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Defining Final Expense Insurance (Burial Insurance)

Final expense insurance is a form of insurance that is normally sold to seniors seeking life insurance (over age 50). The desired reason for the purchase of this insurance is normally the payment of funeral, burial, and other related costs, along with any unpaid bills. Since the average funeral now can cost as much as $10,000 or even more, it’s very important to prepare ahead of time for these large expenses. In addition to a mortgage, car payments, or credit card debts, you may be leaving behind numerous unpaid expenses that could be difficult for your spouse, children or other family members to pay for should they have to deal with your sudden loss.

A final expense policy can be issued in several forms. It can be either a term policy or a permanent policy. The same as with a regular term policy, a term life final expense policy will provide a death benefit but no cash value build up.

A whole life final expense policy is a permanent plan will offer you insurance coverage along with a cash value accumulation. Just like other types of permanent whole life policies, the cash that is inside the policy will grow on a tax-deferred basis.

Meaning that there will be no taxes due on the growth of the cash value until the time of withdrawal. And, the policy owner is allowed to borrow or withdraw the cash value if he or she needs cash for any reason. (Although, any unpaid loan remaining at the time of death will be deducted from the amount of the benefit that is paid out to the policy’s beneficiary).

Typically, the death benefit will range from $10,000 and $25,000. This is because these policies are not being used for large debt payoffs or the payment of estate taxes, but normally just primarily for costs of final expenses. Just like other types of life insurance benefits, the payment from the policy is received income tax free.

Most final expense policies will cover an insured individual up to age 100. Also, applicants for final expense coverage will not normally need to go through the stringent underwriting requirements.

Often times, final expense plans are guaranteed issue. This means the insured will not be asked any underwriting questions. Sometimes, a policy will be referred to as simplified issue. In this case, the insured will only be required to answer limited health questions.

For this reason, and in order to make up the cost of covering more risky insureds, most companies will use graded benefits. Meaning that if the insured dies within the first two or three years that the policy is in force, the beneficiary will only receive a smaller portion of the total death benefit rather than the entire death benefit.

Once the policy has been in effect for the graded number of years, the beneficiary will receive the entire amount of the death benefit.

Final expense coverage can provide many people who would be denied for traditional life insurance with the chance to obtain insurance.

What is the Purpose of Final Expense Insurance?

There are several reasons that one should consider the purchase of final expense coverage. These are just but a few of the many reasons to consider Final Expense:

1. Proceeds for Paying Off Your Final Debt

One of the biggest reasons to purchase final expense life insurance is so that there will be monies available for paying off the funeral and other related expenses of the insured. In many circumstances, people will purchase additional final expense coverage so that their family members can pay off any remaining debt.

2. Supplement to Other Life Insurance Coverage

Even if a person already has other life insurance in force, these policies may be earmarked for other needs, such as paying off a mortgage or providing a surviving spouse with ongoing retirement income. Having an additional policy that is dedicated solely to paying off final expenses, then, can be smart financial planning. Oftentimes, due to its lower face amount of coverage, final expense insurance will be very affordable.

3. Qualification, Even With Adverse Health Conditions

Due to its no medical exam feature, a final expense life insurance policy may allow someone who has certain health issues to still qualify for coverage – even if they have been turned down in the past for a life insurance policy. Therefore, in some cases, final expense insurance can offer people a “backup plan” for obtaining life insurance protection, such as with a guaranteed issue policy as well.

4. No Medical Exam

Having no medical exam can also provide other individuals the opportunity to obtain life insurance coverage, too. For example, there are some people who have a fear of needles. For these individuals, final expense coverage can allow them to obtain life insurance protection, yet without having to go through a needle stick for the blood test that is often required with traditionally underwritten policies.

5. Coverage is Issued Quickly

For those who need coverage quickly, final expense life insurance can also fit that requirement. In many cases, these policies can be approved and issued within just a few days – or even sooner.

For What Type of People is Final Expense Insurance Best Suited?

While people of all ages can usually purchase final expense insurance, this type of coverage is typically sold to seniors. Age is one of the biggest factors in determining rates for traditional life insurance. The older that we get, the more expensive that it becomes. As a lot of people get older, their need for life insurance decreases, they no longer have children that are dependent on their salary. They no longer have a huge mortgage or car payment. With little need, and expensive life insurance premiums, the majority of seniors then turn to final expense insurance instead. Because of this, a final expense policy can be a great alternative for more traditional forms of coverage – especially if a senior has already been turned down for coverage elsewhere.

Will Final Expence Covearge Work if I’ve Already Prearranged My Funeral?

In addition to purchasing final expense life insurance, some people may also make pre-arranged funeral plans with a particular funeral home. In doing so, the funeral home could be named as the beneficiary. That way, the payment from the final expense insurance could go directly towards paying for the individual’s service.When considering a final expense life insurance policy with other financial planning needs, these plans can serve as good alternatives for individuals who simply need a way to pay for their funeral and other related costs without disrupting estate assets and other savings or inheritance that is earmarked for their loved ones.

Consider These Things Prior to Purchasing a Final Exense Policy

Prior to purchasing final expense insurance, there are several things to consider. First, it is important to decide on the type of coverage to obtain. For instance, should the policy be term coverage that offers only death benefit protection, or alternatively, should it be permanent coverage that offers both a death benefit as well as a cash value component?

Once the type of policy has been determined, the appropriate amount of death benefit should be considered. In doing so, an approximation of potential final expenses should be added up – including the potential cost of a funeral, headstone, and burial plot, or alternatively the price of cremation and related costs thereof. Making some calls to local funeral homes in the area can help to narrow down these figures.

In addition, once the above determinations have been made, it is also important to review the financial strength and claims paying reputation of the insurance company that will be underwriting the final expense life insurance. Information on potential insurers can be obtained by checking their ratings from agencies such as A.M. Best and Standard & Poor’s. It is usually best to stick with insurers that have ratings of at least an A or better.

Where Do I Go to Find the Best Final Expense Plan Premium Rates?

Getting the best rates can depend on many different factors. The best ways to keeping your rates low are:

1. Shop Many Different Companies.

When shopping for insurance, it is best to work through a company that has access to more than just one life insurer. This way, you can obtain policy information and premium quotes from several different life insurance companies, and you can see what exactly is available to you. You will also see that the rates for this type of coverage can vary a great deal from one life insurance company to another – even on similar types and amounts of life insurance coverage.

2. Find The Right Payment Plan.

Most plans are paid monthly. However, you can pay them on a yearly basis and get a smal discount. Most carriers do not offer credit card payments, but , if they do, they will probably charge and additional fee.

3. Look For Reviews.

Many companies will have reviews that were posted by previous customers. By reading these reviews, you can choose a company that has experience and reputation, which will make decisions less stressful. Make sure your carriers is an AM Best A Rated carrier, at a minimum. This will let you know that they can pay their policy holders.

4. Plan Your Own Funeral.

This is a tip for saving funeral and burial money. Our loved ones want to honor us in a grand way even if they cannot afford it. By planning your own burial and funeral, you can choose how much to spend and purchase insurance accordingly.

5. How Is Your Health?

Make sure you have a clear understanding of your current and past health. Most carriers will look back to about 5 years. If you have a severe health condition you only option may be a guaranteed issue life insurance plan.

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