What Is Final Expense Insurance?
Final expense insurance (also known as burial Insurance, funeral insurance and end-of-life insurance) is a type of life insurance that is focuses on covering the costs of funeral and burial expenses. Final expense is a type of whole life insurance that is geared towards senior citizens, in which the death benefit can be used to cover funeral expenses, burial expenses, medical bills, credit card debt, and even legal expenses. Final expense insurance is a popular option for many people because it is relatively inexpensive. While it is a more affordable option to other forms of life insurance, it also has a lower death benefit that typically ranges anywhere between $2,000 to $50,000 of coverage.
What Does Final Expense Insurance Cover?
Final Expense insurance does not only have to be applied to cover funeral or burial expenses. Final expense insurance can be used to cover a variety of cost payments, such as:
- Funeral costs
- Burial costs
- Medical Bills
- Everyday Bills
- Legal Fees
- Hospice Care
Benefits of Final Expense Insurance
Final expense coverage can help the people that you love cover end-of-life expenses upon your passing. Since this particular type of policy has a smaller death benefit compared to other standard term life and whole life insurance policies, there is no required medical exam. This makes final expense coverage fairly easy to obtain and typically is inexpensive. As long as pay your monthly premiums, your loved ones will receive a death benefit when you pass away. However, like any other form of insurance, there are some advantages and disadvantages one needs to consider before deciding on whether or not final expense insurance is right for you.
The most well known advantages with final expense insurance include:
Pricing
Final expense usually is less expensive than other forms of life insurance. Factors such as age, health, and the amount of coverage one needs, will determine the premium price.
Fixed Premiums
Premiums for final expense are locked in once approval is submitted. Your premiums will always remain stable and never increase as long as pay your monthly premiums and do not let your policy lapse.
No Medical Exam Required
While other forms of life insurance will need the individual to complete a medical exam, final expense does not require one. Since the requirements for final expense tend to be fairly lenient, this mean that seniors who have prior health conditions, can still qualify for a new policy. The only requirements a person needs to do, is answer several health related questions.
The Death Benefit Can Be Used For Other Cost Related Matters
One of the upsides to final expense insurance, is it’s flexibility. The death benefit the beneficiary receives after a loved one passes, can be used to virtually cover any other type of costs; not just funeral and burial expenses. The beneficiary can use the death benefit to cover funeral or burial related expenses, credit card debts, legal bills, cremation, medical bills, hospice care, and even regular day to day expenses. Any unused premium that is left, the beneficiary gets to keep as well.
Disadvantages Of Final Expense Insurance
Final Expense Can Sometimes Cost More Than Other Types Of Policies
Unfortunately, final expense insurance can sometimes cost more than other types of life insurance policies. If you are older and do not have the best health, you may notice higher premiums for final expense insurance. If so, you may be able to find cheaper options with other forms of life insurance.
Some Policies May Have Waiting Periods
Depending on who the insurer is, there is a possibility you may experience a waiting period. This means that a certain amount of time must pass before the benefits can be paid out.
Final Expense Insurance Typically Has A Lower Payout
Final Expense coverage typically ranges between $2,000 to $50,000. If one is looking for coverage higher than $50,000, then you would need to consider another form of life insurance, such as term life or whole life coverage.
There are two types of final expense policies available to choose from; “guaranteed life acceptance” and “Simplified Issue”. Both types of policies do have pros and cons.
Guaranteed Life Acceptance
A guaranteed life acceptance insurance plan, which is also called “guaranteed issue life”, can be an appealing choice for customers because it’s easy to apply for, a medical exam is not required, and there are no health questions to answer. Guaranteed life acceptance can be a good option to consider for seniors that have serious health issues and who are on a fixed income. However, there are a couple of drawbacks to consider before deciding on this particular plan. The first drawback is the coverage amount. Guaranteed acceptance plans are generally written with a low amount of coverage. The standard amount of coverage in a guaranteed acceptance plan usually ranges between $10,000 to $25,000. For most people, that amount of coverage is not nearly enough to suit their personal needs. If this is the case, then there are better options available that offer more adequate amounts of coverage, such as a whole life, term life, or universal life insurance plan.
The second drawback to guaranteed acceptance is the price. Guaranteed acceptance is one of the more expensive type of life insurance policies a person can choose from. Since there is no medical exam required, or health questions to answer, this means that the insurance company takes on more risk. Therefore, they are going charge more for coverage.
With this type of plan, there is either a 2 or 3 year waiting period once the policy has been issued. The exact waiting period, whether 2 years or 3 years, will depend on the company who the policy is with. What this means, is that if you die within the first 2-3 years of coverage, your beneficiary will not be eligible to receive the full death benefit. Any non accidental death during the waiting period, will result in a refund of your premiums.
Simplified Issue
A simplified issue insurance policy is the second type of final expense insurance. If you decide to opt for a simplified issue policy, you don’t have to worry about performing a medical exam since it’s not required. All you have to do is answer several questions regarding your health and lifestyle. When you apply, eligibility is determined on how you answer the questionnaire, as well as your prescription history. Then, with your permission of course, the insurance company will electronically examine your prescription history which will give them a better understanding about your health history. A simplified issue policy usually only takes about 15-20 minutes to determine if you are approved or not. Simplified issue is also a permanent policy that offers you coverage for your whole life.
