There is nothing as painful as losing a loved one.
As difficult as this experience can be, it is only made HARDER by financial burden. Final expense life insurance is one of the most affordable forms of insurance to help your loved ones deal with their grief rather than worrying about funeral expenses.
On average, expenses associated with death are more than $9,000, which can be very difficult for your family to come up with — especially while grieving.
Final expense insurance can protect your loved ones from selling their belongings or clearing out their savings to come up with the money they need.
Understanding Funeral Expenses
Final burial expenses often exceed $9,000. While funeral costs vary by area and even funeral home, average costs include:
- Funeral services fees: $1,000
- Funeral home facility charge: $800
- Casket: $2,300
- Embalming: $500
- Body preparation: $200
- Hearse: $300
- Transfer of deceased: $300
- Grave site: $1,000
- Grave-digging services: $600
- Grave liner: $1,000
- Headstone: $1,500
This puts the average cost for a basic funeral service at more than $9,000, although there may be other costs associated with a burial service, flowers, memorial cards, and more.
How Final Expense Insurance Works
Final expense life insurance is usually whole life insurance, which means your policy remains in effect for the rest of your life as long as you make payments. Still, some companies do offer term final expense insurance, which offers financial protection for a period of time, often to the age of 80.
Applying for final expense coverage is fast and straightforward. First, there are no medical exams. Some plans have a health questionnaire that you must complete where your answers determine your qualification.
On the other hand, there are guaranteed issue options that have no health or lifestyle questions. For these, your acceptance is guaranteed no matter how good or bad your health is.
All guaranteed issue life insurance plans have a 2-3 year waiting period. During this time, the insurance company will only refund your premiums plus interest if you die for any non-accidental reason. Only after the waiting period is over will they pay out the full death benefit to your beneficiaries.
If you want to get coverage with no waiting period, you must apply for a plan with health questions, and you’re subsequently approved. According to Anthony Martin, CEO of Choice Mutual, most applicants get a no waiting period plan.
Suppose you have health issues and want to avoid a waiting period. In that case, we highly recommend that you work with an independent broker. They will analyze options from dozens of life insurance companies to see if any of them will approve you for immediate coverage.
Final expense insurance typically pays a fixed death benefit that is paid directly to your beneficiary, who may or may not use it for your final expenses. In some cases, you must be between the ages of 50 and 80 to qualify. While this type of whole life insurance policy is designed for seniors, coverage is also available to young adults and children with some burial insurance plans.
There are usually no coverage options; final expense insurance pays out a specific, fixed amount upon your death. As long as you pay your premiums, your policy will cover you until the age of 100 in most cases. Your premiums will never increase and the cash value of your policy is tax-deferred.
- No medical exams
- Premium and monthly payments remain the same for life
- Your policy accumulates a cash value
- Your benefits will never be reduced and coverage will not be lowered
- Final expense coverage of $2,500 to $50,000
Are You Eligible for Final Expense Life Insurance?
Final expense coverage is typically very easy to qualify for as you won’t be required to take a medical exam.
Still, there are some restrictions. Most insurance companies will not issue any life insurance policies — including final expense insurance — if you are over the age of 85 as this exceeds the life expectancy for men and women. Some companies also require that you fall within a certain age range, usually 50-80.
If you have health issues, you may or may not have trouble qualifying for final expense coverage. During the application, you will likely be asked if you have been admitted or confined to a nursing home, hospital, or special treatment facility within the last two years or received treatment or medication for certain health problems, including cancer, stroke, heart disease, lung disease, and diabetes.
You may need to get a Guaranteed Issue final expense policy. Almost anyone can qualify for this type of policy but your beneficiaries will not receive a full death benefit if you die within the first two years. Instead, the premiums you paid plus interest will be paid to your beneficiary.
The Bottom Line
No one enjoys talking about end-of-life expenses but it is important to plan for these costs. A final expense insurance policy is an affordable way to make sure your family will have the money to cover your final expenses, although beneficiaries aren’t required to use the funds for this purpose.
Before you buy a policy, make sure you calculate how much your funeral will cost to ensure you get enough coverage to protect your family. The average funeral in 2015 costs between $8,000 and $12,000 so it may be wise to get a policy for at least $15,000 in coverage. You may also want additional coverage to help your loved ones pay off any debts you will leave behind such as credit card debt or a car loan. If you are looking for higher coverage amounts, a more traditional life insurance policy will make more sense.
Should you have any questions on final expense or anything at all related to life insurance, please don’t hesitate to contact our office. Glad to help.