed-issue life insurance, the same? Essentially, yes, except for premium cost. Guaranteed-issue life insurance can be more expensive. However, as we discussed, we have a guaranteed issue life insurance policy that is affordable. Sometimes, the guaranteed issue life insurance cost less than a comparable graded benefit policy. Moreover, at times, even less than an immediate, level benefit product!
Additionally, the plan we like allows someone else to own the policy. You see, many guaranteed issue life insurance carriers do not allow another person or entity to own the policy. So, if a person has a cognitive impairment, and can’t sign the policy him or herself, the carrier disallows the policy. The plan we like allows someone else, a power of attorney or trust even, to own the policy. This beneficial option proves advantageous for estate planning purposes.
Funeral Trust Could Work As Well
We also utilize a funeral trust. Funeral trusts pay the death benefit directly to the funeral home. More importantly, they also protect your policy from the Medicaid spend-down process. That is right. Whole life insurance, including burial insurance in most cases, is a spendable asset for Medicaid since it contains cash. That means if you need to go into a nursing home, Medicaid will force you to terminate your life insurance policy and use the cash for your nursing home care. If that happens, you have lost the initial intention of the life insurance.
How does this fit with burial insurance for people with Alzheimer’s disease? A lot. The funeral trust is a guaranteed issue policy. Moreover, if your loved one suddenly needs custodial care, the funeral trust protects spendable assets.
We don’t let our clients get to that point. We expedite the transfer of the cash in your burial insurance policy into the funeral trust, where it will be protected. Contact us to learn more.
A word to the wise. If you or a loved one has existing whole life insurance and will ultimately need custodial care, Medicaid will force you to use the cash in the policy to pay for your care before it will pay.
More On Burial Insurance Underwriting For People With Alzheimer’s Disease
Let’s say you or a loved one was just diagnosed with dementia or Alzheimer’s disease. You want the best coverage available. You think to yourself, “the heck with this. I am just not going to state I have dementia or Alzheimer’s. There is no way the carrier will find out!” You then apply for level benefit coverage.
If you think you will lie on the life insurance application, or if you think you can trick the carrier, think again. On level benefit and graded benefit applications, the carriers will run your background through a few different databases to make sure what you say on the application matches to your records. One database is the MIB. The MIB shows your insurance application history. It will show when you applied for insurance in the last few years. If you applied to several life insurance carriers, the carrier will want to know why. It will also raise any red flags if what you said on your application does not match to any previously released information, through your application history.
Additionally, they look at your prescription drug history. Carriers can see all of that. (Even the ones I take.) If an answer to an application question does not match a prescription drug you take, that will be a red flag. If you take any of the following, the carrier will know you have Alzheimer’s or dementia:
Remember that lying on a life insurance application constitutes fraud. Obviously, fraud is a bad thing. There is no need to lie. We will, however, find you the lowest cost policy for your situation, which we discuss next.
We hope you found this article informative. You can obtain burial insurance if you have Alzheimer’s disease. If you or a loved one has Alzheimer’s or dementia, a guaranteed-issue life insurance policy should work just fine. As mentioned, we work with an affordable guaranteed-issue life insurance plan. Additionally, this application is easy to fill out. Moreover, someone else can own the policy which helps for estate planning purposes.
Are you ready to get started? Feel free to contact us or use the form below. We work with many carriers in the burial insurance area and know we can find the right coverage for you. As with everything we do, we work with your best interests at all times. That means if there is a better option for you than what we can provide, we will help put you in touch with someone who can.