Final Expense Insurance
Final expense insurance is an alternative form of end of life insurance that helps your family cover the cost of funeral and memorial arrangements.
Also called burial insurance, final expense policies offer peace of mind by providing for your last wishes, at a fraction of the cost of a pre-paid funeral.
Enclosed in this article you are going to find all the information required to help you determine if final expense insurance is a good fit for you or not.
Below is quick look at how final expense insurance works, but we’ll dive into more detail as you keep reading.
- Meeting with an independent agent and review the various final expense insurance plans.
- Enroll in the plan that best fits your situation.
- Assign a beneficiary (the person who will receive the death benefit proceeds from your policy)
- Document the policy number in your estate planning documents or give a copy of your policy to your beneficiary.
- File your policy in a safe place that will be easy for your family to find.
- Review your policy every 5 years to ensure you’re covered adequately, make changes as necessary
- Have peace of mind your family will not be burdened with your final expenses and can properly celebrate your life.
Now, let’s dive into the details.
How Final Expense Insurance is Different From Life Insurance?
It may seem a little confusing to have a form of insurance for funeral costs when many people utilize life insurance to handle the expense of their funeral services. But final expense insurance has significant differences from traditional life insurance policies, specifically because the two kinds of policies have different objectives.
Life insurance: Life insurance is a tool used in estate planning to provide death benefit funds for family members, loved ones and business or personal expenses in the event of your death.
The main goal of life insurance is to provide for dependents and family members, especially in situations where you are the primary supporter or breadwinner for a family.
In these cases, life insurance can help your family have a smooth transition as they grieve and adapt to a new normal, all without having to worry about how to pay bills or daily living expenses.
Final expense insurance: The purpose of final expense insurance is to help with the cost of funeral services and arrangements (hence its name).
In many cases, final expense insurance, also referred to as burial insurance, can cover medical bills related to your death or other pertinent expenses.
Final expense insurance greatly differs from life insurance in that it is often a much smaller policy, specifically because it is meant to cover your final costs instead of supporting a family or clearing remaining debts.
Types of Life Insurance
Whole Life Insurance
Whole life insurance is the type of life insurance that builds cash value, which in some cases you can borrow against in the future.
Rates for whole life insurance are guaranteed to never increase and the death benefit is guaranteed to never decrease. Final expense whole life insurance policies can also never be cancelled due to your age or health. You can be assured this type of policy will always be there for you family as long as premiums continue to be paid.
Another easy way to remember this is it’s a life insurance policy that will last your “whole” life.
Guaranteed Universal Life (GUL)
GUL is similar to whole life insurance as it can be designed to stay active as high as age 121 if premiums are paid on time each month.
The biggest difference is that GUL policies do not build cash value and cannot be borrowed against. This is a much more affordable way of buying permanent insurance.
Some people often refer to guaranteed universal life insurance as “permanent term”. This is because like term insurance, GUL is based on paying the minimum cost of insurance. Instead of paying the minimum cost of insurance to a specific term or age, GUL allows you to pay the minimum cost of insurance to ages 90, 95, 100, 110 and 121.
If you are healthy, GUL is a great alternative to whole life.
Guaranteed Issue (GI)
Guaranteed issue is a type of whole life insurance that doesn’t require health questions. This means that anyone can qualify.
This is the type of final expense insurance sold through the mail.
Sound to good to be true?
Well, guaranteed issue life insurance is for individuals with pre-existing health conditions that otherwise would make them uninsurable. The way insurance companies get around this is by having a 2-4 year waiting period before the full policy amount goes active.
Below is a list of the health conditions which commonly result in qualifying for guaranteed issue final expense policy.
- Kidney Failure
- Require daily oxygen therapy for COPD
- Receiving hospice care
- Currently confined to a nursing home
- AIDS or HIV
- Had an amputation caused by disease
- Cirrhosis or Liver Disease
- Experienced a Stroke or Aneurysm in the last 18 months
Universal Life Insurance (UL)
Universal life insurance is a type of permanent life insurance which unlike whole life that has fixed premiums, provides a little more wiggle room.
