Life insurance plans offer millions of Americans a sense of security about what will happen to their family once they pass on.
However, high premiums and lengthy application processes can make it difficult to find affordable term and permanent life cover.
One alternative is a policy known as final expense life insurance. These are plans with low monthly premiums that can cover final expenses and debts once a person passes away.
This article will explore final expense insurance and explain what it covers and costs. We’ll also go over the benefits and downsides of final expense insurance and offer tips to help you find the right coverage.
Final expense is a type of whole life insurance with a smaller coverage amount and less strict criteria for qualifications.
However, it works in the same way as other types of permanent life insurance. A person with a final expense life insurance plan pays their insurer a monthly or annual premium. In return, they get financial coverage known as a death benefit.
Life insurance policies offer two types of benefits or features: a death benefit and a living benefit.
A death benefit is the money a policy will pay to beneficiaries when a policyholder dies.
A living benefit is a feature of a life insurance contract that policyholders can access or use when they are alive. For example, disability cover on a life insurance contract is a living benefit.
Compared to other term and permanent life insurance, a final expense policy is an affordable way of getting life cover to pay for final expenses such as outstanding debts, taxes, and burial costs.
These policies cost less than other types of life insurance and usually don’t require a medical exam, which makes them easier to get.
Some final expense plans even offer a cash value component, which is a living benefit that policyholders can use.
A cash value component or benefit is a savings account that policyholders can pay into in addition to their monthly premiums.
For example, if a person has a final expense policy that costs $150 monthly and they pay $200 each month, the extra $50 will be added to their cash value account.
This is known as a living benefit, which is any feature of a life insurance contract that a person can use while they are alive.
A policyholder can use their cash value in a few ways:
Check out our article on cash value life insurance if you want to learn more.
Typically, final expense insurance providers offer coverage for smaller amounts, and you can get coverage for amounts between $2,000 and $50,000.
There are also different final expense insurance contracts, such as burial insurance or guaranteed issue final expense life insurance.
Guaranteed issue final expense life insurance is a type of life insurance that doesn’t require medical exams, medical questionnaires, or medical records to qualify.
However, these plans usually have a waiting period of two or three years. If the policyholder dies during their waiting period, their beneficiaries will not receive the policy’s death benefit.
Instead, they’ll get the value of all the premiums that were paid before the policyholder died. This is known as a return of premium clause.
For example, a person takes out a guaranteed issue life insurance policy of $25,000 with $280 monthly payments and a waiting period of three years.
If they die after two years, their beneficiaries won’t get the plan’s death benefit. However, they will get the total value of the premiums they paid for 24 months.
In this case, the amount they receive would be $6,720 (24 months x $280).
Final expense life insurance is for anyone who wants to cover debt and bills after they die.
A good candidate for final expense insurance is someone who doesn’t have other life coverage and wants to ensure that their burial or hospitalization costs are covered once they’ve passed on.
Take a look at these points to decide if a final expense life insurance policy is right for you:
You have dependents to look out for: If you have family members who depend on you, this kind of coverage will help them pay for any costs they would otherwise have to pay for.
You’re worried about qualifying for other types of permanent or term life insurance: If you are concerned that you’ll be rejected by a life insurer based on your age, chronic conditions, or health status, a final expense life insurance policy might be a good option for you.
You don’t want to go through a long, drawn-out application process: Getting final expense life insurance is easier. The qualifying criteria are lower, and you also won’t have to go through a medical exam.
You want life coverage that isn’t going to cost a lot each month: It’s also more affordable than most term and permanent life insurance policies. This means that most people can find a plan that suits their financial situation.
Final expense insurance plans pay listed beneficiaries a death benefit that they can use in any way they need.
However, people usually use this money to pay for medical treatment, funeral costs or to help their beneficiaries with estate fees and related expenses.
Ultimately, it’s up to you and your beneficiaries to decide how to spend the money. One of the great things about final expense insurance is that policyholders and beneficiaries have the freedom to plan how they will use the money.
