Final Expense Insurance [The Ultimate Guide]
Final expense insurance is designed to pay for burial and funeral expenses. As a whole life insurance policy, final expense insurance doesn't have an end date and stays in force until you die as long as premiums are paid. Final expense policies are usually more affordable due to lower death benefit amounts and are easier to qualify for than standard life insurance.
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UPDATED: Feb 24, 2021
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- Final expense insurance is a life insurance policy designed primarily to pay for burial and funeral expenses
- It is a whole life insurance policy that stays in force until you die as long as premiums are paid
- Death benefits with final expense insurance usually have a lower maximum than other types of life insurance
Whenever there is a death in the family, it often throws the entire family off-track. It can be a very painful time and it is often very stressful. One of the biggest stressors that interrupt the grieving process is money. Things like burial costs, funeral expenses, remaining debts, and medical bills can all mount up on families that are trying to navigate a very confusing time in their lives.
Final expense insurance is a type of permanent life insurance that can help to protect your family from dealing with financial stress at a difficult time.
Death can be a tough topic to talk about and an even tougher one to navigate on your own. In this guide, we’re going to explore everything about final expense insurance. You will learn what it is, how it works, how to get it, and more. You’ll be able to decide if final expense insurance is right for you.
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What is final expense insurance?
Final expense insurance is a type of whole life insurance that is designed to help cover end-of-life expenses for the policyholder. Final expense insurance is sometimes referred to as funeral insurance, burial insurance, and even simplified issue whole life insurance. Though each of those terms carries a slightly different meaning, each of them refers to this type of policy.
Final expense insurance is more of a marketing term rather than a specific type of policy. It refers to life insurance policies that feature a lower face value. It is a smaller type of policy that is easier to get, more affordable, and has lower death benefits for the policyholder. These types of policies are typically reserved for those who may have trouble getting any other kind of life insurance or those with lower incomes.
Final expense insurance policies are designed to help cover, specifically, the cost of a funeral or memorial service, as well as other expenses that are incurred when someone passes away. Even though this is the case, these types of policies don’t explicitly require the funds to be used for this purpose.
The main thing that sets final expense insurance apart from other policies is that it is specifically designed to cover short-term expenses, not replace income, or cover large expenses.
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What’s the difference between burial insurance and final expense insurance?
Some people use the term burial insurance to refer to final expense insurance. While burial insurance is considered a type of final expense insurance policy, it will have some marked differences. It could even refer to a completely different type of policy.
Many insurance companies lump all of these terms together so it is very important that you make sure to understand all of the terms before you sign any paperwork or pay any premiums.
Burial insurance, specifically, can also be called preneed or prepaid insurance. If the type of burial insurance policy you’re looking at is classified this way, it is not the same thing as final expense insurance. This type of policy only covers burial and funeral expenses and the death benefit is paid directly to the funeral home.
You will be in charge of handling all of the specific arrangements and the benefit amount will be relative to those arrangements you choose. Once you start making payments, you are not really able to make any changes as this would alter the cost and other terms of the policy.
These policies have a significant variation in terms of premium costs because the providers and selection offered by those providers can be vastly different. This type of policy is completely set in stone. The benefit amount never changes and the policyholder will not be allowed to borrow against the value of their policy.
Final expense insurance is an umbrella term that refers to a specific type of simplified whole life insurance. It is designed to cover final expenses, just like burial insurance; however, the death benefit does not have to be used specifically for end-of-life expenses.
With this type of policy, the simplified whole life insurance policy, you are able to choose your beneficiary. Also, the specific arrangements surrounding your funeral are flexible because they were not set in stone when the policy was created.
Some life insurance companies will allow policyholders to borrow against the face value of this policy; however, the face value is going to be much lower than with a traditional life insurance policy. Also, some final expense insurance plans do allow for the benefit amount to increase as a result of tax-free savings that can accumulate over time.
The specific benefits from your burial insurance or final expense insurance policy are going to differ based on the insurance company you chooseand how much coverage you purchase.
The important thing to remember is that burial insurance may refer to both preneed/prepaid insurance and final expense insurance. Reading the fine print can help make sure that you get the coverage you are looking for.
