Dealing with funeral expenses and end-of-life costs can be stressful for anyone. Choosing the right insurance policy to cover these expenses can make a huge difference.
A final expense policy is a great option for seniors looking to get coverage for end-of-life bills such as funeral expenses, hospital bills, and other costs.
This article will cover final expense life insurance for seniors, and tell you everything you need to know to find the best plan.
Life insurance is an insurance contract that covers a policyholder’s life either until they die or their policy ends.
These contracts offer the policyholder a death benefit in exchange for monthly or annual premiums, which are paid to the life insurance provider. When a policyholder dies, their beneficiaries will receive their death benefit.
Death Benefit: This is the amount of money your beneficiaries will receive when you die. It is sometimes known as the face value of a life insurance contract.
Premiums: These are monthly or annual once-off amounts that policyholders pay to their life insurance company in exchange for their life insurance coverage.
Living Benefits: Life insurance benefits and features that a policyholder can use while alive.
Riders: Specific clauses or features that life insurance companies add to a life insurance policy.
Beneficiaries: The people designated to receive the death benefit of a life insurance contract. Usually, a life insurance company will require a policyholder to list more than one beneficiary.
Some types of insurance plans also offer living benefits to policyholders on top of death benefits.
Some common examples of living benefits include:
A cash-value account: An investment feature that allows policyholders to add additional money to their policy which is then invested in various ways to generate a return. To find out more about cash-value accounts, read this article.
Disability Riders: Clauses or conditions in life insurance contracts that offer added coverage in case the policyholder becomes disabled.
AD&D Riders: A form of supplemental insurance that financially protects a policyholder in case they are injured in an accident.
Group Coverage: A policyholder may be able to add coverage for an additional person and pay an additional premium every month.
These days you can buy a range of life insurance products. While many people purchase life insurance to cover their assets and to provide for their family after they’ve passed away, some just want to make sure that they can protect their burial expenses.
One great option for older people is final expense insurance.
Final expense insurance is a smaller type of permanent life insurance that beneficiaries can use to pay for expenses like medical bills and funeral costs.
It is somewhat similar to ‘funeral insurance’ or ‘burial insurance,’ but the key difference is that beneficiaries can use it to pay for anything, such as hospital bills, estate transfer fees, or even college tuition.
Final expense insurance is designed to cover end-of-life expenses that include payment for caskets, headstones, transportation, doctors, hospital bills, cremation fees, venue fees, and funeral services.
When you die, your beneficiary (you can also choose to nominate more than one) will receive a tax-free check equal to your death benefit. The beneficiary can use the payout to cover your end-of-life expenses or use it for anything else. There are no restrictions on what the money can be used for.
Being a type of permanent life insurance, this is a policy that does not expire as long as the premiums are paid. A permanent policy carries a guaranteed cash value, whereas term life insurance, although cheaper, has a set end date after which coverage will end.
For example, if you get a 20-year term life plan and die after 21 years, your policy will not pay out a death benefit.
A final expense policy builds up value over time and is generally paid out following your death. After a certain period of time, you may also be allowed to cash out the insurance plan before death.
While traditional life insurance requires a full background check of your health history and a physical exam, final expense insurance requires answering a few questions to qualify. A medical exam isn’t required, not even if you live with a high-risk disease.
If your age falls between 50-85 you can usually get approved for a final expense insurance policy within a few days.
Final expense death benefits can be used to cover costs such as:
The beneficiaries of the policy, however, are allowed to use the payout for whichever purpose they need to. The death benefit could be used to pay for property taxes or even to go on a vacation.
Final expense insurance works in the exact same way as other life insurance policies.
As long as you continue paying your monthly premium, your coverage will continue and your beneficiaries will be able to claim the policy’s death benefit when you die.
If you decide to get final expense life insurance, you usually won’t have to go through a detailed underwriting process.
Underwriting is a risk assessment that life insurance companies do before they accept a person’s application. During the underwriting process, insurance companies look at your:
Family medical history
With final expense insurance, all you’ll have to do is answer a health questionnaire.
Our insurance company will also want to know about any previous health conditions or chronic diseases you and your immediate family were diagnosed with.