For example, let’s say you are hospitalized before passing away and some of your medical bills weren’t covered by your health insurance or Medicare.
Your beneficiaries could use your final expense insurance to settle the bill, or they could also use the death benefit to pay for final expenses such as funeral costs, a memorial service, or a cremation.
Your beneficiaries can also use the money from a final expense life insurance policy to put a down payment on a property, go on a vacation, pay for college, or visit family overseas.
If you’d like to know more about how beneficiaries can use a final expense death benefit, speak with one of PolicyScout’s consultants today.
Different insurers charge different amounts for final expense cover. However, final expense life insurance is usually much less than you’d pay for whole life or term life insurance.
The amount you pay each month for coverage will depend on your total coverage, risk profile, plan benefits, and age.
For example, you might pay anywhere between $40 to $90 each month if you want to get $15,000 in coverage for final expenses.
If you have a high-risk profile, your insurance provider might also charge you higher monthly fees as your risk of dying increases.
For example, a 60-year-old person will pay less for final expense cover than a 90-year-old person because they have a lower risk profile.
If you think you’re paying more than you should for final expense life coverage, speak with one of our agents to find out if you can get a better deal.
Final expense insurance is a good way of ensuring that your beneficiaries won’t have to deal with any expenses you have when you pass away.
Affordability: The great thing about final expense insurance is that it is affordable and tailored to your needs. You can get specific coverage based on your lifestyle and financial situation, which means you won’t have to stress about making payments for the rest of your life.
Financial security: If you were hospitalized before your death, there might be significant hospital bills that your medical provider from your estate will claim. Final expense cover can ensure your family or beneficiaries are covered against claims like this.
Easier to get: The application process and qualifying criteria for final expense insurance are more flexible than traditional life cover. Applicants won’t have to undergo a medical exam, and people with pre-existing conditions can get final expense coverage quickly.
Flexibility: Another benefit of this type of insurance is that your beneficiaries can use the policy’s cash value to pay for any expenses they need to. Your beneficiaries can also use the money to take a trip or pay off their costs if you don’t have any uncovered debts when you pass away.
However, final expense insurance might not suit you depending on your expenses, lifestyle, and needs. Here are some points to consider:
Low coverage amounts: A final expense insurance plan might not cover the entire sum of a mortgage or large debt.
Expensive in the long term: If you live for a long time after taking out the policy, you might lose money.
Policy lapses can have consequences: If you don’t pay your premiums and let your policy lapse, your beneficiaries won’t receive a death benefit when you die and the premiums paid over to your insurer will be forfeited.
If a policy lapses, a policyholder has stopped paying their premiums. If this happens, the contract between a policyholder and the insurer becomes null and void.
It’s important to make sure that you pay your premiums on time. If you don’t, your insurer will not honor the contract and your beneficiaries will not receive a death benefit when you die.
Follow these steps to find a final expense insurance plan that will offer you the coverage you need at a price you can afford.
Think about what you would like to use your final expense coverage for. If you plan on the funds going towards the cost of your burial or funeral expenses, research what it will cost.
Speak with an insurance agent or broker and find the best insurers in your area. This can save you time and make finding the best plans easier.
Compare prices for each insurance policy and see if they offer value for money and whether their options are affordable.
Getting the right cover can be difficult, especially if you don’t have the experience or expertise needed to understand policies, terms, and different coverage options available.
If you need assistance finding a final expense insurance plan or provider that will offer you the best rates, speak to one of our consultants today.
If you’re interested in learning more about life insurance policies, terms, and coverage, visit our Life Insurance Hub to read our latest articles.
We cover topics that will help you make sense of life insurance and help you find the coverage you need.
Check out our articles on how long it takes for beneficiaries to receive money after a policyholder dies and find out more about cash value life cover to learn about living benefits.
Reach out on 1-888-912-2132 or email@example.com to get one-on-one assistance with your life insurance questions. Our life insurance agents can assist if you have any questions or want to speak to someone about your life cover options.