Is final expense insurance the same as life insurance?
Final expense insurance is a type of simplified whole life insurance that is typically marketed to seniors, those who may have trouble securing other types of life insurance, and even those with lower income. Final expense insurance is easier to get, more affordable, and is a permanent life insurance policy that will not expire as long as you continue to pay your premiums. It does differ from a traditional life insurance policy, though.
Life insurance is a broad term that covers a range of different types of insurance such as term life insurance, whole life insurance, variable life insurance, and more. So, final expense insurance does fall under that broad umbrella. However, traditional life insurance policies are not the same as a final expense insurance policy.
Life insurance can be set up to pay out in a lump sum or the death benefit can be distributed in separate payments annually, monthly, or even quarterly. Sometimes, depending on the type of life insurance policy, the benefits can be delayed for a certain amount of time as well. Life insurance policies can stretch into the range of several million dollars. Some of them have the ability to accumulate cash value while others do not.
There are also types of life insurance, specifically term life, that can expire before the policyholder dies. In order to get a traditional life insurance policy, there are health questions and medical exams that you must pass most of the time. Things like your behavior, occupation, age, and other factors can also impact whether or not you are able to get certain types of policy.
For this reason, final expense insurance can sometimes be an extremely attractive alternative. Final expense insurance is a whole life insurance policy, which means that it will never expire and will follow you for your entire life as long as you pay your premiums as you’re supposed to. It is also much simpler to get, with no medical exam required.
Final expense insurance offers much smaller death benefits than traditional life insurance. Policies usually don’t exceed a face value of $50,000 and some policies can be as low as $2,000.
They come in smaller amounts because they are policies designed to cover short-term expenses associated with the death of the policyholder instead of replacing income, covering long-term expenses, or leaving an inheritance.
Final expense insurance is always paid in a lump sum and pays pretty much immediately upon the death of the policyholder. The majority of final expense insurance policies also accumulate cash value, which is not typical of all types of life insurance.
So, final expense insurance is a type of life insurance policy; however, it has some distinct features that make it easier to acquire, more affordable, and otherwise differentiate it from life insurance as a whole.
What is the difference between ‘simplified issue’ and ‘guaranteed issue’ final expense insurance?
Similar to many other types of life insurance policies, final expense insurance comes in two varieties: simplified and guaranteed issue policies. Most final expense insurance policies are simplified issue but there are guaranteed issue options available for those who may need them.
Simplified issue final expense insurance is the most common. You can start shopping for this type of policy as young as 45 in some cases though some insurance companies will have higher age restrictions.
Coverage amounts range from as low as $2,000 and can be as much as $50,000. This is a type of permanent life insurance, which means that the policy does not expire and you are not required to pay the policy in full in order for the death benefit to be paid. Simplified issue policies are easier to get because they do not require medical exams.
You will be required to fill out a medical questionnaire as part of your application. Some insurance companies will also want to know about your prescription and medical history as well. It is considered simplified because there is no medical exam.
This type of coverage is suitable for most people who are in the market for final expense insurance. If you’re someone who meets the age requirements, needs a small amount of life insurance coverage, and has had difficulty securing a traditional life insurance policy, then this is the perfect option for you.
Guaranteed issue final expense insurance is a little bit different. Most insurance companies only sell this type of policy to people who are over the age of 50. Coverage amounts range from as low as $2,000 and only go up to $25,000. This is also a permanent life insurance policy so it will not expire and you are not required to pay in a set amount before your beneficiaries are eligible to receive the death benefit.
This type of insurance policy is guaranteed to be issued, hence the name. You will not be subject to as extensive of an application process for this type of policy. You may not be asked any health questions at all and those that may be asked are much more limited. You may need to provide information about any terminal illnesses, if you have ever tested positive for HIV, and if you live in a nursing home. Some companies may deny you based on these answers but this is still the easiest type of final expense insurance to get. It can cost a little bit more than a simplified issue policy.
If you’re someone who has a terminal illness or any other serious health concerns, this is going to be the easiest type of insurance policy for you to get.
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Is final expense insurance the same as a prepaid funeral?
