Final Expense vs Burial Insurance – What’s the Difference?

  • Last updated Jun 1, 2019 at 8:54PM | Published on Jan 24, 2019
  • Richard Reich
Final Expense Insurance

I have heard from many seniors that they are not certain what Final Expense Insurance is and what Burial Insurance is and if there’s a difference. I can certainly understand the confusion when life insurance companies assign certain “marketing names” to various insurance products. When I say “marketing names” I am referring to insurance types like the following:

  • final expense insurance
  • burial insurance
  • funeral insurance
  • mortgage protection insurance
  • credit insurance

These marketing terms are used to help consumers identify with the “purpose” of the policy not the actual type of insurance. For example, when you purchase “Burial Insurance,” you are typically getting a whole life policy and nowhere on the insurance contract will you find the term “Burial Insurance.”

So then, in an attempt to try and clear up the muddied waters, here we’ll discuss final expense insurance and burial insurance and find out what’s the difference.

 

What is Final Expense Insurance?

 

As we mentioned above, final expense insurance is a marketing term used to describe the purpose of a policy, not the actual type of life insurance product you are purchasing.

Insurance agents use the term “final expense insurance” to help their clients understand that the purpose for purchasing the policy is to leave sufficient money for surviving loved ones to pay the final expenses we leave when we die. Everybody will typically leave final expenses like funeral and burial costs, unpaid medical bills, and for some, unpaid nursing home bills when they die.

Since the average cost of a moderate funeral service is between $9,000 and $12,000 (depending on where you live), your funeral is the major portion of the final expenses that you leave to surviving loved ones when you die. The benefits of having a final expense insurance policy are:

There is no medical exam requirement
The coverage is guaranteed for a lifetime as long as you make your payments
The premium remains level and cannot be increased by the insurer
The policy builds cash value that can be accessed for any reason
Provides a tax-free death benefit for surviving loved ones

 

Different types of Final Expense Policies

 

Fortunately for seniors, most insurance companies that offer final expense insurance understand that the senior market needs liberal underwriting. Most companies understand that applicants in this age group will likely be dealing with various health conditions and they accommodate this by offering three types of final expense insurance policies.

 

Level Benefit Policy
The level benefit policy is very similar to traditional life insurance because the rates are lower and the death benefit is available on the first day of coverage.
Graded Benefit Policy
The graded benefit policy was designed for applicants who cannot qualify for the level benefit policy because of severe or multiple health conditions. This policy typically pays a portion the face amount (death benefit) during the first three years and then the full death benefit thereafter. An example would be year 1 – 25%, year 2 50%, year 3 75% and then 100% beginning in year four.
Modified Benefit Policy (Guaranteed Issue)
Modified benefit policies are offered to applicants who cannot medically qualify for a level benefit or graded benefit policy. The modified benefit policy requires no medical underwriting so virtually anyone who is alive and of eligible age can purchase life insurance. Typically, there is a two or three-year waiting period. If the insured dies as a result of natural causes, the company would pay the sum of all premiums paid plus 10% interest. Once the waiting period expires, the company would pay the full death benefit.

 

What is Burial Insurance?

 

Simply put, final expense insurance and burial insurance are basically the same things. In fact, final expense insurance, burial insurance, and funeral insurance are all the same thing because they all share a common purpose.

When insurance agents talk about these three kinds of life insurance policies, the term they use simply indicates the purpose of the policy. When agents talk about final expense insurance they are referring to a whole life insurance policy with a death benefit sufficient enough to cover the cost of a funeral and other types of final expenses (listed above).

When an insurance agent is talking about burial or funeral insurance, they are typically referring to whole life insurance with a death benefit sufficient enough to cover the costs of a funeral and burial. All three of these types of insurance policies include the guarantees and benefits found in traditional life insurance policies.

 

Since Term Insurance is Cheaper, Shouldn’t I buy Term?

 

Term life insurance is much cheaper than whole life insurance because it is considered temporary life insurance coverage. And yes, term insurance can be used for final expense, burial insurance, and funeral insurance, but most agents are against using term because it’s temporary and doesn’t provide the same guarantees and benefits that whole life insurance provides.

Final expense insurance is designed to last a lifetime and most term policies will not provide coverage past age 90. Also, term insurance does not build any cash value over the term of the policy. And finally, the monthly premiums for term life insurance are not guaranteed to remain level. For example, if you have a 20-year term policy, you will likely be offered a renewal but the monthly rate will be based on your attained age (new age) when your renewal is processed and most renewal policies are annual term which means that each year your insurance premiums will go up as you age.

 

How much does Final Expense and Burial Insurance Cost?

 

As with any type of life insurance, your insurance quotes will depend on your age at application, your health (except for guaranteed issue), and the face amount (death benefit) of the policy.

 Here are $10,000 final expense and burial insurance quotes for a healthy male and female non-smoker:  

 

Mutual of Omaha 10k Final Expense quotes

 

These rates are based on a level benefit insurance policy. If you are dealing with major health issues or multiple health issues, please contact your independent agent for a free and confidential quote.

 

Who Should buy Final Expense Insurance?

 

Any person age 50 or older should consider buying final expense or burial insurance. In most cases, the coverage is affordable and simple to buy, and the underwriting is straightforward since there is no requirement for a medical exam or blood/urine tests. We have found over the years that many seniors discover later in life that they will be leaving a substantial debt for their loved ones and would rather make arrangements that all final expenses are covered by life insurance.

We have also found that many seniors discover they are not insured due to the following circumstances:

  • They have recently retired only to find that the life insurance they’ve had at work for many years is not portable and they must purchase a new policy.
  • They may have cashed in their insurance during the market crash and then put off obtaining a replacement policy.
  • They’ve had difficulty buying traditional life insurance because of health issues and have given up on looking for coverage.

 

If any of these circumstances apply to you, do not despair because independent agents like LifeInsure.com will work with you to help you find quality coverage at a price that will fit your budget.

 

Speak with a Professional
For more information about Final Expense or Burial Insurance and to get a free and confidential quote, call the insurance professionals at LifeInsure.com (866) 691-0100 during normal business hours or contact us through our website.

 

 

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