Final Expense Life Insurance
Written By Doug Mitchell
Holly Mitchell &
Rob Pinner &
Many people view life insurance as a way of replacing their income after they die.
However, it is not always about income.
Burials, cremations and funerals often cost a lot more than people think they do. So, it is important to understand options like final expense life insurance.
There are a lot of different options for getting life insurance, and each of them have their pros and cons.
Today we look at final expense life insurance.
What is Final Expense Life Insurance?
Final expense insurance, also known as burial or funeral insurance, is a type of life insurance policy specifically designed to cover the costs associated with a policyholder’s final expenses, such as funeral, burial, cremation, and related expenses.
While these may seem like straightforward expenses, they can actually be quite costly, often exceeding what many people anticipate.
According to the National Funeral Directors Association, the average funeral cost in 2023 is just over $11,000.
Final expense insurance can be a great way to cover these cost so that your surviving family is not burdened financially.
Unlike traditional life insurance policies that offer larger death benefits to cover items like paying off outstanding mortgage and replacing your income, final expense insurance policies typically provide lower death benefit values, ranging from as low as $2,000 to as high as $50,000.
This makes them a more affordable option for individuals who don’t a lot of coverage but still want to ensure their final expenses are taken care of. Final expense insurance is particularly popular among seniors who wish to offset the high costs of a funeral without burdening their loved ones with significant financial obligations.
One of the primary advantages of final expense insurance? It is easy to qualify and obtain. Even for individuals with pre-existing medical conditions or older ages. While premiums can vary based on factors such as age and health, rates will be locked in and never increase as long as you have the policy.
Final expense insurance serves as a practical option for people seeking peace of mind and financial security for their loved ones after their passing.
How Much Does Final Expense Insurance Cost?
The premiums for these policies vary, depending on the death benefit value and the policyholder.
For example, the rates for a 60-year-old male that buys a $12,000 policy will cost around $50 per month. That same $12,000 policy for a 75-year-old is over double at $108 per month. The older you are when you purchase your policy, the more it is going to cost you.
Here is a table to show you what a final expense policy can cost. We are using $12,000 for the policy face amount because of the average funeral cost being just over $11,000.
|Female $12,000 (monthly Rates)
|Male $12,000 (monthly Rates)
I would also like to point out that the cost to insure females is less than males. You can get a better idea of your cost by using the calculator on the side of this page.
Fortunately, the good thing about Final Expense policy premiums is that they stay level for the rest of your life. There’s no need to worry about the cost suddenly going up in the future and leaving you unable to pay for it.
What’s the Difference Between Final Expense and Burial Insurance?
There isn’t any difference. Final expense insurance goes by several different marketing terms like burial insurance, funeral insurance, and simplified issue or guaranteed issue whole life insurance. All of them to helping to cover end of life expenses.
These policies are typically purchased by older adults between ages 45-85.
Whole Life Insurance is the product of choice because other types of life insurance policies generally do not offer lifetime coverage and level premiums. The companies that offer final expense insurance also have liberal underwriting guidelines because the older we get the more likely we are to have health issues.
There are even a couple of companies that offer guaranteed Issue or guaranteed acceptance final expense insurance. This is for people that are extremely unhealthy. Maybe they have had a heart attack, developed cancer or are terminally ill. There are no health questions and coverage is guaranteed but there is a 2 year waiting period before the full benefits would be available.
Finally, since final expense life insurance policies are whole life insurance, the policyholders will be getting the same guaranteed benefits that come with traditional whole life policies:
- Guaranteed life insurance coverage for a lifetime as long as premiums are paid. Your insurer cannot cancel your coverage for any reason other than non-payment of premiums.
- Guaranteed level premiums. Once your policy is issued, the insurance cannot raise your premiums for any reason.
- Your policy builds cash value. Like traditional whole life insurance, your final expense insurance policy will have a cash value component that builds value over time by earning tax-deferred interest that can be accessed via policy loans or withdrawals.
What about a Medical Exam – Do I have to Qualify?