Unlike a guaranteed acceptance policy, simplified issue can have no waiting period. This means you will be fully insured for accidental death or natural causes once your first premium payment is made.
How Does Final Expense Insurance work For Seniors?
The requirements for final expense insurance are very lenient. They don’t require a medical exam, and the companies’ underwriting is fairly lax.
In other words, seniors that have prior health conditions, can still qualify for a new policy.
Most final expense companies only require the applicant to answer some basic health questions.
Plans with health questions, if approved, have no waiting period. Upon making your first payment, you’ll be insured for the full death benefit.
At the same time, some policies have no health questions. Those are called guaranteed life acceptance plans.
With guaranteed life acceptance plans, you cannot be denied due to health, but remember that there is a two year waiting period. If you die due to natural causes within those first two years, the insurance company will only pay out a refund of your premiums paid with a small amount of interest.
How Much Does Final Expense Insurance Cost?
On average, a final expense policy typically costs between $30-$100 per month for $10,000-$15,000 of coverage. The exact amount that a final expense policy will cost depends on a few factors; your age, sex,gender, health, state of residence, if you use tobacco, and the amount of coverage you are looking to purchase. However, your age will always have the biggest impact on life insurance rates.
For example, the cost for final expense life insurance for seniors over 70, will be double the cost of someone in their 50s.
And final expense costs nearly double what someone in their 70s would pay.
Furthermore, if you have severe health issues, that may also increase your monthly premiums.
For example, someone with Emphysema or COPD, will certainly have a higher premium than someone without Emphysema or COPD.
Below is a sample final expense quote table that most seniors can qualify for.
| Age & Gender | $5,000 | $10,000 |
| 40 Year Old Male | $14 | $25 |
| 45 Year Old Male | $15 | $27 |
| 50 Year Old Male | $17 | $31 |
| 55 Year Old Male | $20 | $36 |
| 60 Year Old Man | $23 | $43 |
| 65 Year Old Male | $29 | $54 |
| 70 Year Old Male | $37 | $70 |
| 75 Year Old Male | $50 | $97 |
| 80 Year Old Male | $69 | $135 |
| 85 Year Old Male | $91 | $178 |
| 40 Year Old Female | $12 | $21 |
| 45 Year Old Female | $13 | $23 |
| 50 Year Old Female | $14 | $24 |
| 55 Year Old Female | $15 | $28 |
| 60 Year Old Female | $18 | $33 |
| 65 Year Old Female | $22 | $41 |
| 70 Year Old Female | $28 | $53 |
| 75 Year Old Female | $37 | $71 |
| 80 Year Old Female | $70 | $136 |
What Does Final Expense Insurance Cover?
Final Expense insurance for seniors will pay out a cash benefit to your loved ones, so there is no worry about having to come out of pocket for your end-of-life expenses.
There are also no restrictions on how they can spend the payout money, which means they can use the proceeds for non-funeral costs, including:
- Cremation Costs
- Embalming
- Burial Costs (including casket, vault and viewing)
- Headstone
- Cemetery Costs
- Credit Card Debt
- Legal Bills
- Medical Bills
- Flowers
- Opening and Closing of Grave
Your loved ones will get to keep any unused funds.
How To Qualify For A No Waiting Period Final Expense Policy
A no waiting period final expense policy means that you are immediately covered for natural and accidental causes of death.
Even if you pass away on the effective date that the policy starts, the insurance company still has to pay out the full death benefit.
Fortunately, final expense policies were built so seniors with health conditions can still qualify for immediate coverage.
Understand that some high-risk health issues, such as having a terminal illness, would make a waiting period unavoidable.
It’s important to understand that you must qualify for insurance products with no waiting period.
To do so, you must apply with a company that requires you to answer health questions with no medical exam necessary.
For example, Mutual of Omaha’s final expense coverage, which is called “living Promise”, has no waiting period, but you must answer their health questions to qualify.
It’s also worth noting that almost all immediate coverage options are only sold through licensed insurance agents.
If you want to purchase final expense coverage with no waiting period, then you will need to buy through an agency.
Companies like Colonial Penn that allow you to apply online fully, or through the mail, have a waiting period. Not always, but most of the time.
Do You Need Final Expense Insurance?
If you currently have no means to pay for your funeral costs, final expense insurance is the perfect solution to ensure your family isn’t stuck with the burden of unpaid funeral bills.
The NFDA (National Funeral Directors Association) reports that the average cost of a funeral is $8,300 (including casket and burial). The NFDA also reports that the current average cost for a funeral with cremation, is $6,280.
Most American families are already struggling. So having to financially stomach a $10,000 unexpected bill, can place an even greater financial burden on the family.
That is why final expense life insurance is the ideal way to ensure your passing won’t result in a financial burden.