Life insurance policies are contracts between policyholders and insurance providers. If people lie in their application forms, their life insurance companies will not pay out their death benefits.
A common example is people lying about tobacco use or a preexisting condition. If an insurance company finds evidence that you lied at any point in your insurance application, they will nullify your contract.
The premiums you’ve paid might also be forfeited to the insurance company, which means your beneficiary won’t get anything from your policy.
To avoid this, always be honest with your life insurance provider.
Once you sign your final expense life insurance contract, you’ll have to pay a monthly premium to keep your coverage.
As long as you were honest in your application and you’re up to date with your premium payments, your beneficiaries will be able to claim your policy’s death benefit.
Once a policyholder dies, beneficiaries are required to contact their life insurance company to make a claim. If your beneficiaries aren’t prepared properly, they’ll struggle with lodging a claim to receive your policy’s death benefit.
Use these tips to help your beneficiaries make a claim when you’ve passed away.
Discuss the existence and nature of the policy with your beneficiaries Store all of the important information they’ll need in a secure location Instruct your family on what they need to do to make a claim Give your lawyer or another trusted person your policy numbers
If you’d like to learn more about making claims on life insurance policies, read our related guide.
One of the major benefits of final expense insurance is that it is more affordable than traditional term or permanent life insurance.
Because final expense plans have a smaller death benefit (up to $50,000), they usually cost between $50 and $150 per month.
Each person gets a personalized rate based on their age, health, and lifestyle. Life insurance companies calculate monthly premiums based on:
For example, a 56-year-old with no chronic conditions will likely pay less than an 85-year-old with high cholesterol, diabetes, and high blood pressure.
This is because the younger healthier person has a lower risk profile. Life insurance companies use risk profiles to assess the likelihood of premature death and base their pricing on a person’s overall risk profile.
A final expense life insurance policy can offer your loved ones some financial security following your death.
With final expense insurance being a more affordable policy that doesn’t require a medical exam or a declaration of preexisting conditions, it could be a viable option for you.
The policy is also permanent and as long as you have paid your premiums, the beneficiaries are guaranteed the death benefit once you die.
Your final death benefit may not be able to cover something like a large mortgage, but it will help your loved ones pay end-of-life bills, funeral costs, and other expenses.
If your family already has a plan to pay for your final expenses, perhaps a final expense life insurance policy isn’t ideal for you. Before making a decision, take a look at the pros and cons listed below:
|Policies are available for people with preexisting conditions that may have barred them from other life insurance policies.||Sometimes it is difficult or confusing to understand the information on your insurer’s marketing material.|
|The application process doesn’t include a medical exam, but rather a short questionnaire and prescription history at most.||The information on the marketing material may not be complete and something important may have been left out.|
|The premiums that you pay never increase, nor do they decrease. Often, other life insurance premiums increase with time.||Because final expense insurance policies have relatively low death benefits, you may end up losing money if you live long enough that your premiums already paid start outweighing the amount that your beneficiaries will receive from the death benefit.|
|Your insurer cannot decrease your policy’s death benefit unless you borrow against the policy’s cash value or request an accelerated death benefit.||Without any major health problems, insurers may attempt to steer you toward a more expensive and restrictive policy even though better coverage is available.|
|The beneficiaries of the death benefit may use the payout as they please.||The policy beneficiary isn't required to use the money for your funeral or other end-of-life costs. Ensure that you have a trusted beneficiary to take care of your wishes after you pass away.|
|As long as you pay your premiums and don’t have a term policy, your death benefit is guaranteed.||The average cost of a funeral is about $8,000, but that just covers the actual funeral itself. Other costs can add up to a whole lot more. Final expense insurance offers less coverage than other types of insurance, usually ranging to upwards of $25,000 for more expensive plans. It's worth considering whether or not this will provide enough return on your investment.|
|The death benefit is tax-free.||There are other more affordable ways to get a typical life insurance policy in relation to the extent of coverage that other policies may provide. Traditional investments that can yield financial returns may be a better option.|
If you’d like to find the best plan for your situation, it’s a good idea to contact one of PolicyScout’s insurance consultants to help you through the process.
