You can’t plan for the unexpected, but you can prepare for it. As you start getting your affairs in order — planning retirement, budgeting life on a fixed income, evaluating insurance policies — it’s smart to consider final expense insurance to help take care of end-of-life costs.
Funerals can cost anywhere from $8,000 to $10,000, and more than 20% of adults over 65 reported having medical debt in 2022. But social security only offers a $225 death benefit to those who qualify. This can put your loved ones in a tough financial situation after you’ve passed away.
No one likes to think about death, but planning ahead can give you and your loved ones peace of mind. Final expense insurance can cover end-of-life costs like medical bills, funeral costs, and burial expenses, removing the financial burden your family might face.
Here’s what you need to know about how to choose final expense insurance that’s right for you.
What is final expense insurance?
Final expense insurance is a type of whole life insurance policy that pays a beneficiary a determined sum in the event of your death. Also known as funeral insurance, burial insurance, or simplified issue whole life insurance, final expense insurance can be used to cover end-of-life expenses, including cremation, memorial services, outstanding debt, and legal costs.
Unlike term insurance that terminates once you reach a certain age (usually 80), whole life final expense insurance covers you until death as long as you continue to pay the premium. It’s also easier to get approval for final expense insurance — some policies don’t require medical exams, allowing seniors with higher health risks to enroll.
It’s important to keep in mind that while some providers issue policies to people at any age, some observe an age range (usually 45-80) within which adults can be approved for final expense insurance.
4 types of final expense insurance
There are multiple types of final expense insurance policies.
- Level: This type of policy has no waiting period and pays out benefits immediately, regardless of when the policyholder dies.
- Guaranteed issue: Many traditional health insurance policies won’t approve an application with serious health conditions. But people with higher health risks can still qualify for guaranteed issue final expense insurance, as it doesn’t require a medical exam. These policies also tend to be more expensive and have a two- to three-year waiting period.
- Graded benefit: A graded benefit policy typically has a two-year waiting period before it pays out the benefits in full. If the insured dies within the first year, the policy pays 30%-40% of the benefit, and if they die within the second year, they receive 70%-80%. But it pays 100% of the benefit after the first two years.
- Modified: A modified plan pays based on the timing and nature of death. For example, for an accidental death at any time or a non-accidental death in year three of the policy, your benefits are paid immediately and in full. However, if a non-accidental death occurs in the first year or two of the policy, your loved ones receive a limited benefit.
How to choose final expense insurance
There are a range of policy types that can suit your needs. Choosing a final expense policy that’s right for you depends on factors like your age, your current health condition, and how much you want to leave for your family.
For example, the older you are, the higher your premiums and the lower your death benefit. Adults in good health under 55 can qualify for the maximum benefit — which can go as high as $50,000 — and pay lower premiums.
Also, while you can’t be turned away for final expense insurance because of your health, coverage amounts cap at $25,000 for adults with more serious health conditions. The same applies to adults over 75 enrolling in a policy for the first time, regardless of health condition.
One of the advantages of final expense insurance is that once you sign up, the premiums won’t increase and the benefits won’t decrease. You pay the same amount for the life of the policy.
End-of-life costs considerations
Depending on the type of plan you sign up for, the death benefit for whole-life final expense insurance can range from $2,000 to $50,000.
This can cover end-of-life costs, including:
- Casket: $2,000-$10,000
- Funeral service: $2,300
- Embalming: $775
- Cemetery: $1,500-$3,500
- Raised headstone: $3,500
- Hearse: $325
- Cosmetic services: $275
Funeral, burial, and other end-of-life costs can quickly add up. When considering what policy to get, consider whether the coverage amount will be able to take care of all your expenses.
Start planning early with final expense insurance
With policies more affordable — and accessible — than traditional life insurance, final expense insurance can help remove the financial burden of end-of-life costs for your loved ones. If you want to learn more about final expense insurance, connect with a licensed sales agent standing by to answer your questions. Or if you’re looking to explore our extended options for planning and protecting what matters to you, the UMA team is here to help.
*Disclaimer:
The information provided in this blog post is intended for general informational purposes only and does not constitute medical advice. It is not a substitute for professional medical consultation or treatment. Always consult with a qualified healthcare provider for any questions you may have regarding a medical condition.
United Medicare Advisors does not endorse or recommend any specific products, treatments, or procedures mentioned in this article. Reliance on any information provided in this blog post is solely at your own risk. We encourage you to discuss any health concerns or questions with your doctor before making any decisions about your health or treatment.
