Four 70-year-olds with different health: which policy fits each

At 70, health decides which kind of policy you can buy far more than age does. A healthy person can often get a fully underwritten policy at the best price. Someone with a manageable condition may qualify for a short-questionnaire policy. Someone with a serious diagnosis may be offered a policy that pays only a reduced amount for the first two or three years. And someone who is very ill may only be able to buy a policy with no health questions at all. The four people below, who are invented for illustration, show what each path looks like.

All four are 70 and want to leave money for final expenses and a little extra. All prices are round numbers chosen for the example. They are not quotes, and no insurer is described. Real approval depends on the company, the exact diagnosis, medications, test results and the state. Nobody can tell you from a description which category you will land in; only an application can.

The four, side by side

To compare policies of different sizes, use the cost per $1,000 of coverage per year: monthly premium x 12, divided by the thousands of coverage.

• Harold: $150 x 12 = $1,800; $1,800 / 20 = $90 per $1,000.
• Lena: $140 x 12 = $1,680; $1,680 / 15 = $112 per $1,000.
• Daniel: $125 x 12 = $1,500; $1,500 / 10 = $150 per $1,000.
• Ruth: $115 x 12 = $1,380; $1,380 / 8 = $172.50 per $1,000.

The price climbs as the insurer learns less, or fears more. That pattern is the heart of this post: less information or more risk means a higher price, a smaller policy or a waiting period. guaranteed issue, simplified issue and full underwriting at 65 compares the three approaches in a table; here we follow people through them.

Harold: fully underwritten

Harold is a nonsmoker who takes one pill for blood pressure and has normal cholesterol. He applies for $20,000 of permanent coverage.

What happens. In how life insurance underwriting works, the insurer asks detailed health questions, may send a nurse for a paramedical exam (height, weight, blood pressure, and blood and urine samples), and requests records from his doctors. It checks prescription history and the MIB database of past insurance applications. The process often takes a few weeks, not minutes. If everything matches his answers, he is placed in a rate class based on his health, and that class sets his price. Harold's hypothetical $150 a month sits in a good class.

What Harold gets. The lowest price per $1,000, a death benefit that pays in full from day one for any covered cause (after the contract's usual two-year contestability review for misstatements; see the two-year contestability period), and a larger amount if he wants it.

What Harold accepts.

• A longer process, an exam and records requests.
• A decision that can come back at a worse class than he hoped. Blood test results or an old record can change the offer.
• A premium that stays level for life, which is wonderful if he can keep paying it for 15 or 20 years and heavy if his income shrinks.

The arithmetic of staying. If Harold lives to 85, he will have paid $1,800 x 15 = $27,000 for a $20,000 policy. He paid more than the policy pays. That is not a flaw; the policy bought certainty that his family would have $20,000 whenever he died. If he dies at 72, the family receives $20,000 for about $3,600 of premiums. The estimate of whether that trade is worth it depends on how much he values certainty versus keeping the money. The life insurance at 70: options and costs guide covers that trade-off for healthy buyers.

What Harold should ask. Is the price guaranteed for life? Is the policy whole life or guaranteed universal life, and what happens if he misses a premium? What does the policy pay if he dies in the first two years?

Lena: simplified issue

Lena has type 2 diabetes controlled with oral medication, a knee replacement and no heart history. She dislikes needles and exams. Her agent suggests simplified issue: no exam, a handful of yes-or-no questions, and database checks.

What happens. She answers questions about diagnoses, hospital stays, tobacco and certain medications. A "yes" to a knock-out question, such as recent cancer treatment, heart failure or oxygen use, would end the application. The insurer checks prescription history and MIB data, and compares them with her answers. A decision can arrive in days. If she is approved at the top tier, the policy pays its full face amount from the start.

What Lena gets. Speed, no exam, and a price that, for her, may be lower than a fully underwritten policy that rates her for diabetes. For a person with a common, well-controlled condition, a rated fully underwritten offer can end up costing more than a simplified-issue price. The only way to know is to get both quotes.

What Lena accepts.

• A smaller amount than a fully underwritten policy would offer.
• A higher price than Harold's per $1,000, since the insurer has less information.
• Risk of a tier surprise: some simplified-issue products sort applicants into a level tier and a graded tier based on the answers. A borderline answer can move her to a graded tier at a similar premium without much fanfare. She should ask which tier she is offered and read it.
• The need to answer exactly. Because there is no exam, the insurer checks records later. A material misstatement in the application can lead to a denied or reduced claim during the contestability period. what happens if you lie on a life insurance application explains how that works.

The arithmetic. If Lena lives to 85, she pays $1,680 x 15 = $25,200 for $15,000 of coverage. If she dies at 72, her family receives $15,000 for about $3,360 in premiums ($1,680 x 2).

What Lena should do. Apply for the best tier she can; ask the agent in writing whether the benefit is level from day one; compare against a fully underwritten quote, since diabetes that is well controlled is something many underwriters can price. The caution runs the other way too: more than one application at a time can be a problem if each is recorded.

Daniel: the graded tier

Daniel was diagnosed with heart failure a year ago and spent several days in the hospital eight months ago. On a simplified-issue questionnaire, heart failure is often a knock-out answer. He would likely be declined for a level benefit. Some companies, though, offer a graded product to applicants who miss the best tier, and guaranteed issue is a fallback.

