Final expense insurance protects families both financially and emotionally after the death of a loved one. In this article, we will cover the basic features of this type of insurance, also known as burial insurance or funeral insurance.
Final Expense Insurance: Article Contents:
What Is Final Expense Life Insurance?
Final expense insurance is a type of permanent life insurance that covers medical expenses related to the end of a person's life as well as their funeral and burial expenses (for this reason, it's sometimes called burial insurance or funeral insurance). It is not intended to leave extra money to the deceased's family; rather, it is specifically designed to cover death-related expenses without this affecting their assets.
Why Is It Important to Have Final Expense Life Insurance?
It's true that many people don't like to talk about issues relating to the end of their lives. But it is important to do so. Death-related expenses such as embalming, burial, cremation, graves, ceremonies, etc., can have a serious impact on your loved ones' finances during an emotionally difficult time.
Final expense insurance protects them both financially and emotionally after the death of a family member. The death of a close family member is difficult enough in and of itself; dealing with the out-of-pocket expenses of burial or cremation, as well as other unforeseen costs, adds yet another burden.
Final expense insurance gives families various options and money to manage funerals and burial or cremation, as well as the necessary peace of mind to say a proper goodbye to a loved one.
Basic Features of Final Expense Life Insurance
Help dealing with unforeseen expenses
Above all, final expense insurance is designed to ensure that your family is protected when you die, which includes the payment of extraordinary and unforeseen expenses. It is very important to keep this in mind when understanding this type of insurance. While some people might have a good idea of their wishes for their funeral or burial and, therefore, know about how much it will cost, the vast majority of people do not. This can result in unanticipated burdens and responsibilities on loved ones.
The final expense insurance policyholder
The policyholder is the person who took out the insurance and pays for the policy by monthly or annual premiums. This person wants the additional costs related to their funeral or cremation to be covered in order to relieve the financial burden on their family.
The final expense insurance beneficiary
There is always a beneficiary (or beneficiaries), those who will receive the insurance payout upon the death of the policyholder and will be responsible for paying the cost of the funeral, will, and other pending death-related matters. Of course, if a person dies without insurance or savings, someone will have to pay all of the costs of their burial or cremation out of pocket.
Life insurance without a medical exam
Most companies that offer final expense insurance do not require the policyholder to undergo a medical exam to take out a policy. However, in almost all cases, they do require the policyholder to answer a questionnaire on health-related issues.
An immediate policy
To qualify for insurance without a medical exam, you simply have to answer the questionnaire. If you are not rejected, you will be approved almost immediately: within a few hours to a few days. In any event, in a much shorter period than the 6 or 8 weeks it takes to sign up for insurance with a medical exam.
More expensive than other types of insurance
Since almost everyone can qualify nearly immediately, the final cost is higher than for life insurance with a medical exam.
What Expenses Does Final Expense Life Insurance Cover?
In general, it covers:
- Burial and cremation expenses
- Funeral services (body storage and preparation, use of funeral facilities)
- Medical bills
- Credit card debts related to these expenses
- Other death-related costs, such as transporting the deceased to the place of burial, gravestones, coffins, flowers, memorials, renting or purchasing the grave, etc.)
How Much Does a Funeral Cost?
According to the National Funeral Directors Association (NFDA),1 in 2017, the cost of a funeral was over $8,700 with a burial and over $6,260 with cremation. These numbers only include basic funeral services with a ceremony (religious or non-religious); death certificates; storage, preparation and transport of the remains; and coffins. Purchase or rental of the grave, gravestone, flowers, etc., is not included in this price. As such, the final cost can easily exceed $20,000.
It is important to note that the Social Security Administration will only pay a small part of the final expenses, subject to qualification. In no case will this payment exceed $255.00
How Much Does Final Expense Insurance Cost?
Depending on whether you are a man or a woman, what age you start the policy, and how much coverage you're looking for, the cost of a final expense permanent insurance policy can range from slightly more than $50 to over $400. Policies typically offer $10,000.00 in coverage, though some companies may cover from $1,00000 to $75,000.00
If you're worried about how much final expense insurance costs, just think about how much anxiety and distress your family won't have to face when confronted with all these expenses. But there are other reasons, too. These expenses can also force them into making very difficult financial decisions at a time when they're not mentally prepared.
When Should I Buy Final Expense Insurance?
Final expense insurance is usually bought at the end of a person's life, when their health has already begun to deteriorate. For this reason, premiums tend to be higher than for other types of policies. You shouldn't think about purchasing this insurance unless you believe you have only a few years left (between 5 and 10).
Who Qualifies for Final Expense Insurance?
This insurance is available for people between the ages of 50 and 85, no matter their preexisting health conditions. The policy may begin in as little as 24 hours, as there is no required medical exam (you only need to answer a health questionnaire).
However, certain applicants may be rejected if they reveal they have an incurable disease, take drugs or have been hospitalized for extended periods in the last year.
Additional Benefits of Having Final Expense Insurance
- Constant premiums: The monthly amount will stay the same; it will never increase.
- Guaranteed death benefits: The benefits are guaranteed as long as the premiums are paid as agreed.
- Payment flexibility: You can select either monthly or annual premiums.
- Tax incentives: A small amount of the premium may generate dividends, which are subject to special rules for deferred taxes.
- Variety of use: The cash value generated by the dividends may be used to reduce premiums, be withdrawn as cash, generate more savings, or purchase other insurance.
- Final expense insurance is a basic insurance policy for people that should be taken out in the last 5 to 10 years of their life.
- The premiums vary depending on sex, age, and the amount of coverage.
- Anyone can purchase it without needing to have a medical exam.
- It provides peace of mind to family members, as it allows them to say a proper goodbye to their loved one at the time of their death.
- It reduces or at least helps to manage the stress and emotional drama associated with the death of a loved one.
- It is not intended to leave extra money to cover long-term needs (such as college or retirement); rather, it is exclusively designed to handle the immediate bills and debts that are generated upon the death of the policyholder.