No, final expense insurance is not the same as a prepaid funeral. Burial insurance, which is usually lumped in with other types of final expense insurance, can be, as discussed above.
Burial insurance that is sold as prepaid or preneed insurance is the same as a prepaid funeral.
Prepaid funeral plans are usually sold by funeral homes. These are not sold by life insurance companies and are not considered any type of life insurance policy. In this case, you meet with a funeral director and you will plan out your funeral arrangements. You can be as detailed as you want in this process but once you have everything planned, that plan usually isn’t allowed to be changed later on.
This is a way that someone can handle all of their funeral expenses before passing away. Policies usually range from $10,000 to $20,000 and are locked in at a monthly rate. You would be required to pay the funeral home directly and the funeral home is the only one who has access to the money. There are a lot of risks associated with this approach and many experts advise against it.
Prepaid funerals are not tax-deductible. Also, most of these plans are completely non-transferable. If you were to move or die out-of-state, the money that you put into this type of plan is usually lost. The majority of these plans are also non-refundable if you were to change your mind, and there is no death benefit for any of your family members.
Preneed insurance plans are very similar to prepaid funeral plans. Preneed or prepaid insurance policies are a type of burial insurance that you purchase through an insurance company rather than a funeral home. The process is the same in the sense that you will make your arrangements, those arrangements will be set in stone, and then you will pay a set monthly premium.
This type of insurance policy doesn’t accumulate any cash value and you don’t have the ability to select your beneficiary. Instead, the death benefit is paid in a lump sum to the funeral home that you choose. If you move, you may be able to go through the process of selecting a different beneficiary.
These policies are more flexible than a prepaid funeral but are very similar overall. Some burial insurance plans offer less flexibility, which can result in a loss of benefits if you need to change the contract. This all depends on your insurance company.
Finally, there is final expense insurance. Final expense insurance is designed to do the same thing as a prepaid funeral plan or a burial insurance (preneed) policy. However, final expense insurance does not require you to make funeral arrangements, can offer the benefit of accumulating cash value, and will pay directly to a beneficiary rather than a funeral home. In addition, final expense insurance death benefits are not required to be used towards a funeral and can be used towards other short-term expenses if desired.
How much do a burial and a funeral cost?
Funerals tend to be much more expensive than many people plan for, and understanding the cost is important so that you can make the best financial decisions for yourself and your family.
The average funeral cost in America can range from $7,000 up to $12,000; the median cost of a funeral for the year 2020 was $7,360.
There are a variety of factors that will impact the final amount that your funeral will cost. This includes whether you will be buried or cremated if the cemetery you choose requires your family to purchase a vault and more.
The funeral service itself will include costs like a funeral service fee, facility usage fees, transportation fees, and the cost of using the hearse. These are pretty standard with any funeral service and come out to a combined $3,175 on average. If you choose to have funeral home staff assist with the service or would like any memorial service extras like pamphlets, those can cost as much as $500 and $160, respectively.
If you choose to be cremated, you will probably pay less than you would for a typical burial. Expenses associated with cremation include a cremation casket, a cremation fee, and a basic urn. This totals out to $1,625. Some families may choose to have a special urn as well, which could end up resulting in a higher price tag.
If you choose to be buried, you will need to purchase a casket. The average casket made of metal is roughly $2,400; however, specialty caskets made of wood, bronze, or some other material can set you back even more. Some caskets can cost up to $10,000. When you’re buried, the cemetery that you choose will require you to purchase a burial plot and may require a vault.
Burial plots range from $1,000 up to $4,000 and vaults are typically around $1,400. You will also need to consider what type of headstone you may like. Basic ones can be fairly cheap at just $200 but the average cost of an upright headstone is around $5,000. Of course, premium grave markers like statues and monuments will cost more.
If you would like to have a viewing or an open-casket funeral, you will also be required to pay for embalming and cosmetic preparations. Combined, this could run you close to $1,000.
You may also want to purchase flowers, publish an obituary, or offer a service vehicle to transport your family to and from the funeral. Each of these things can drive up the price tag by several hundred dollars more.
You can put together a nice funeral service without breaking the bank; however, most families do not have the amount of money they need in savings to cover an entire funeral, even if they choose the most basic of options. Most experts suggest planning for a funeral cost of about $10,000, which is why final expense insurance policies are popular.