Nope. Final expense insurance policies are simplified underwriting and the rates reflect this. Prices for final expense insurance are slightly higher than traditional underwriting coverage. Insurance companies are aware of the medical issues that most seniors have to deal with and so the underwriting guidelines are liberal enough to help applicants qualify for coverage.
Some companies have more than one plan to accommodate seniors who may be dealing with severe or multiple illnesses. There are typically three plans to choose from:
LEVEL BENEFIT PLAN
The level benefit plan is similar to traditional life insurance and offers first-day coverage and a full death benefit if the insured dies because of natural or accidental causes. Level benefit policies are generally offered to applicants who are in good health.
GRADED BENEFIT PLAN
The graded benefit plan was designed for those applicants who cannot medically qualify for a level benefit plan. With a graded benefit plan, your insurer will typically pay 25% of the death benefit in the first year, 50% in the second year, and 75% in the third year. Once the policy has been in force for four years or longer, the insurance company would pay 100% of the death benefit. The graded benefit varies by insurance company so be sure to check for the best deal for your circumstances.
GUARANTEED ISSUE (Guaranteed Acceptance)
The guaranteed issue or guaranteed acceptance plan was designed for applicants who cannot medically qualify for a level or graded benefit plan. This plan typically has a two-year waiting period where if the insured dies from natural causes during the first two years, the insurance company generally pays the sum of all payments into the policy plus 10%.
However, if the result of death is due to an accident, the insurance company will pay the full death benefit starting the day your policy is issued.
Who Should Consider Final Expense Insurance?
Anyone concerned about passing on final expenses like funeral and burial costs to their family and children. Here are some common examples of when seniors should be especially concerned about life insurance:
- Employer-Sponsored Life Insurance – If you are still working and have life insurance through an employer group life plan, in most cases this coverage is not portable and therefore will not follow you when you eventually leave your employer.
- Term Life Insurance – If your current life insurance is term insurance, you should be concerned about outliving your coverage. Since final expense insurance policies are whole life insurance, you can purchase only the amount of coverage you need and lock in your monthly rate.
- No Life Insurance Coverage – If for whatever reason, you are not currently insured. Since life insurance rates are primarily based on your age and health, you will never be able to buy final expense insurance cheaper than you can today. Even if you’ve been previously turned down because of health issues, you can buy guaranteed issue burial insurance as long as you are 50 to 85 years old.
Another group of people who often buy burial insurance are those over 40 who because of certain health issues can’t get approved for a traditional policy.
How much Final Expense Life Insurance do I Need?
The amount of final expense or burial insurance you need will depend on the expenses or debts you want to be paid when you die. The minimum amount recommended is generally enough to cover your funeral, burial, or cremation expenses when you die.
Additionally, in many cases, many applicants want to leave some type of financial legacy to a surviving loved one or a favorite charity like their church.
Funeral and Burial Cost Estimates
The average cost of a funeral and burial can vary depending on various factors such as the location, type of services, and personal preferences. However, to provide you with a general idea, the average cost of a funeral and burial in the United States in 2023 is just over $11,000. It’s important to note that these figures are estimates and the actual expenses can be higher or lower depending on individual choices and circumstances.
The cost of a funeral typically includes various components such as professional services from the funeral home, embalming and body preparation, casket or urn, transportation, facility rental for the funeral service, viewing or visitation, ceremony or memorial service, and burial or interment fees. Additional expenses may include flowers, obituary notices, catering, and other related services.
Cremation Cost Estimate
The average cost of cremation in the United States can also vary depending on several factors, including the location, funeral service provider, and any additional services or preferences chosen. On average, the cost of cremation in the US ranges from $1,500 to $3,500. However, it’s important to note that this is a general estimate and the actual cost can be higher or lower.
The cost of cremation will not include a service. You can add at least $5000 to this cost for a basic service. Additional expenses may arise if there are additional requests and add-ons.
We can help you buy your final expense policy. We have a lot of carriers that want to insure you. Start by gathering a quote from the calculator on the side of this page.