Whatever your opinion might be about Keanu Reeves’s acting ability, one thing most people can agree on is that when he was asked by Steven Colbert…
“What do you think happens when we die?”
Keanu nailed it when he responded:
“The ones who love us, will miss us.”
With this in mind, we’re now going to talk about what a final expense insurance policy is and how it can provide comfort to the ones who will miss you when you’re gone.
What is final expense insurance?
Final expense insurance, also known as burial insurance or funeral insurance, is a type of life insurance policy that is designed to cover the expenses associated with a person’s funeral and final expenses.
These policies specialize in offering smaller death benefits and can be used to pay for things like funeral costs, outstanding medical expenses, and other end-of-life expenses.
The coverage is usually provided on a simplified issue basis, which means that there is no medical exam required, and the underwriting process is typically more lenient than with other types of insurance.
Final expense policies are often marketed to seniors, whose insurance needs may be lower and are just looking to purchase a small whole-life insurance policy specifically designed to cover any end-of-life expenses.
How it differs from traditional life insurance?
Final expense insurance policies, also known as burial insurance or funeral insurance, are a type of whole-life insurance designed to cover end-of-life expenses such as funeral costs and outstanding medical bills.
These policies typically have smaller death benefits than traditional life insurance and are geared toward individuals who do not have a significant amount of savings or assets to cover these end-of-life expenses.
Another difference between most traditional policies and final expense policies is that the majority of final expense products tend to be whole life insurance policies whereas, with traditional coverage you will have a larger percentage of the industry focus on term life insurance.
How can a final expense policy be used to cover end-of-life expenses?
A final expense insurance policy can be used to cover a variety of end-of-life expenses, including:
- Funeral costs: The death benefit from a final expense policy can be used to pay for a funeral, cremation, or burial services, including the cost of a casket, headstone, and other funeral-related expenses.
- Outstanding medical bills: If an individual has unpaid medical bills or other unpaid debts, the death benefit from a final expense policy can be used to pay them off.
- Probate costs: In some cases, the death benefit from a final expense policy can be used to pay for the legal and administrative expenses associated with the probate process.
- Estate taxes: If an individual’s estate is subject to taxes, the death benefit from a final expense policy can be used to pay them.
- End-of-life expenses: The death benefit can also be used to cover any other end-of-life expenses such as home care, legal and accounting fees, or other miscellaneous expenses that the family may incur.
It’s important to note that, beneficiaries of the policy will receive the death benefit as a lump sum after the policyholder’s death, and the funds can be used in any way the beneficiaries see fit.
Final expense insurance can provide peace of mind for both policyholder and their loved ones
According to the National Funeral Directors Association, the median cost of a funeral in the United States in 2021 is around $9,000. However, the cost can be significantly higher in certain regions or for more elaborate services.
So as one can imagine, the cost of a funeral can be a significant financial burden for many families, especially when it is unexpected.
As a result, many families will have to borrow money or dip into savings to cover the expenses, which can obviously strain their finances and cause financial hardships.
You also have to take into account how the emotional stress of losing a loved one can make it difficult for families to make rational financial decisions, often times leading them to make foolish and rash decisions about a loved one’s burial that can and often will be regretted later on.
This is why, a final expense insurance policy can be a good way to mitigate this issue, as it provides a source of funds specifically for end-of-life expenses and can help ease the financial burden on the family.
How to buy final expense insurance?
There are two main types of final expense insurance policies that one can choose from, a simplified issue or a guaranteed issue. The main difference between the two is the underwriting process and the level of medical questions that are required.
Simplified Issue:
Simplified issue policies typically require the applicant to answer a few medical questions on the application, and in some cases, the insurance company may also request a medical exam. This type of policy generally has lower premiums than guaranteed issue policies, and the application process is quicker. However, if you have pre-existing health conditions, you may be denied coverage or charged higher premiums.
Guaranteed Issue:
Guaranteed issue life insurance does not require the applicant to answer any medical questions or undergo a medical exam. They are designed for individuals who may have pre-existing health conditions or who have been denied coverage by other insurance companies. They typically have higher premiums than simplified issue policies, but they provide a way for individuals who may not be able to qualify for other types of coverage to obtain coverage.
Face Amounts
When you buy a final expense policy, you’ll also have to choose the death benefit amount, usually between $5,000 and $50,000 for simplified issue, and guaranteed issue typically caps out at around $25,000.
Whole or Term
Additionally, you may have the option to choose the type of final expense policy you want, either whole life or term.
Whole-life policies are guaranteed to be active for the lifetime of the policyholder, and the premium is guaranteed to stay the same for the life of the policy.
Term policies, on the other hand, have a term limit and the premium will increase as the policyholder ages.
The vast majority of people who choose to purchase a final expense policy will typically choose to purchase a whole life final expense policy so that they can be sure that the policy won’t end before they die or become too expensive that they can no longer pay the premium.
To Summarize
So now let’s just quickly summarize every that we’ve gone over.
- First, final expense policies are a type of life insurance that is specifically designed to cover end-of-life expenses such as funeral costs and outstanding medical bills.
- These policies typically have smaller death benefits than traditional life insurance policies and are geared toward individuals who do not have a significant amount of savings or assets to cover these expenses.
- The policies are accessible and generally easy to apply for.
- Individuals with serious pre-existing medical conditions can qualify for guaranteed issue life insurance policies provided they meet a few, non-medical requirements.
And, it is always advisable to consult with an insurance professional when deciding whether or not to purchase a final expense policy and which type of policy is best for you based on your individual needs and circumstances.
An insurance professional like the ones here at JBM who specialize in final expense policies.
Here are some frequently asked questions about paying for a burial:
- How much does a burial cost? The cost of a burial can vary widely depending on a number of factors, including the location, type of service, and whether the individual is buried or cremated. According to the National Funeral Directors Association, the median cost of a funeral in the United States in 2021 is around $9,000. However, the cost can be significantly higher in certain regions or for more elaborate services.
- Can I use my life insurance policy to pay for a burial? Many life insurance policies include a death benefit that can be used to pay for end-of-life expenses, including funeral costs. It’s important to check the terms of your policy to see if this is an option.
- Can I use my savings to pay for a burial? Yes, many people use their savings or other personal funds to pay for a burial.
- Are there any government assistance programs that can help pay for a burial? In some cases, government assistance programs such as Medicaid or veterans benefits may be available to help cover some of the cost of a burial. It’s important to check with the appropriate government agencies to see if you qualify and how much financial assistance you would receive.
- What is burial insurance and how does it work? Burial insurance, also known as final expense insurance, is a type of life insurance policy that is designed to cover the costs associated with end-of-life expenses. It typically has a lower death benefit than traditional life insurance policies and is intended to cover specific end-of-life expenses. The death benefit is paid out to the beneficiaries in the event of the policyholder’s death.