What does final expense insurance cover?
Final expense insurance, when purchased specifically as a simplified whole life insurance policy, offers flexible coverage. The main thing to remember about final expense insurance is that it is designed to cover end-of-life expenses and can also be used to cover other short-term expenses.
The most common reason that people get a final expense insurance policy is to cover the cost of their funeral. As you read above, the average funeral cost is around $7,360 according to the most recent data but the different services and things that you may need can add up fast.
Final expense insurance policies have a lower face value than traditional life insurance policies. They can start as low as $2,000 and typically range up to $50,000. Because of this, they are not very viable for long-term income replacement.
If long-term income replacement is something that you’re looking for out of an insurance policy, then you may be interested in some other type of whole life insurance policy.
Final expense insurance policies pay directly to a beneficiary that you select. Even though this type of policy is usually discussed when it comes to needing to pay for any funeral and burial costs, the money can be used in other ways. Final expense insurance policies pay out in a lump sum and usually immediately following the death of the policyholder. The smaller face value allows for this.
Those funds, once they are paid out, can be used however the beneficiary sees fit. This can be towards medical costs, funeral and burial expenses, small debts, and anything else that the beneficiary desires.
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How much final expense coverage do I need?
The amount of life insurance coverage you need is going to be personal to you. There are a lot of things that you should consider when you’re breaking down how much coverage you need. Even though we’ve discussed the average cost of a funeral, experts advise that you should have a little bit more than that put away. They suggest anywhere from $10,000 to $15,000 worth of coverage for simply covering your funeral expenses and helping your family tie up any loose ends. That number is based on estimates from the National Funeral Directors Association.
Final expense coverage is typically sold in smaller policies because it is intended just to cover funeral costs; however, your beneficiary has the option to use that money however they see fit as it will pay directly to them. With that in mind, if you have any small debts such as a credit card that isn’t paid off, or are concerned about medical bills, then you can consider adding additional coverage.
You do have a little bit of leeway with the policy, as long as you can afford the premium that comes along with the coverage you need. You can also use your final expense insurance to leave a small legacy behind for your family. Just keep in mind that the death benefit for final expense insurance is typically smaller than a traditional policy and will pay out in a lump sum to the beneficiary. You will not have the option to split up payments with this kind of policy.
The best thing that you can do to help you determine how much coverage is right for you would be to do a little bit of math. Start with how much you anticipate your funeral to cost and then add on any additional things like bills, anticipated medical debt, or extra expenses associated with your funeral. Once all of your necessities are calculated, you can work with an insurance company to help you get the right amount of coverage based on what you decide your family will need.
Who needs final expense insurance?
Final expense insurance is most often marketed to seniors. This is because of its focus on covering final expenses, among other things. Final expense insurance is more affordable because the coverage amounts are lower in comparison to a traditional life insurance policy; this makes it great for those who may be on a fixed income.
The affordability of final expense insurance is also perfect for those who may not have a lot of extra room in their budget to pay for a larger life insurance policy. Anyone who is worried about how their family is going to be able to cover their burial costs is a perfect candidate for this type of insurance, especially because it isn’t going to come with exorbitant premiums and because you can get a smaller policy that fits your individual needs.
Final expense insurance is also a good option for someone who is over the age of 40 and has had trouble securing other more traditional types of life insurance policies.
Things like age, health conditions, medical history, occupation, and other “hazardous behaviors” can make it hard for some people to secure a normal life insurance policy.
If you have found that you’re not a good candidate for other types of insurance, or you are concerned that you wouldn’t be able to pass a medical exam, final expense insurance is perfect. It is a type of simplified whole life insurance. Because there is less coverage available, there is less of a risk for the insurance companies. This means that there are usually no medical exams associated with this type of insurance and it is way easier to qualify for.
Final expense insurance isn’t reserved just for seniors; however, it is much easier for seniors to get. The less likely someone is to pass away during the length of their insurance policy, the more affordable that policy usually is. Final expense insurance is specifically designed for end-of-life costs, so it can be easier to get for those who are older and not qualified for more traditional policy options.
