Final expense insurance is a type of life insurance that is designed especially for funeral expenses. It is also known as burial insurance. This insurance policy is relatively more affordable than individual insurance, and it provides funds for funeral expenses when the policyholder dies. If you are not eligible for an individual life insurance policy, then you can consider a final expense insurance policy.
Final expense insurance pays the beneficiaries the death benefits to cover the burial expenses. However, the beneficiary can also use the death benefits for another purpose. This type of insurance policy is popular among seniors, and it is more affordable.
What is Final Expense Insurance?
Final expense insurance is a whole life insurance policy that has a small death benefit and is very easy to get approved for. It covers medical bills and funeral expenses when you pass away. It is a very popular choice among senior citizens.
This whole life is known as funeral insurance, modified whole life insurance, simplified issue whole life insurance, or burial insurance. These insurance policies are usually open to people from the age of 50 and above and given at low coverage amounts.
Final expense insurance is akin to life insurance. In this insurance coverage, the insurer sells the policies to make them cheaper. There is a death benefit created to cover all the expenses, such as memorial or funeral services, cremation or embalming, and a casket. The beneficiaries can also use the death benefits for other purposes, such as taking a vacation or paying property taxes.
How Does Final Expense Insurance Work?
As soon as you have your policy, the premiums can’t increase, and the death benefit can’t decrease. Unlike a term policy, a whole-life policy doesn’t expire when you reach a specific age. A whole-life policy also gathers cash value that you can borrow against while you are still alive.
Your unpaid loans will reduce how much money your beneficiaries will receive when you die. There is no medical exam required when you apply for final expense insurance. However, you will answer some health-related questions. Due to the health questions, certain people won’t qualify for a policy with coverage that starts on the first day.
If you have no life insurance with your employer or don’t have any individual life insurance policy, then you can consider final expense insurance. You will be asked a few basic questions about your health. Final life insurance companies are created to offer death benefits with an insurance premium to suit your budget.
The premiums are more affordable due to the smaller death benefit. This insurance policy is also permanent. Regardless of when you die, the beneficiaries will get the death benefits you leave for them as long as you pay the premium. Final expense insurance might not be enough to cover everything; however, it can help your loved ones cover some bills.
Benefits of Final Expense Insurance
Final expense insurance has several perks that make it an excellent option for seniors. This insurance policy is not only affordable, but it also offers several perks, such as:
- The premium amount never changes, and this can be very useful for budgeting.
- Due to the lower coverage amount, it is affordable.
- The insurance policy can’t be canceled even if your health gets worse.
- It can be a good choice for people who aren’t able to get other insurance due to their health or age but want to lessen the financial burden for their loved ones.
- Coverage is guaranteed.
- The death benefit can be used for any other purpose.
- It can relieve the worries of your beneficiaries because it gives them money they might need to cover the expenses related to your death.
- This type of insurance policy develops a cash value over time so that you can borrow from it or make use of it as collateral.
- The death benefit is not taxable.
- The premiums never increase.
- The policies are available to applicants with poor health.
These are the perks of buying a final expense insurance policy.
Types of Final Expense Insurance Policy
There are two major types of final expense insurance policies, and they are:
• Simplified Issue Life Insurance
If you apply for simplified-issue life insurance, you will be required to answer questions concerning your health; however, you won’t take any medical exams. The insurance company gathers additional information about you through third-party sources.
This includes details about your prescription drug use and driving record. With simplified life insurance, you can typically know if you have been approved after filling out the application. One of the merits of having a simplified-issue life insurance policy to cover the cost of your funeral is that it is much cheaper.
Simplified-issue policies also have higher death benefits that are available than guaranteed-issue life insurance. This type of policy will have graded death benefits, which means your beneficiaries won’t get a full payout if you die from an illness within the first year of buying the policy.
• Guaranteed Issue Life Insurance
If you purchase a guaranteed-issue life insurance policy to pay for your burial, then you won’t have to answer any health-related questions. There is also no medical exam, and you also can’t be denied coverage.
Although guaranteed-issue life insurance is very easy to get, there are some downsides, such as how expensive it is to buy life insurance. You also need to be at least 50 to buy guaranteed-issue life insurance, and it usually has a graded death benefit.
How Much Does Final Expense Insurance Cost?
The cost of your final expense insurance is determined by your age, health, gender, coverage amount, and the state in which you live. Some websites offer calculators that give you an estimate of your cost. To get a cheaper rate, you can shop around and compare rates.
Do I Need Final Expense Insurance?
If you have investments, substantial savings, and life insurance, then you don’t need final expense insurance. However, with the rising cost of funeral expenses, you might want to consider a final insurance policy to assure your family has what it needs to cover the bills associated with you passing away.
This insurance policy is also an option if you are unable to afford the regular insurance that can lessen the financial burden you’re passing away might have placed on others. Note that even if your estate has sufficient money, a final settlement can sometimes take up to a few months. Final expense insurance can give your beneficiary quick access to a huge sum of money needed at such trying times.
What Can I Use the Final Expense Death Benefit For?
You can use the death benefit of final expense death benefits for anything. You can use the money to cover medical bills, flowers, funerals, or nursing home costs. The beneficiaries can also use the money to pay their credit card debt.