This means that there is a minimum premium you can pay each month to keep your policy active. This is particularly helpful for families who live on a fixed income and need the flexibility. But, it can be risky.
If you miss a premium payment on a universal life policy, it affects the long term performance of your policy.
UL policies are also sensitive to interest rates and as many of you know, interest rates were extremely high in the 80’s. This created a massive population of universal life insurance policy holders that are now stuck with under performing policies and faced with a decision on how to not go without coverage. They think they have coverage, but many are finding their policies lapsing unless they renew with a substantially higher monthly premium.
While universal life can be a great option for many people, we don’t suggest using it for final expense insurance as it just doesn’t provide the level of guarantees needed to ensure your family won’t bear the financial burden of your death.
Features of Final Expense Insurance
Burial insurance covers just what it says: costs associated with funeral arrangements, services and burial.
This kind of insurance policy is often a fraction of what a life insurance policy is, generally ranging between $2,000 and $20,000.
For this reason, monthly premium costs are often much lower than traditional term life or whole life insurance policies.
Final expense insurance policies often have quick payouts — an important benefit for families who are beginning to make funeral or memorial service arrangements. Since a final expense policy is specifically geared towards funeral home and burial costs, this promptness often plays a large part in the decision process.
This kind of end of life insurance is also a popular option because of the lighter underwriting restrictions compared to other forms of life insurance.
Final expense insurance policies are most commonly approved without a medical examination or questionnaire, making them a strong choice for people who do not quality for other kinds of life insurance.
In addition, the lower monthly premium allows people living on a fixed income to still have some kind of life insurance in place to cover the costs of funeral arrangements.
What Does Final Expense Insurance Cover?
Burial or final expense insurance is geared towards covering the cost of burial expenses or other costs related to your memorial or end of life care.
Many common uses for final expense insurance payouts include:
- Funeral home services provided by funeral director
- Memorial services provided by a funeral home or at another location
- Cremation services
- Cremation jewelry
- Cemetery plots and related expense
- Hearse transportation
- Costs related to your last wishes, such as travel to a particular location to scatter ashes or transport of your body to a specific cemetery or region (such as a hometown or country)
- Remaining medical bills
Final expense insurance can often be used for other necessary or related costs as determined by your beneficiary.
In many cases, funds left over after your funeral expenses have been paid are sent to your chosen beneficiary. Just like other forms of end of life insurance, you may choose to designate how your beneficiary uses remaining funds, such as donating to a charity, or simply gifting the balance to a predetermined organization.
This is often accomplished by using the additional benefits with many of the final expense life insurance companies. The core estate planning benefit available through many of the best final expense companies is a free simple will.
By taking advantage of this benefit, you are able to save money on legal fees and get more value from the premium dollars you are spending for your final expense policy.
How Final Expense Insurance Works
While burial insurance works similarly to life insurance, there are some differences. One of the main differentiating factors is how you can qualify for this kind of coverage.
Step 1: Select a plan
There are a variety of final expense insurance policies offered by countless insurance companies. For this reason, rates are competitive and companies often promote their plans as having more benefits with fewer restrictions.
Unlike whole life or term life insurance policies, final expense insurance plans generally do not require a medical examination or questionnaire. Companies that do require questionnaires still often accept people with pre-existing health conditions or other factors that life insurance providers often reject, such as a history of family illness, prior health situations such as heart attack or age.
In fact, many final expense insurance plans will offer policies to individuals until age 85, if not slightly older.
Step 2: Designating a Beneficiary
As with other forms of life insurance, if you sign up for final expense insurance, you will be required to select a beneficiary.
This person of your choosing — often a spouse, child, friend or sibling — will receive the insurance payout in a lump sum and can put those funds toward the cost of your final wishes, whether they be burial, cremation or another request.
Step 3: Paying a Monthly Premium
After you have successfully signed up for your final expense insurance policy, you will be responsible for a monthly premium. This cost can vary by person and often depends on factors listed in your medical questionnaire (if one was required) as well as age.