Where can I get final expense insurance?
There are some insurance companies that choose not to offer final expense insurance policies. Some insurance companies do not offer coverage amounts that are less than $50,000 because they have found that it isn’t worth the time and cost to do all of the underwriting required for smaller policies.
Even though that’s true of some insurance companies, you still have plenty of options. There are some bigger names in insurance that you may have heard of that offer highly-rated final expense insurance policies. AARP Easy Acceptance Life Insurance offers one of the highest-rated options and offers coverage to those between the ages of 50 to 80; you can get as little as $25,000 in coverage with this policy.
Gerber Life Insurance offers coverage amounts from just $5,000 up to $25,000. Applicants are accepted as long as they are between the ages of 50 and 80 and, similar to AARP, this policy doesn’t require applicants to pass a medical exam to get covered. Colonial Penn is also a well-known company with good ratings; however, the specifics of their coverage could not be located for this article.
There are also some companies that you may have never heard of that offer great policies. Mutual of Omaha offers final expense insurance policies with a face value as low as $2,000. You can get up to $25,000 in coverage and do not have to pass a medical exam in order to get approved. Anyone from 45 to 85 is eligible to apply.
Globe Life offers some of the most affordable final expense insurance policies. It is unclear what age range you must be in to apply; however, there is no medical exam required. Coverage amounts range from as little as $5,000 up to $100,000.
Final expense insurance is available, as you can see, from a variety of providers both big and small. Shopping for final expense insurance online is one of the easiest ways that you can compare different plans and companies. You can look up information, reviews, and read over different information that insurance companies provide to their prospective policyholders. When you do research online, make sure that you check that the type of coverage you’re looking for is offered in your state.
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How do I apply for final expense insurance?
Securing a final expense insurance policy has a similar, albeit simpler process, when compared to other types of life insurance policy. The first thing that you will need to do is fill out an application. Nowadays, almost all life insurance applications are completed online. Most insurance companies will have people available to walk you through your application, though, either through chat support or over the phone.
Your application could be pretty short or it could be up to ten pages long. The application is going to ask you questions about your age, your weight, your occupation, your habits, your medical history, and more. You may also be asked about your blood type, level of activity, and family history. Longer applications are usually for traditional life insurance policies, though. Simple issue insurance, such as final expense insurance, may not have as extensive of an application.
Unlike traditional insurance policies, final expense insurance does not require a medical exam during your application process. The coverage you’re eligible for and your premium amounts will be determined solely based on the answers that you give on your application. Just make sure that you are completely honest. Some questions you’ll probably see on these shorter applications could include:
- Are you currently bedridden, hospitalized, in a care facility, or receiving hospice care?
- Do you have a disease of the heart, including heart attack or heart surgery?
- Do you have a disease of the circulatory system, including stroke?
- Do you have cancer?
- Have you had a history of alcohol or drug abuse?
These, along with other questions, will help your insurance company decide if you qualify. Even if you do answer affirmatively to any of those questions, or others you may be asked, you can still qualify for coverage. Final expense insurance is much easier to get for those who have had any of those issues, or any others, in the past.
After you’ve completed the application, you will receive a quote. The quotes you receive do not obligate you to do anything; instead, this is just how much coverage the particular insurance company is willing to give you and what you will pay for it. You are allowed to shop around with multiple companies and compare final expense insurance quotes.
When you decide on a policy, you simply need to get in touch with the particular insurance company you chose and they will help walk you through the rest. You may have to virtually sign documents, or appear in-person at an insurance agent’s office to finalize everything. After that, you will simply be responsible for paying your premiums.
What if my application for final expense insurance is denied?
It is always frustrating to put your time and effort into something and have it fall through. This is something that you may run into as you’re applying for different types of final expense insurance as well, though it is highly unlikely.
If your application is denied by an insurance company, they will likely disclose the reason to you. They may also be able to suggest other companies that might be more suitable for you or different types of policy offered by the company that denied your initial application.
Because final expense insurance is a type of simplified issue insurance, it is extremely unlikely that you will be denied. Final expense insurance is one of the easiest types of insurance to qualify for and you shouldn’t run into any problems. In the event that you do run into problems, for any reason, the insurance company that denied you will be able to help point you in the right direction.