Suppose Daniel is offered a $10,000 policy at $125 a month with a two-year graded benefit: if he dies of natural causes in the first two years, the insurer pays the premiums paid plus 10%; after two years it pays the full $10,000; an accidental death pays in full from the start.

How the graded benefit pays out.

The table shows what the "graded" label means in dollars. The family should plan on the number in the first column that fits, not the face amount, and graded death benefits: why the first two years matter works through the logic in more detail.

What Daniel gets. Coverage he could otherwise not buy at a price that is lower than the most expensive alternatives, and full coverage after the waiting period.

What Daniel accepts.

• A real chance that his family collects far less than $10,000. If the family cannot make up the difference from savings, they will feel it.
• A high price per $1,000, $150 a year in this example.
• A small policy.

The planning move. Daniel and his family can treat the waiting period as a period to bridge with savings. If he can set aside even a few thousand dollars in a payable-on-death account, the family has a floor while the graded benefit climbs. After two years, the policy and the savings together cover more than the policy alone.

A word on stopping. The graded structure only works if the policy stays in force. If Daniel skips a premium and the policy lapses, the waiting period can restart if he reinstates. Automatic payment and a family member who can see the bank statement help; life insurance grace periods and lapses explains the grace period.

Ruth: guaranteed issue

Ruth is in treatment for advanced cancer and uses supplemental oxygen. She would be declined for nearly any policy that asks health questions. guaranteed issue coverage asks none, so it is the only kind of life insurance she can realistically buy.

Suppose she is offered $8,000 for $115 a month, with a two-year graded benefit like Daniel's.

The arithmetic.

If Ruth's prognosis is short, a policy like this may return less than a modest amount. That is what the product is: the insurer cannot decline sick applicants, so it prices high and delays full payment to protect itself. If Ruth's family is counting on that policy for the funeral, it may not deliver, and they should know that now.

What Ruth gets. A chance, if she outlives the waiting period, at a full $8,000. And accidental death coverage from the start.

What Ruth accepts.

• The highest price per $1,000 of the four, at $172.50.
• A limited benefit if she dies early, which for someone with a serious illness is the most probable case.

Alternatives Ruth should look at first.

• Savings or a payable-on-death account. If Ruth can set aside the same $115 a month in an account that passes to her daughter directly, that money is there in full whenever she dies, in month 6 or month 60.
• Existing coverage. An old policy, an employer group policy with a conversion window, or union or veteran benefits. The conversion deadline is often short (commonly about 31 days after coverage ends), so it needs attention now.
• A prepaid funeral contract. It fixes some funeral choices, though it comes with its own terms. See preneed funeral insurance and funeral contracts.
• Accelerated benefits on an existing policy. If Ruth already owns a permanent policy, an accelerated death benefit rider might pay part of the benefit early. The accelerated death benefit riders: how they work and how they're taxed guide explains it, including the tax rules.

For someone whose health has already changed this much, guaranteed issue is rarely the first thing a neutral adviser would suggest. It makes sense mainly if the family can absorb the first two years from other money and wants a floor later.

What changes the answer

Several things can move a person from one column to another.

1. Time since a diagnosis or event. Many underwriters treat a condition differently after a stable period. A heart event last month is not the same as one five years ago, and a person declined now may be insurable later.
2. How well controlled the condition is. Daniel's heart failure and Lena's diabetes are very different to an underwriter. Control, medications and test results matter.
3. Which insurer you ask. Companies draw their lines in different places, and one company's knock-out question is another's rated approval. That is the argument for an independent agent who can ask several. See captive vs independent life insurance agents.
4. Whether you apply to more than one place at once. Applications leave a record in the MIB, and a decline can follow you. Ask an agent how to approach it before applying to many companies.

A sensible order of attack

Whatever your health, the same order of questions helps.

1. Decide how much you need and for what. Use the final expense and funeral cost calculator. If the answer is a funeral and a few bills, the amount is small, and savings may do the job.
2. Try the best tier first. Apply for fully underwritten coverage if you think you might qualify. Then simplified issue. Then graded or guaranteed issue.
3. Compare by cost per $1,000 and by what the policy pays in year one and year two. Ask for the numbers in writing.
4. Answer every question truthfully. If you are unsure of a date or a medication, find the record. The the two-year contestability period exists to check.
5. Use the free-look period after delivery to read the policy, and keep the old coverage until the new one is in force.
6. Tell your beneficiary the insurer's name and what the policy pays now.

If you are declined, that is not the end. The Declined for life insurance? What to do next guide covers next steps.

Key takeaways

• Health, more than age, decides whether a 70-year-old is offered full underwriting, simplified issue, a graded benefit or guaranteed issue.
• Cost per $1,000 per year rises as the insurer learns less: in the examples, $90, $112, $150 and $172.50.
• A graded or guaranteed issue policy can pay only premiums plus a small percentage in the first two years, so the family should plan on that number, not the face amount.
• Apply for the best tier you might qualify for first, and compare quotes from more than one insurer.
• For someone who is seriously ill, savings, existing coverage, or a prepaid arrangement may serve better than a new policy.