Like most insurance policies, the younger you purchase the plan, the cheaper the monthly premium will be. Paying your premium on time and in full is necessary to ensure that the insurance company does not drop your coverage; so long as you do so, your policy will remain intact.
Step 4: Consider an Insurance Assignment
In some cases, you can choose to initially bypass a beneficiary and have your final expense insurance payout directed to a specific funeral home. Mortuaries that take insurance assignment — the lump sum payout from your policy — can use the funds to help cover the cost of your expenses, which is especially helpful if you have already made arrangements.
Though, it is important to verify that the funeral home accepts assignment, as not all do; some funeral homes will require upfront payment or have terms that do not work well with assignment payout. With insurance assignment, any remaining funds are then dispersed to your beneficiary.
Step 6: Payout Upon Death
Many final expense companies promote quick payout times, which is of importance considering how quickly funeral arrangements are often made. Many policies disperse funds within 48 hours which is key due to how many funeral homes requiring a percentage of the service in the form of a down payment.
Step 7: Remaining Funds
The average American funeral costs between $7,000 and $12,000 — a cost that can be overwhelming without help from a final expense insurance policy. In some cases, your final wishes may leave room for remaining funds, in which case, you can designate how a beneficiary is to use them. The best way to do this is by taking advantage of establish a free simple will.
Who is final expense insurance for?
While burial insurance is often targeted towards older people, it can be purchased for anyone. Final expense insurance is often considered for:
- Children in the case of unexpected death
- Older family members who do not have a life insurance policy
- People who have difficulty getting a life insurance policy due to pre-existing conditions or other factors
- Individuals with low or fixed incomes who cannot afford more costly life insurance policies
- People who do not have heirs or surviving family, and who are not worried about providing life insurance funds for dependents
- People looking to make funeral planning easier on family members by designating specific funds — outside of life insurance — that can be used
- Individuals with specific, costly final wishes, such as returning their body to a foreign country, construction of a mausoleum or having family members and friends scatter ashes in a particular region
Final expense insurance is also of use for people who have estate plans in place, but worry about the length of time it takes for money to be dispersed as their estate goes through probate.
Quick payouts means your family members do not have to worry about the upfront cost of funeral arrangements while they wait.
Final expense insurance also has other perks, even if you already have life insurance. Older individuals with term life policies may consider adding a final expense policy, especially as the term for their life insurance plan draws near.
This ensures you have some kind of coverage even if your term life expires.
Who are the best final expense insurance companies for seniors?
This is up for debate every year as most of the final expense life insurance companies are A rated and financially stable. What you need to be asking yourself is, “what is the best final expense insurance company for me?”
Each life insurance company has a different set of underwriting rules and guidelines. Based on these guidelines, we can help match you with the company that best fits you. For example, you have some mild pre-existing conditions, such as type II diabetes. Many of the funeral expense plans will offer you a policy with a 2 year waiting period simply due to your diabetes.
But wouldn’t it make sense for us to ask you some specific questions regarding your diabetes to see if you qualify to have that waiting period removed? On top of that, wouldn’t it make sense for use to ask you those same qualifying questions to determine the discounts you can earn on your policy?
Long story short is that the more we as agents can understand about your health history, the better chance we have at approving you for a policy at the most competitive rate and with no waiting periods.
It’s unfortunate but true that sometimes the only difference between a policy with a waiting period and one with out, is 2 or 3 simple yes or no questions.
Now that you know there is always an option to improve the quality of your final expense insurance policy, lets take a look at what we consider the best companies.
Mutual of Omaha Living Promise
Mutual of Omaha is not only a household name, but they have been a leader in the life insurance industry for many years. To point out the obvious need for final expense insurance, Mutual of Omaha released their final expense product line, Living Promise in 2009. Final Expense Insurance is slated to be their number 1 selling product in 2017.
This goes to show you how competitive final expense insurance can be as a solution to pay for your funeral.
Aside from being one of the cheapest final expense companies for healthy people, they accept a wide variety of pre-existing conditions. Approved pre-existing conditions include Cancer, Leukemia, Lupus, Bipolar Depression, Schizophrenia, felony arrest, and chronic kidney disease.