How do I qualify for final expense insurance?
Qualifying for final expense insurance is not difficult. In fact, it is one of the easiest types of life insurance to qualify for. The applications are usually short, there are no medical exams, and even those who have been denied by other insurance companies or for other, more traditional, policies should be able to secure a final expense insurance policy without any issues.
During the application process, you will be asked the questions you read above along with others. Most final expense insurance companies want to know about the state of your health but this information isn’t generally used against you. Instead of saying that you’re flat-out unqualified, they will just use the information that you give them to determine how much coverage you’re eligible for or what your premiums will be each month.
One thing that you do need to look out for when it comes to final expense insurance is your age. This type of policy is usually offered to those over a certain age.
Some companies offer final expense insurance to people as young as 45 but most of them have a minimum age of 50. Some of them may also have a maximum age, typically 80 to 85.
Some final expense insurance companies, like Foresters Financial, offer coverage all the way up to 121.
Your biggest risk with final expense insurance is waiting too long to apply because many policies have age restrictions in place. It is easier to qualify for final expense insurance in general, though, and it is a perfect option to explore if you have had trouble getting a more traditional life insurance policy.
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How Much Will Final Expense Insurance Cost?
Final expense insurance is known for being one of the most affordable types of life insurance, especially when you consider that it does not require a medical exam. The overall average cost per month for $10,000 worth of coverage is $50. The amount that you will need to pay as your monthly premium is going to depend on a few factors, though.
If you are a smoker, for instance, you could see premiums as much as 30% higher when compared to what a non-smoker would be expected to pay. There are also some other health problems that you may have that could result in your premiums being higher. The reason that your premiums are higher in certain cases is to help ensure that you have your policy paid off before you pass away. As an example, a nonsmoker who purchases $15,000 worth of coverage at the age of 55 could pay just $41; a smoker of the same age could see rates closer to $56.
You will also find that the younger you are when you apply, the lower your rate will be. For example, we will look at a $10,000 final expense insurance policy. A nonsmoker whose health is typical for their age could pay as low as $25 a month if they apply for their policy at the age of 50. That same person, at the age of 65, could have to pay as much as $56 a month for the same coverage.
Your gender also is a factor when you purchase life insurance of any kind, including final expense insurance. For this example, we will look at just $5,000 worth of coverage. If a nonsmoking woman in typical health for her age applied for the policy at the age of 70, she could pay around $30 a month; a man of the same age with a similar health background could expect to pay roughly $40 a month.
As you can see, there are a lot of different things that will determine your final expense insurance premium. The best thing that you can do to help guarantee a better rate is to start shopping sooner rather than later.
One thing that you should know about your premiums, though, is that they are locked in. As you age, if your health changes, if you pick up smoking, your rate is going to stay the same throughout the life of your policy and will not go up. This is another reason that applying younger is better; you can lock in a great rate!
What happens if I die before the plan is paid?
There are a few different types of final expense insurance and the type you have will determine the answer to this question.
Typical final expense insurance policies are whole life insurance policies. You will be expected to continue to pay premiums on this type of policy until you pass away, even if the amount that you end up paying exceeds your coverage.
As an example, let’s say that you purchase a $5,000 final expense insurance policy at the age of 53 and your premiums are roughly $24 a month. If you live to be 78, you will have paid a total of $7,200 towards your life insurance policy. In the same example, if you live to be 67, you will have paid $4,032 towards your life insurance policy. In either case, the death benefit that pays out will be the same.
Burial insurance, when it is used to refer to preneed insurance, doesn’t function the same way. This is a type of prepaid insurance plan that pays directly to a funeral home and is specifically designed to cover end-of-life expenses and offer no death benefit to any of your surviving family members.
If you purchase a burial insurance policy with $8,000 worth of coverage, you will be required to pay premiums on that plan until you’ve put in the total face value of the policy. If you die before this type of policy is paid off, the amount that you have paid for will go directly to the funeral home. Any amount of money that was not paid into this policy will need to be covered out of pocket by your family.
