What is Final Expense Life Insurance?
What is final expense life insurance? We get the question all the time so wanted to take the time to answer it?
Understanding “what final expense life insurance” is, is a huge factor before deciding to purchase a policy
Final expense insurance and burial insurance policies are a type of whole insurance policy, but come with limited underwriting and lower death benefits. These insurance policies are commonly referred to as:
A lot of people get confused by the different names of the insurance policies, but they offer the same benefits with slight differences. Seniors, who want to leave money behind for their families after their death to pay off debts or cover funeral costs, should acquire burial insurance.
What is Final Expense Life Insurance? Explained In Depth
Most people confuse final expense insurance and burial insurance by assuming that they are different life insurance policies, but they are the same. The names of the policies are different, but both policies are a type of whole life insurance policy for the elderly. They offer death benefits that are less than $50,000. The amount is enough to cover the individual for life and will give a large payout to the beneficiaries to cover funeral costs when they pass away.
The best thing about burial insurance policies is that they have a short underwriting process. Final expense insurance policies are generally more expensive than whole life insurance policies that are fully written because the insurer has limited heath information about the individual.
Final expense insurance policies come with a cash value component and a small part of the premium funds the cash value. This is the reason why these policies can become expensive. You will have three different options for paying final expense insurance, depending on your health and the insurance company. These three options are as follows:
Ø Fixed period
If you are working and have enough money to pay the premiums, this is the best option for paying final expense insurance. You will no onger have to worry about paying premiums once you retire. You will get permanent coverage for around 10 to 20 year and will be paying higher rates, after which the policy will be locked for life.
Ø Lump sum
If you’re in poor health and are shopping for final expense insurance, you may be asked to make the premium payment in a lump sum amount. This option can work out in your favor because you won’t have to worry about making monthly payments.
Ø Periodically (monthly or annually)
This option will mean you will have lower premium payments, but you will be paying off a higher amount, depending on the length of time you live. You also run the risk of losing your coverage if you forget about making payments regularly.
The Difference Between Final Expense Insurance and Burial Insurance
Before we move on to discuss final expense insurance, it is important that we answer this question so that there aren’t any doubts. To do that, we have shared the definitions of both final expense insurance and burial insurance below.
Burial Insurance definition- What is final expense life insurance
A type of whole life policy ranging from $5,000 to $25,000 in which the primary purpose of the death benefit is to cover burial or funeral home expenses. The policy pays out a lump sum death benefit to the beneficiary upon the death of the insured. Some companies market burial insurance as pre-need insurance, which are small whole life policies with an increasing death benefit..
Final Expense Insurance Definition
A type of whole life insurance policy ranging from $5,000 to $25,000 where the primary purpose of the lump sum death benefit payout is to cover burial expenses, like a grave marker and cemetery plot, and other final expenses like outstanding debts that are not forgivable upon death.
(Note: Some funeral insurance policies will have named the funeral home as the beneficiary. You should always name a family member as a burial insurance beneficiary, so that the money is given to them, instead of the funeral home.)
1. Final expensive insurance policies
These are designed to cover all final expenses after the cost of the burial has been covered.
2. Burial insurance policies
These are designed to only cover the cost of the funeral, and are also known as the funeral insurance policies.
Best Final Expense Life Insurance Companies
If you are in excellent health, you will not have any problems in qualifying for life insurance policies, since there are a lot of companies offering permanent coverage. But when it comes to final expense life insurance policies, there are fewer options available in the market.
To save you time and money, we did all the hard work and evaluated the best final expense life insurance companies. We only focused on companies that offered the best insurance rates and coverage options. It is recommended that you conduct your own research before buying any type of insurance policy to get the best results.
We understand how difficult it can be to shop for life insurance policies, especially final expense life insurance policies. So, check out the best final expense life insurance companies below:
New York Life
Mutual of Omaha
Gerber Life Insurance
Payout During Waiting Period
|Premiums paid + 10% interest||Premiums paid + 20% interest||Premiums paid + 10% interest||Premiums paid + 10% interest||Premiums paid + 30% interest|
|2 years||2 years||2 years||2 years||2 years|
We believe that all these companies are offering people with competitive rates for final expense insurance. The choice ultimately rests with you, but out of all these companies AIG has better coverage. They are offering you a part of the death benefit upfront if you get a terminal disease, which allows you to cover medical expenses easily.
Burial Insurance vs Pre-Need Funeral Insurance: What’s the Difference?
