Final expense insurance is a type of life insurance that can help your loved ones cover the costs of your funeral, pay off debt, or take care of lingering medical bills if you pass away.
The death benefit of a final expense insurance policy is typically lower than that of other types of life insurance. Though your beneficiaries can use the insurance payout however they choose, this minimal coverage is typically used to help cover the cost of a casket, burial, and funeral service. For these reasons, you may hear final expense insurance referred to as burial or funeral insurance.
Final expense insurance is a popular option for older people. Though the premiums are more expensive, and the available coverage is lower, it is easier to get approved for final expense life insurance than other types of life insurance.
How Does Final Expense Life Insurance Work?
Exactly how does final expense life insurance work? Like all life insurance policies, a final expense policy will provide a death benefit to your beneficiaries if you pass away. The amount of available coverage you can purchase is what sets final expense life insurance apart from other types of life insurance.
The death benefit on final expense life insurance typically starts at $5,000 and rarely exceeds $50,000 — a small amount compared to the millions of dollars of coverage you can purchase on a whole or term life insurance policy.
Once you are approved for a policy, you will select your coverage amount, name your beneficiaries, and pay your premium to keep the policy in force. Like other types of life insurance, if you die with a final expense policy in force, your beneficiaries can file a death claim after your passing to receive your policy’s insurance payout.
Types of Final Expense Insurance
As you can imagine, final expense insurance is more popular with older people. The limit of a lower death benefit makes it easier to qualify for than a thirty-year term life insurance policy with $1 million in coverage.
Final expense insurance policies are typically permanent, providing coverage for your lifetime, even if you come up against some health issues in the future (as long as you keep up with your premium payments).
Now that you know the basic answer to the question of the hour (what is final expense insurance?) let’s get into the details. There are two main types of final expense insurance:
Simplified Issue. The underwriting process for simplified issue final expense insurance is less involved than with other types of permanent life insurance. If you apply for simplified life, you will answer health and lifestyle questions instead of undergoing a medical exam.
People with minor health issues who haven’t been able to get approved for other types of life insurance might look into applying for a simplified issue policy. This type of final expense insurance usually offers higher coverage maximums and is typically less expensive than other types of final expense insurance.
Guaranteed Issue. Finding life insurance coverage when you are older or have a serious medical condition can be challenging. Guaranteed issue policies can offer some relief in these cases.
With this type of final expense insurance, you can get a policy without answering a single health question or seeing a doctor — there is no medical exam whatsoever. The amount of coverage you can purchase is typically low, and the premium you pay is generally high. Still, if you need life insurance and have hit a wall everywhere else, guaranteed issue might be your answer.
But is there a catch, and how does guaranteed issue final expense insurance work? The death benefit on a guaranteed issue policy is graded over time. If you die before that time is reached, your loved ones won’t walk away empty-handed. Instead, they would receive a smaller payout or a refund on the premium payments you made while the policy was in force.
What Are the Benefits of Final Expense Life Insurance?
For those looking to supplement income or cover significant expenses, like a mortgage or small business, final expense insurance will likely not work. Instead, younger people in good health typically get more value from a more traditional type of life insurance, like whole life or term life insurance.
But for some, once they find out how final expense insurance works, it makes sense.
If any of these situations sound familiar, you might want to ask your insurance agent to explain in detail what final expense insurance is and if it is right for you:
You have a medical condition. Pre-existing health conditions can result in a denial for life insurance coverage. Final expense insurance offers permanent coverage without a medical exam.
You are battling a serious or terminal illness. Facing cancer, kidney disease, or a brain tumor will take all your strength. The last thing you need to stress about is life insurance underwriting. You can still qualify for a guaranteed issue policy if you have a serious disease.
Your term life insurance policy expired. By the time your term life insurance policy ends, you are older. You could develop health issues or be financially stable enough to no longer need as much coverage as you did when you were younger. The end of a term policy is a great time to learn how final expense insurance works.
You lost your group coverage. Some employers offer life insurance as a work perk, an excellent benefit to take advantage of while employed. But what happens when you retire? If the policy isn’t portable, you will likely lose coverage. Those of retirement age looking for coverage might find final expense insurance an optimal choice.
Where Can You Go to Learn More About Final Expense Life Insurance?
Bestow specializes in term life insurance, but the agents over at eFinanical.com can answer questions and help you find quotes for a final expense insurance policy.
Can You Use Term Life Insurance to Cover Final Expenses?
Your beneficiaries can use the payout from your life insurance policy to soften the landing of a difficult time. There are no regulations or stipulations attached. For example, beneficiaries of a term life insurance policy can use the money to pay off a house, send kids to college, cover bills while taking time to grieve, or pay for final expenses.
If you get approved for a term life insurance policy, the premium payment will likely be much less than that of a final expense policy. If you go with Bestow, term life insurance coverage options range from $50,000 to $1.5 million, and rates start from just $11 per month.
