What Is Final Expense Insurance – Our end-of-life expenses aren’t something many of us want to spend much time thinking about, but taking just a few hours to learn about and purchase final expense life insurance will alleviate many problems your loved ones could face when you pass away. We know their comfort is important to you, which is why we recommend a final expense insurance plan for many of our clients.
Today, we’re going to give you an introduction to what final expense life insurance is, how it works, and how much it costs.
What is final expense life insurance?
Final expense life insurance is also called funeral insurance or burial insurance. As the names imply, it is designed to help with the cost of a funeral or other end-of-life expenses. The average cost of a funeral is a whopping $10,000 – a hefty burden for your family to bear after you’re gone. Final expense life insurance plans are relatively small life insurance policies that help with those expenses.
Most policies range in face value (also called a death benefit) somewhere between $2,000 and $50,000. Technically speaking, these plans are considered whole life insurance policies.
How does final expense life insurance work?
Burial insurance is very straightforward. First, you select the amount of coverage you want by comparing the face value to the premium. Then, you designate a beneficiary to whom the money will transfer when you pass away. You make the monthly premium payments, and when you die, your beneficiary contacts the insurance carrier to start the claims process. They will need a copy of the policy and a copy of the certified death certificate to file the claim.
Funeral insurance is not intended to leave beneficiaries with large amounts of money – there are other kinds of life insurance plans that offer higher face values. However, they are able to use the funds however they need to at the time. They can pay for legal expenses, outstanding debt, and other costs not associated with the funeral. Essentially though, they are designed to pay for:
- Funeral arrangements, including the viewing and services
- Burial expenses, including cremation or embalming, a casket, a plot, the headstone, flowers, etc.
- End-of-life medical expenses
How much does final expense insurance cost?
The cost for a funeral expense life insurance policy depends on how much coverage you want and what kind of policy you have: guaranteed issue or simplified issue. Let’s review their differences and the cost of each one.
Guaranteed Issue Final Expense
This is the easiest way to obtain a burial insurance plan. Guaranteed issue policies do not require the insured to answer health questions or have a medical exam. You are granted a policy regardless of your current or past health conditions. That makes these policies advantageous to older individuals who have likely developed at least one major medical condition and would not be able to pass medical underwriting.
The downside to guaranteed issue is that since the insurance company takes a greater risk by insuring potentially unhealthy persons, the premiums are higher, even for policies with a small death benefit. The maximum death benefit for a guaranteed issue final expense plan is $25,000.
Some policies have a graded death benefit, which requires that the plan be in place for a minimum of two years before the entire face amount can be paid. If the insured passes away before the two years are up, the beneficiary receives 110% of the paid premiums. However, if death results due to an accident, most insurance companies pay the full death benefit regardless of how long the policy has been in place. Guaranteed issue plans never pay benefits if suicide is the cause of death.
Premiums vary based on the insurance company and the insured’s age and gender. For example, a 65-year-old female will likely pay around $35 per month for a small $5,000 policy or around $200 per month for a larger $25,000 policy.
Simplified Issue Final Expense
Unlike the guaranteed issue, you will have to answer health questions and undergo medical underwriting if you’d like to apply for a simplified issue final expense plan. You must also be between the ages of 45 and 85 to qualify for one of these plans. The advantage of choosing this kind of funeral insurance is that you can get higher death benefits – up to $50,000.
However, since an actual medical exam is not required, the premiums are still higher than other policies that require a physical exam. Like the guaranteed issue option, some plans have a graded death benefit rule.
Using our same 65-year-old female as an example, the premium for a $5,000 policy would be around $xx. For the full $50,000 policy, the premium increases to $xx.
Interested in learning more about final expense life insurance? Speak with a licensed insurance agent at Texas Medicare Advisors. We offer complimentary quotes and can help you determine how much coverage you need.