Final Expense Insurance Explained

  • Oct-16-2017
  • Richard Reich
final expense insured

Final expense insurance is specifically designed to cover the bills, debts, and expenses that will be left for your loved ones upon your passing. These costs can be quite varied and be anything from funeral cost and burial expenses to medical bills and final debts. Final expense insurance is also known in some circles as burial insurance. Even the most basic funeral can cost your family thousands of dollars. All of the nuances of life insurance can get quite tricky. Let’s go over the main points that you should keep in mind when shopping for life insurance and  make sure we get final expense insurance explained.

The Basics

Final expense life insurance is not the same as “insuring your life.” Insuring your life means that, upon your passing, you leave funds for your family that take the place of your income that has been lost. Term and permanent life insurance place a value on your wages as of now and for the rest of your life in order to fill this need.

Funeral insurance, however, is different. The only factor taken into account for the face amount of the policy is the expense of the insured’s desired funeral and other final expenses like outstanding nursing home bills. Many other forms of life insurance can reach face amount values into the millions of dollars; final expense insurance policies rarely go above $30,000.

Why would I need Final Expense Insurance?

There are many different reasons a person would need final expense life insurance. If a person already has term and or whole life insurance policy, then final expense serves a very specific purpose. A final expense policy can be the policy that helps your loved ones pay for final expenses, while your term or whole life policy can afford them a lifestyle in light of your missing income. However, if you have a term life insurance policy and you happen to outlive the policy term, things are quite different. In that case, you may want to consider final expense insurance as a solid backup.

Another scenario could be that your family has access to lots of liquid assets that will aid them once you pass. In this case, you could undergo a process called “self-insurance.” “Self-insurance” is a term that can appear complicated at first glance; however it is much more simple than it seems. To self-insure simply means that upon your passing, the money that you have accumulated will be used for all final expenses and needs.

Would your family be able to self-insure to take care of your final expenses? The average funeral cost $10,000. One thing to keep in mind is whether or not you would like the food services catered after the service. Perhaps you would like your family to take a trip abroad to scatter your ashes in a designated location. It is possible that you would leave a lot of expenses behind. If any of these sound like things that could be of interest to you, then final expense insurance is something you should look into. Another thing to keep in mind for anyone hoping to utilize the lump sum death benefit from Social Security is that it only pays $250 per individual. This is nowhere near enough for any type of burial.

How Much will it Cost?

How much you will pay for your final expense insurance policy will be dictated by your age. Unfortunately, as time passes and you get older, the premium you will pay for your policy will increase. This happens because the older the insured is, the insurance company is closer to having to pay out a death benefit. If you purchase final expense insurance at the age of 45, it will be significantly less expensive than if you purchase the same policy at the age of 75.

Why not just Prepay My Funeral?

Prepaying for your funeral expenses is possible, and many people do this. There are pros and cons that come along with this approach. One of the biggest benefits to prepaying for your funeral is that you have the ability to personalize everything. You also have the ability to reach out to funeral directors and determine which ones you prefer. You have the ability to pick out the perfect casket, and the make a great choice on picking a plot in the cemetery. Most importantly, pre-paying will likely prompt you to initiate a conversation with your loved ones about the choices you have made. This may give both parties more peace of mind in the long run.

States have varying guidelines on funeral pre-payment. These guidelines work to prevent you from paying unscrupulous folks who can take your money and run. It helps protect you or your family from overpaying on top of what you pre-pay. Before you pre-pay, check your state guidelines for how the money will be held until your death.

Make sure that you fully understand the details in the insurance plan you purchase. Be sure to determine whether or not you have the ability to lock in your rate. By doing this, your family will not be stuck with a much higher rate later. When pre-paying for your services, be sure to keep all the proper documentation to prove what has taken place. By maintaining the proper documentation, this gives you and your family the proper peace of mind that things will be taken care of properly.

There are disadvantages of pre-payment for a funeral. One of the biggest problems is that it is less flexible than burial insurance. If you decide to change your funeral arrangements or you decide to move, you and your family may not receive the money back that was already paid. Another negative possibility is that the funeral home could potentially go out of business altogether and there will be no means of retrieving those funds. Final expense insurance has the benefit of providing your surviving relatives with a payout that can be used in any way and anywhere they see fit. In this scenario, you have much less control; however, your family has much more flexibility in what they choose to do.

The Bottom Line

If you would like your final wishes documented but do not want to commit to any particular funeral parlor, it is possible for you to combine burial insurance with documentation that clearly states your final preferences. You should always have a will, and this document should be kept in the same location for ease of access. This documentation would detail things such as whether you prefer being buried or cremated, and whether or not you prefer an open casket ceremony or a closed casket ceremony.

You may choose to opt for a life insurance policy that will provide for your family after you pass away. You may choose to purchase a dedicated final expense life insurance policy simply to cover burial costs. You may even decide to pre-pay for your funeral expenses. Regardless of your decision, all of these will put your loved ones in a much better position to take care of your final wishes. Putting in the effort to deliberate and create documentation to support your end-of-life wishes could be slightly uncomfortable now; however, it will make a world of difference once your time has come and your loved ones are left to grieve and fulfill your wishes.

For more information about final expense insurance and to get a free and confidential quote, call the insurance professionals at Life at (866) 691-0100 during normal business hours, or contact us through our website at your convenience.


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