We already discussed how burial insurance is commonly referred to as funeral insurance, but there is another term that may confuse you, which is pre-need funeral insurance. You should steer clear from pre-need funeral insurance because final expense insurance is better and offers you better coverage. In general, pre-need funeral insurance policies are like burial insurance policies, but they do have a few differences. Here is what you get with a pre-need funeral insurance policy:
If you are thinking about buying a pre-need funeral insurance policy, you should know that these types of policies aren’t legal in all states, since the beneficiary of the policy is the funeral home. You should also know that funeral homes don’t have strong financial ratings, which means it could go bankrupt before you die, and you could end up with nothing.
You can’t make any changes to pre-need funeral expense policies, which is another reason why you shouldn’t invest in them. Apart from that, the cost of funeral home services also increases with time. This means that the death benefit of your policy may not cover the costs when you do die.
Should I Buy Final Expense Insurance?
Deciding whether or not to purchase buying final expense insurance isn’t going to be easy. Most people don’t think they need it, but nobody can predict the future or their financial future, which is why it is better to be prepared. Your current financial situation and lifestyle will determine whether you think you need final expense insurance. The average funeral costs today are around $10,000, so the question you must ask yourself is: How long will it take you to save $10,000?
Can do you that in less than 10 years? If not, then you should buy a final expense insurance policy. In fact, there are even term life insurance policies that offer coverage for 10 years to seniors. If you have made up your mind and want to buy final expense insurance policies, you must find the right insurance company to buy the policy from. Again, we did all the hard work for you, and have picked out the insurance companies that offer the best final expense insurance policies:
|Guaranteed Universal Life Insurance||Simplified Issue Whole Life Insurance||Simplified Issue Guaranteed Universal Life Insurance||Guaranteed Acceptance Whole Life Insurance|
|Health questions and medical exam||Health questions, no medical exam||Health questions, no medical exam||None|
Maximum Death Benefit
|Over $1 million||Usually less than $100,000||Usually less than $250,000||Usually less than $25,000|
If you are a senior in good health, you will not have any problems in qualifying for guaranteed universal life insurance. That is like a term life insurance policy, which will offer you coverage till you reach the ripe old age of 121 or any other age mentioned in the policy. You can choose the amount of coverage you want and there will be a short medical exam. This shows that the most affordable option for covering funeral expenses will be a guaranteed life insurance policy.You will also get higher death benefits, which will come in hand if you have financial obligations or a mortgage to cover.
If you fail the medical exam but don’t need assistance for doing normal activities, you should choose a guaranteed universal or simplified whole life insurance policy. This policy will be more expensive because there isn’t a medical exam, but it is cheaper than final expense insurance. Most insurance companies even offer coverage that extends to $100,000 in coverage, but some even have death benefits that go till $500,000, ensuring that you can cover any financial obligation.
The most expensive life insurance policy available is the guaranteed acceptance life insurance, which isn’t recommended for burial insurance. If you’re not in good health, you should check the waiting period of the insurance policy because if you die in the waiting period, the beneficiaries will get a portion of the premiums that are paid along with interest. You must clear the 2-year waiting period after you buy coverage to ensure your family gets the full death benefit after your death.
Final Expense Insurance: What to Look For- What is final expense life insurance part 2
When you are looking to buy a final expense insurance policy, there are a lot of things that you should consider. After looking at multiple policies, we have identified the things you should focus on. The main criteria are:
Final expense insurance policies are offered on a term basis and are for the remainder of the insurer’s life. If you’re in poor health or have a terminal illness, you should choose a term policy. However, you should know that if you are still alive after the term has ended, then you will not receive any benefits.
Ø Coverage Type
Another important thing to focus on is the type of coverage you are getting in a final expense insurance policy. If you want an affordable option, then immediate burial plans are better since they don’t involve funeral home costs. A full-service funeral home plan will include stuff like:
A final expense insurance policy should also cover expenses like legal fees and unpaid medical bills.
Ø Coverage Amount
The amount of coverage you need is determined by what you need. You should assess all costs related to the funeral service to get an accurate estimate of the coverage you will need. Most funeral homes have packages with full services, which can be adapted to meet individual requirements. Once you have compiled a list of costs, you should go over the coverage amount with an insurance agent to ensure that you get the right numbers.
The Bottom Line
So what is final expense life insurance?
Hopefully this time around you have a better idea of the answer.
Death is an inevitable part of life and every individual must prepare for it. Therefore, it is smart to prepare for your death, even if you are in good health by buying a final expense insurance policy. It will give you peace of mind knowing that your loved ones won’t have to worry about finances, and will allow them to mourn and grieve in peace. There are a lot of options available in the market, so make sure that you make an informed decision when buying final expense insurance policies.
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FILED UNDER – LIFE INSURANCE FOR DUMMIES
Josh Martin is the founder of Good Life Protection. He began his career as a captive Agent working for New York Life Insurance Company. After continued education and designations, Josh founded Good Life Protection to provide consumers with more options and insurance that truly fits into your budget and health classification.