If you are researching final expense plans, you may be aware that there are different types of death benefits depending on your health status. These benefit types vary according to your health conditions. The terms you may run across are level, graded, and modified death benefits.
Level benefit plans are the best option available for those who have good to excellent health. Working with an independent agent who has access to multiple companies will help you get the best rates available according to your health.
Level benefit plans pay the full death benefit on Day 1 of the policy. If you die in the first year or two of the policy being issued, the full death benefit gets paid.
For those with some health history, a graded death benefit may be your only option. An example of this might be someone with congestive heart failure taking a medicine like Carvedilol. With a graded death benefit, the full benefit amount is not paid out until after two years.
Details vary according to company, but an example would be paying out 30% of the death benefit in year 1 and then 50% in year 2 of the policy. After two years, the full death benefit would be paid out.
Another type is a modified death benefit. With this, the insurance company might only return premiums paid + interest in case of death within the first two years. For example, death in the first two years of a modified benefit plan may return all the premiums paid + 10% interest to the beneficiary.
Obviously, a level benefit policy is ideal. But that may not be possible for everyone. The key takeaway is to work with someone who has multiple carriers that they represent, so you can select the company that will see your case in the most favorable light.