Final Expense Insurance
What is final expense insurance?
Final expense life insurance is a type of permanent life insurance where the death benefit is used to cover medical costs and other end-of-life expenses, most often funeral costs including services like burial or cremation, items like caskets and urns, and more.
Permanent life insurance does not expire and remains in force for as long as the premiums are paid. When you purchase final expense insurance, as long as you continue to pay the premiums, the policy will be in effect until you die and your beneficiaries will receive the death benefit.
Unlike traditional life insurance policies, which require a medical exam to help set the cost of your policy, final expense policies like a burial insurance policy don’t require such in-depth research and applicants will often be insured after answering only a few questions.
Types of final expense insurance
Final expense insurance comes in two types: guaranteed issue life insurance or simplified issue life insurance.
Guaranteed Issue Life
Guaranteed issue policies ask just a few knockout questions to make sure you don’t currently have a terminal illness but otherwise will cover high-risk individuals. Because of this, it’s more expensive than simplified whole life and offers lower maximum coverage amounts, typically at or below $25,000.
Simplified Issue Life
Simplified issue life insurance is for people who may not qualify for fully underwritten life insurance policy, but are considered only moderate risk. You’ll have to answer a detailed medical questionnaire, but there’s no medical exam involved. This is your best bet for getting a life insurance policy affordably with coverage up to $50,000.
How much does final expense insurance cost?
Because there’s no medical exam involved, and because it’s reserved for older or less-healthy shoppers, the cost of final expense insurance is about the same as a term life policy, for ten times less coverage.
Is final expense insurance worth it?
A term policy should always be your first option when it comes to life insurance. It’s the most cost-effective way to cover burial expenses, and any other expenses your loved ones may have. However, if you absolutely need the financial protection and would only be able to get covered by answering health questions and avoiding the medical exam, a final expense plan may be worth looking into. You should always speak to a licensed expert that can help you compare policies before committing to a pricey final expense life insurance policy.
How to use final expense insurance as funeral insurance?
Final expense insurance is meant to be used as burial insurance for funeral expenses, but the beneficiary isn’t technically (or legally) required to do so. The death benefit can be used for whatever they wish. Policyholders name someone a beneficiary that they trust to use the death benefit money to fulfill their funeral plan. This is especially true for policyholders of final expense insurance; they typically skew older in age and may not have trusted people like a spouse or siblings to name as their beneficiary.
Some funeral homes will accept an assignment of the insurance policy death benefit payout. This means that the proceeds will go directly to the funeral home to cover the cost of the funeral. (The funeral home would be the primary beneficiary, with the secondary beneficiary receiving any money over the cost of the funeral.) When you’re making arrangements, make sure to ask about this and don’t assume that the funeral home will accept this sort of payment method; some funeral homes require payment upfront and won’t wait until the final expense insurance policy pays out.
Benefits of Final Expense Life Insurance
Final expense insurance is relatively affordable if you’re on a tight budget. It typically doesn’t provide as much coverage as other insurance (more on that later), but if you only need enough of a payout to cover burial costs, rather than a payout for long-term expenses, it could be enough for your needs.
Final expense insurance provides peace of mind in regards to funeral expenses being covered. With a traditional insurance policy, your dependents are using that death benefit for every expense: mortgage, college, everyday living, and so on, in addition to funeral costs. With final expense insurance, you and your beneficiaries know what the money is supposed to be used for, taking much of the stress out of planning your burial.
© 2012 Dover Insurance & Financial Services, Inc.