This wide net of underwriting is what makes Mutual of Omaha one of the best final expense insurance companies in America.
Transamerica Immediate Solution
Another great household name.
What we really love about Transamerica final expense is their underwriting. For example, individuals with Chronic Obstructive Pulmonary Disease (COPD) can qualify for a final expense insurance policy with NO WAITING PERIODS! Also, unlike many final expense companies, Transamerica will write final expense for ages 0-85.
This is an amazing service to people all ages living with COPD, history of stroke, hepatitis B or C, congestive heart failure, alcohol or drug abuse, and even kidney disease.
Royal Neighbors of America Simplified Issue Whole Life
Royal Neighbors of America has a very interesting story. Aside from great financial stability, Royal Neighbors is a woman owned and operated insurance company. They have a tremendous program that gives back to women in America.
Some of the health conditions they will accept are Diabetes, Stents, Pacemaker and Cardio Myopathy (assuming it’s been over 2 years).
On top of that, each of their policy holders receives a FREE Simple Will. This is great as it compliments your decisions of buying a final expense policy to leave behind to your loved ones.
American General Guaranteed Issue (AIG)
We’ve all heard of AIG.
AIG’s final expense plan was designed to provide life insurance for pre-existing conditions.
This means there are no health questions and everyone qualifies between the ages of 50 and 80.
Guaranteed issue final expense insurance will accept individuals living in a nursing home, diagnosed with AIDS or HIV, Dementia or Alzheimer’s Disease, Cancer and many other pre-existing conditions.
Other Final Expense Companies
As I mentioned, there are many companies that offer final expense insurance. As you’re shopping online for final expense, you can expect to see the following companies as options.
- AAA Life Insurance
- American Home Life
- American General Life Insurance Company
- American Amicable
- Colonial Penn Life Insurance
- Fidelity Life Insurance
- Genworth Life Insurance (no longer sells, but still has many policy holders)
- Government Personnel Mutual (GPM)
- Globe Life (apply for life insurance through the mail with no health questions)
- Global life Insurance
- Mass Mutual
- Monumental Life Insurance Company
- Nationwide (guaranteed issue life insurance)
- Prosperity Life Company
- Pioneer American
- Physicians Mutual
- Sentinel Security Life Insurance Company
- Senior Life Insurance Company
- State Farm Life Insurance
- Transamerica Life Insurance Company
- Gerber Life Insurance Company
- New York Life
- State Farm
- United Home life Final Expense Insurance
- Progressive Advantage
Looking back at the differences between the best final expense insurance companies, you can see why it’s important to shop with an independent agent
Even if you don’t need to shop every single company, it’s important that your agent runs a rate comparison to make sure you’re not over spending or getting any unnecessary waiting periods.
Remember, the more health questions you can answer NO, the more discounts and waiting period reductions you will qualify for.
Always ask questions and make sure you’re comfortable with the agent you are working with.
The cost of final expense insurance
Many kinds of final expense insurance are budget-friendly, especially for people on tight budgets or fixed incomes. Premiums often fall under $20 per month, but do vary based on pre-existing conditions (though many burial insurance providers do not consider this factor) and age.
You can even coordinate your monthly payments to occur on the same day your social security check get’s deposited into your bank account. Social security payment coordination makes it easy to predict when your bills are coming and out of your bank.
Many final expense insurance providers do not have medical underwriting rules, or relaxed rules, which allows you to get a policy much easier than life insurance plans.
Shopping for final expense insurance doesn’t need to be a daunting task, but it does take some time. Remember the following tips before choosing a final expense insurance company.
- Always work with an independent agent who can shop the market
- Choose an A-Rated company
- Answer as many health questions as possible to increase your chances of discounts and reduced waiting periods
If you are considering final expense insurance, it is important to shop around simply because there are so many options. Let a PolicyZip final expense insurance specialist help guide the way as you begin exploring your options — simply fill out the form below or call 888-211-5685.
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