Prepaid funeral plans function in an identical fashion, as well. If you pass away before the entire plan is paid, your family will be responsible for any remaining expenses. Keep in mind, prepaid funeral plans offered through funeral homes are generally considered a risky investment and typically do not provide the same value as a policy offered through an insurance company. Further, final expense insurance is regarded as the best value as opposed to a burial insurance policy alone.
Who can I list as a beneficiary on my final expense policy?
When you purchase final expense insurance as a whole life insurance policy, you are able to list whoever you want as a beneficiary. This is because final expense insurance policies are the same as any other whole life insurance policy except for the fact that the coverage amount is typically much lower than you could get with a typical life insurance policy.
When you select a life insurance beneficiary, you are able to leave details about how the death benefit should be used. There is nothing that requires your beneficiary to follow these wishes, though. Once they receive the death benefit, they will have the final say in how the money is used. Because of that, you should make sure that your beneficiary is someone that you trust. Many people choose a spouse, a child, or even a surviving sibling.
You may also be able to select multiple beneficiaries, depending on the insurance company that you choose. Keep in mind that the death benefit is generally smaller with final expense insurance, though, and it may not be wise to purchase a small policy and divide it amongst several people if you want to ensure that it goes towards your final expenses.
If you choose a burial insurance plan, though, you will not be able to select a beneficiary. Instead, you will need to select a funeral home where your service will be held in the event of your passing. All of the money you paid into the insurance company will go directly to the funeral home and there is no death benefit that will be paid to one of your surviving family members.
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What are the benefits of final expense insurance?
Final expense insurance offers a lot of benefits, especially if you’re someone who has been turned down for other more traditional life insurance policies in the past. Final expense insurance is available to those who are older and even those who are in poor health.
Final expense insurance offers smaller death benefits in comparison to traditional life insurance policies, which results in lower premiums. This means that this type of insurance is typically more affordable so it is perfect for those who have a limited budget or those on a fixed income.
The application process is very easy. Almost all final expense insurance policies are simplified issue whole life insurance policies, which means that there are no medical exams required. Instead of a medical exam, you will only have to complete a health questionnaire. Even those who are denied this type of final expense insurance still have another option, which is to seek out a guaranteed issue final expense insurance policy.
Your premiums will never increase and your death benefits will never decrease with this type of insurance. If you choose to borrow against the cash value of your death benefit, though, the amount will decrease unless and until the amount that you borrowed has been paid back.
Final expense insurance offers a guaranteed death benefit as long as you continue to pay your premiums. Death benefits are not taxable and can be used for any purpose that your beneficiary wishes.
Because final expense insurance is a type of whole life insurance, it will build cash value. This cash value can be accessed for any reason.
Final expense insurance is also much more flexible than any prepaid plan, whether that is through an insurance provider or funeral home. You can allocate funds towards your final expenses without being tied to a specific funeral home or location. You also do not have to create a plan for your funeral service when you purchase the policy unless you choose burial insurance.
What are the disadvantages of final expense insurance?
One of the biggest disadvantages of final expense insurance is that you could potentially lose money. Because the death benefits are smaller, you may end up paying more in premiums than the face value of the policy depending on how long you live after you purchase it.
If you allow your policy to lapse, all of the money that you have paid to the insurance company will be lost. This is true of any type of insurance policy, though.
You could end up purchasing a burial insurance policy that is a preneed policy rather than a final expense insurance policy if you fail to do your due diligence.
Death benefits are lower with final expense insurance and you may not purchase enough coverage when selecting your policy, leading your family to have to cover additional unexpected costs.
Your beneficiary has the right to use the death benefit however they see fit even though you designated the money to cover funeral and burial costs. This is a risk that comes with almost any type of life insurance. Since the death benefit is lower with final expense insurance, though, you need to make sure that you select a beneficiary that you trust will put the funds to the appropriate use.
The most important thing to look out for is misleading marketing. It is imperative that you do your research and understand how much your funeral and any other end-of-life expenses are going to be. This is crucial because some marketing tactics may mislead you and cause you to purchase more coverage than you actually need which will cost you more money.
