Final Expense Insurance

Final expense insurance which is also referred to as burial insurance and funeral insurance is a whole life insurance policy designed to pay for certain final expenses we leave our surviving family members when we pass away.

For most people, final expenses are made up for funeral and burial costs, unpaid medical bills, and nursing home expenses that were not paid by individual health insurance or Medicare. The practical purpose of having a separate insurance policy that is designated to cover final expenses is that since it’s a whole life insurance policy, it comes with the traditional guarantees and benefits of traditional life insurance:

• Lifetime insurance coverage – Your insurance company cannot cancel your final expense insurance for any reason as long as you pay your periodic premium.
• Lifetime level premiums – Once your final expense insurance policy is issued, your insurance company cannot increase your payments, even if you become terminally ill or must live the rest of your life in a nursing home or hospice, your insurance payment remains the same.
• Cash Value – As with traditional whole life insurance policies, your final expense insurance will build cash value over time while earning interest that is tax-deferred. You can access your cash value by using policy loans, withdrawals, or a policy surrender.

It’s also important to note that insurance companies who offer whole life final expense insurance will not require you to undergo a medical exam and in most cases, you can purchase as little as $5,000 in coverage. Many of the top-rated final expense insurance companies also allow for policies to be sold over the phone so there’s no need for a face-to-face interview with an agent.

One Type of Life Insurance but Three Kinds of Policies

Certainly, anyone who watches TV has seen commercials for “Guaranteed Acceptance” life insurance for seniors. While this is a type of final expense insurance, it should be considered as a policy of last resort because the rates are much higher than other kinds of final expense insurance. Here are the three kinds of policies that are available:

1. Level Benefit – The level benefit final expense insurance policy provides insurance coverage from the first day of issue and the death benefit is paid in full whether the death is the result of an accident or natural causes. Although there is no medical exam required for this policy, the applicants must answer a series of qualifying questions about their health and lifestyle.
2. Graded Benefit – The graded benefit final expense policy was designed for applicants who do not medically qualify for a level benefit policy. With the graded benefit policy, there is typically a percentage of the full death benefit if death occurs in the first three years. A typical benefit payout would be 25% of the full death benefit if death occurs in the first year, 50% if death occurs in the second year, 75% if death occurs in the third year and then 100% thereafter.
3. Guaranteed Issue (Guaranteed Acceptance) The guaranteed issue final expense policy was designed for applicants who have multiple or severe health issues and cannot qualify for a level benefit or graded benefit policy. Insurance companies that offer guaranteed issue final expense insurance will generally issue a policy to anyone who qualifies for an acceptable age bracket. There are a few caveats that applicants should be aware of before purchasing a guaranteed issue final expense insurance:

Higher Premiums – Since the insurance company is accepting an unknown health risk, the insurer is going to charge much for the life insurance.

Waiting Period – Guaranteed issue final expense policies have a waiting period of two or three years before they will pay the full death benefit if death is the result of natural causes. Typically, if your death occurs during the waiting period, the insurance company will pay your beneficiary the sum of all payments you’ve made to the company plus an additional 5 or 10 percent. Once the waiting period has expired, your beneficiary will receive the full death benefit in the policy.

It’s important to note that with most insurance companies, the waiting period does not apply to death from accidental causes.

Who should Consider Final Expense Insurance?

Like any other type of life insurance, final expense life insurance may not be the best choice for everyone. For example, individuals who already carry permanent life insurance like whole life or universal life may not need an additional policy for final expenses. Individuals who should consider final expense insurance are:

• Anyone (especially seniors) who do not currently have life insurance
• Seniors who have very little life insurance and have been dealing with health issues
• Seniors who only have group life insurance through their employer (this insurance is not portable)
• Seniors who may have cashed in their insurance during the crash in 2008
• Seniors who have term insurance (not lifetime coverage)

How much Final Expense Insurance should I Buy?

Certainly, you should only buy enough insurance that your budget can tolerate, but it’s important to make sure that you do not pass on financial burdens to surviving loved ones. The last thing you’ll want is for your surviving loved ones to stress over how they can pay for your funeral while they’re grieving the loss of their loved one. To establish a minimum amount of insurance you should purchase, consider how much an average funeral will cost.

According to Parting.Com, a national online resource for funeral planning, the average cost of a funeral in the U.S. is typically between $7,000 and $10,000. Here is how they break the numbers down:

While cremation is gaining in popularity, the traditional funeral is still the most popular manner for disposing of the deceased.

Here is a reasonable “ballpark” estimate of the main funeral costs.

It’s important to notes that funeral prices vary considerably between funeral homes and geographic areas of the country,

• • fee for the funeral director’s services: $1,500

• • cost for a casket: $2,300

• • embalming: $500

• • cost for using the funeral home for the actual funeral service: $500

• • cost of a gravesite: $1,000

• • cost to dig the grave: $600

• • cost of a grave liner or outer burial container: $1,000

• • cost of a headstone: $1,500

In this example, total costs would approximate $9,000….and that’s just for the “main” items.  There could be additional charges for things like placing the obituary in the newspaper and buying flowers. Read the full Article.

How much does Final Expense Insurance Cost?

As with other kinds of life insurance, the rates for final expense insurance are based on three main factors: your health, your age, and the amount of the death benefit.

Here are actual quotes for a $15,000 Final Expense Policy for a male and female non-smoker:

What if I Don’t Qualify for a Level Benefit or Graded Benefit Policy?

As we mentioned above, most independent agents will be able to offer a guaranteed issue final expense policy no matter how unhealthy you may be. As long as you are alive and under 86-years old, you can purchase final expense insurance if you agree to the increased pricing and the applicable waiting period.

Here are actual quotes for a $15,000 Guaranteed Issue Final Expense Policy for a male and female non-smoker: