As the name implies, Final Expense Insurance is an insurance policy that is designed to cover the final expenses of the named insured when they pass away. This insurance policy, which is commonly whole life insurance, is the funding vehicle that will provide the money your beneficiary will need to take care of your final expenses and eliminate passing these expenses on to surviving loved ones.
Although term insurance is less expensive than whole life insurance, the fact that it isn’t permanent insurance makes it a less than ideal product for a legitimate final expense insurance policy. There are certain circumstances, however, when term life insurance makes a lot of sense for final expense insurance. For example, if you purchased a large term policy at age 40 and then you were subsequently diagnosed with a terminal illness that will likely result in your death before the end of your term policy, then it makes better financial sense.
Many individuals have multiple life insurance policies, and some of them designate each policy for a specific purpose such as paying off the mortgage, replacing income, paying off all your debt, or leaving a financial legacy to your children. Without a final expense policy in place, these other policy death benefits would be substantially reduced and thus likely fall well short of your intended purpose.
Yes, term insurance would be the least expensive product, but in most cases, it will not be the best choice. Let’s consider the following scenario to illustrate why.
Let’s use a 45-year-old male nonsmoker and a $30,000 Term policy for 30 years.
The monthly premium would be about $24 or $267 per year. At age 75, when the policy expires, the insured would have no life insurance and will have paid $8,010 for the insurance coverage. If the insured dies just one week after the policy expired, there would be no death benefit for the beneficiary and thus a loss of over $8,000 on the transaction.
Using a level benefit whole life policy, the same amount of insurance would cost about $60 per month or $713 per year. If the insured dies at age 76, there would be a $30,000 death benefit available for the beneficiary and the insured would have paid about $22,000 for the insurance coverage. Plus, since the whole life policy accumulates cash value over time, the insured could have accessed it tax-free during a financial emergency.
It’s also important to note that any severe or chronic health conditions will more than like disqualify you from being able to purchase term insurance.
Whole life insurance is all about guarantees:
Whole Life insurance is permanent insurance coverage and will stay in force for as long as the policyholder is alive as long as the periodic premium is paid. The insurance company cannot cancel your policy for any reason other than non-payment.
Once the policy is issued, the periodic premium will never go up. This means if you become terminally ill or as you get older, the insurance company cannot raise your premium.
Your whole life insurance policy builds cash value over time. This cash value can be accessed using tax-free policy loans for any reason without a credit check. You can elect to pay back the loan or not pay it back; it’s your choice. Any loan balance will simply be deducted from the death benefit when you pass away.
Your whole life policy is an asset that you can surrender in exchange for the available cash value, or you can sell your policy to a third party.
On a scale of one to ten of frequently asked questions about Final Expense Insurance, this question is typically in the top three. How much insurance you buy, your death benefit depends on your final wishes for a funeral or cremation service and other final expenses that are typically outstanding.
The cost of a moderately priced funeral can be as much as $15,000 depending on the state you live in, and a cremation service is generally about 40 percent of that. There are several online resource sites that can help with the planning and pricing of a funeral based on where you live.
According to Parting.Com, a well-known resource for end-of-life planning, the average cost of a traditional funeral is:
“Funeral prices, like everything else, have increased with inflation. Today, the average North American traditional funeral costs between $7,000 and $10,000. This price range includes the services at the funeral home, burial in a cemetery, and the installation of a headstone. While cremation is gaining in popularity, the traditional funeral is still the most popular manner of disposing of the deceased. Here is a reasonable “ballpark” estimate of the main funeral costs.It’s important to notes that funeral prices vary considerably between funeral homes and geographic areas of the country,
>fee for the funeral director’s services: $1,500
>cost for a casket: $2,300
>cost for using the funeral home for the actual funeral service: $500
>cost of a grave site: $1,000
>cost to dig the grave: $600
>cost of a grave liner or outer burial container: $1,000
>cost of a headstone: $1,500
In this example, total costs would approximate $9,000….and that’s just for the “main” items. There could be additional charges for things like placing the obituary in the newspaper and buying flowers.” Read More…
You can really show your loved ones some love by pre-planning your funeral and then paying for it using final expense insurance. Taking this action in advance will significantly relieve the stress associated with losing a loved one and bring peace of mind to your family and friends. Should you decide to plan your funeral in advance, be sure and discuss it with your intended beneficiary so he or she will understand your final wishes.