Another disadvantage that you may face is that you may end up purchasing a final expense insurance policy, which is decidedly more restrictive when you could qualify for better coverage. The most important thing to avoid any of the disadvantages of final expense insurance is making sure that you do thorough research, read the fine print, and do not be afraid to ask questions.
When should I buy final expense insurance?
Final expense insurance is a good option but it isn’t the most attractive life insurance option for a lot of people. If you are younger and in good health, traditional life insurance options should always be your first step.
Traditional life insurance policies, whether you choose to get term or whole life insurance, are better options if you qualify for them. The death benefits on traditional life insurance policies are higher and you can secure lower rates by applying young and by passing a medical exam. If you’re able to get traditional life insurance, it is a better investment for you because you can get a better value out of your policy.
Final expense insurance is extremely affordable for what it is, but it does offer less value if you’re someone who could get some other type of life insurance policy. However, final expense insurance can be more affordable if you do not have a lot of money to put into a large policy. Because the death benefits are smaller, your premiums are going to be smaller.
If you’re older, have health concerns, or have struggled to qualify for other types of life insurance in the past, then you should apply for final expense insurance. Final expense insurance has fewer hoops to jump through in order to qualify, so you can still get coverage if you have health concerns that have kept you from being able to get life insurance in the past.
Final expense insurance is a good option for seniors, those who have serious health concerns, those who have retired and lost coverage, those who have a lower income, and those who have “aged out” of low premiums because they are purchasing their policy later in life.
If you choose to get final expense insurance, it is something that you should apply for as soon as you are eligible. You will pay less over the life of your policy if you apply for it sooner; some companies let you apply as young as 40 years old but some have age restrictions that require you to be at least 50. You should also make sure that you purchase a final expense insurance policy before you age out of the range that companies are willing to cover, which is generally 85.
In general, explore traditional life insurance options first. If traditional options are not a good fit for you, for any reason, then you should look into purchasing final expense insurance as soon as you are eligible.
Can final expense insurance be combined with traditional life insurance?
Yes, final expense insurance can be combined with other types of life insurance coverage. Final expense insurance policies are smaller because they are typically designed to pay just for things like your funeral and covering your burial expenses, as well as any other end-of-life expenses. Even though they are a form of life insurance all on their own, they can be combined with other policies if you wish to do so.
If you purchase specific final expense insurance in addition to your existing life insurance policy, you can guarantee that the death benefit of your main policy will not be needed when it comes to covering any expenses associated specifically with your passing. It ensures that your beneficiaries will get the full amount that you intend to leave them.
There are several reasons why someone may choose to do this. If you’ve encountered health problems and have started to accumulate more medical expenses than you originally anticipated, purchasing this type of policy can help offset some of those costs when you pass away.
If you’ve experienced other changes in your life that could increase the expenses your family will encounter after you’re gone, this can be a simple way to add additional coverage without impacting your current policy or premiums that you pay on that policy. It can also be a simple way to secure additional coverage if your health has declined as you’ve gotten older.
Final expense insurance also tends to pay out much sooner than other types of death benefits. This can help your family in an immediate sense when you die, so they won’t have to pay for any of your end-of-life expenses out of pocket while they wait for your other life insurance policy to pay out.
Finally, if your primary life insurance policy does not have a guaranteed death benefit, or if you’ve purchased survivorship life insurance, having final expense insurance in place is a great way to protect your family from any undue financial burdens when you pass away.
Final Expense Insurance: The Bottom Line
Final expense insurance is a type of whole life insurance that is easier to qualify for and can be more affordable than traditional policies. It’s a great option for anyone who doesn’t have a traditional life insurance policy and wants to help protect their family once they’re gone. Death benefits pay directly to your beneficiaries in a lump sum after you pass away. Your death benefit is guaranteed as long as you pay your premiums.
Burial insurance is a term that is sometimes used to refer to final expense insurance but can also refer to a preneed or prepaid policy. These policies will pay directly to the funeral home, hold no cash value, offer no death benefit for family members, and need to be paid in full. If the policy isn’t paid in full before you pass away, your family will be responsible for covering the difference out of pocket.
Final expense insurance is a valuable investment but it is important to do your research and make sure that you’re getting everything you need out of the policy.
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