Many people think that final expense insurance is the same as burial insurance. Both of these insurance plans are affordable options that have smaller death benefits. There are, however, key differences.
Burial insurance is insurance coverage for a specific expense. If you get burial or funeral insurance, your beneficiaries can only use the payout to cover the costs of your funeral.
With final expense life insurance, your beneficiaries can use your policy’s death benefit in any way they choose.
For example, if you were hospitalized before your death, your beneficiaries would be able to use your final expense insurance to pay any outstanding medical bills.
Let’s say you want to help your children pay for their first house after you die. With final expense insurance, they’ll be able to contribute some money toward this goal.
With burial insurance, your family would only be allowed to pay for your funeral with the death benefit and they would have to cover the medical bills with money from your estate.
Burial insurance can’t be used to help your family pay for things that they might prefer should all your end-of-life costs have been met, like a down payment on a house, or a family vacation.
So, in a sense, final expense insurance can be used as burial insurance, but burial insurance can’t be used to pay all of your final expenses.
A final expense policy is a good option for people who want to cover burial expenses along with other costs. Burial insurance or funeral insurance is better for those who only want their funeral costs covered.
If you’re thinking about getting a final expense insurance plan, here’s how to find a plan that will suit your needs.
1) Do your research: Read through your different life insurance options and make sure that final expense cover is right for you. While it may be affordable and easy to get, you might need to consider something else to cover all your debts and other financial obligations.
2) Get quotes from several insurance providers: Typically, older individuals will usually pay higher premiums for life insurance as they have higher risk profiles than younger people.
Our advice is to shop around before you make a decision and to ask your friends and family if they think you’re getting a good deal.
3) Use an insurance agent to help you find the best providers and plans: Insurance agents are experienced and knowledgeable about your state's different plans and providers. They can save you time and money if you want to find the best plan quickly.
4) Ask questions and make sure you understand everything about your policy: Life insurance is supposed to offer you peace of mind. The last thing you want is unexpected bills and complicated contracts that you don’t understand.
5) Look at the qualification criteria for your preferred plan and read through the application process: You can save time and avoid lengthy delays or rejections by reading up on what your preferred provider requires when you apply.
6) Look at your preferred life insurance company’s track record: Find out what current customers think of the company and look out for any red flags, such as:
Claims frequently being denied
Poor customer service
Long application times
7) Look for a better deal if you already have life insurance: Speak to an insurance professional to see if there are more affordable alternatives that you can get. There are a number of different insurance products out there. With the right advice, you may be able to save money and get a similar level of coverage.
If you’re interested in learning more about final expense insurance, reach out to one of our experienced agents to find out how you can get covered, save money, or change to a better plan.
Final expense insurance may not be for everyone and isn't the only way to help cover end-of-life costs. Here are a few alternative options:
If you are coming towards the final stage of your life and you have saved enough money, it is likely that you are in a position where you can arrange to cover your own funeral and other end-of-life expenses.
If this is the case, signing up for final expense insurance might be unnecessary. However, getting into this position can take decades of planning and is not always feasible.
This type of policy has the most in common with final expense insurance as it relies much less on your medical and health history compared to most other life insurance policies.
As a result, getting coverage typically is much faster and easier, but the monthly premiums are generally more expensive than traditional life insurance.
This is an option that is offered by most insurance providers and is a good choice if you are young and healthy.
Traditional life insurance typically requires a medical exam to see if you are healthy enough to insure. Preexisting conditions could be a potential barrier.
If you do end up qualifying for a traditional life insurance policy, it is often more cost-effective than final expense insurance.
If you are healthy in your 50s or 60s and willing to undergo a medical exam, term life insurance could be a more affordable option as it offers temporary coverage.
Term life insurance only lasts for a specific amount of time. Because of this, it is a popular alternative to a whole life policy.
However, keep in mind that your coverage will be valid for a specified time only, which means you might end up paying premiums for twenty years after which your policy expires and nobody benefits from it.
If you’re interested in learning about final expense insurance, burial insurance, or other forms of insurance coverage, be sure to check out our life insurance hub.
Our PolicyScout life insurance consultants can also answer questions about coverage, costs, insurance terminology, and more.