Final expense insurance, also known as burial insurance or funeral insurance, is designed to cover the bills that your loved ones will face after your death — typically funeral expenses, but potentially other final bills as well.
Understanding how this insurance works, who offers it, and how much it costs can help individuals make informed decisions about providing for their final expenses.
This article explores the essentials of final expense insurance and answers some frequently asked questions.
What is Final Expense Insurance?
Final expense insurance is a type of whole life insurance policy that has a small death benefit, typically between $2,000 and $50,000.
Unlike traditional life insurance policies, the main purpose of final expense insurance is not to accumulate wealth for beneficiaries but to cover the costs associated with end-of-life expenses.
These expenses include funeral services, caskets, cremation, legal fees, and any outstanding medical bills.
These policies are popular among seniors, as they often require no medical exam and feature fixed premiums.
How Does Final Expense Insurance Work?
Final expense insurance policies are straightforward: the policyholder pays a monthly premium, and upon their death, the insurer pays a lump sum to the designated beneficiary.
This sum can then be used to manage any costs arising from the policyholder’s death.
These policies typically do not expire as long as premiums are paid, and they often accumulate a cash value that the policyholder can borrow against, similar to other whole life policies.
Who Sells Final Expense Insurance?
Many insurance companies offer final expense insurance, ranging from large, well-known insurers to smaller, niche companies specializing in senior products.
Some reputable providers include Mutual of Omaha, Gerber Life Insurance, and AIG. It’s essential to choose a provider that is financially stable and has a good reputation for customer service.
How Much Does Final Expense Insurance Cost?
On average, final expense insurance premiums can range from as little as $15 to over $100 per month. Typically, the younger and healthier you are when you purchase the policy, the lower your premiums will be.
Conversely, older adults or those with health issues might face higher costs, as will those interested in larger policies to cover additional costs.
Who should consider final expense insurance?
Final expense insurance is best suited for individuals who do not have savings or life insurance to cover their funeral expenses, or who do not want to burden their families with these costs.
Is a medical exam required to get final expense insurance?
No, one of the advantages of final expense insurance is that many policies do not require a medical exam. Applicants are often only required to answer a few health-related questions.
Can the death benefit be used for non-funeral expenses?
Yes, while the death benefit from a final expense insurance policy is intended to cover funeral costs, the beneficiary can use it for any purpose, such as paying off debts or other final expenses.
How do I choose the right final expense policy?
Consider factors such as the insurer’s financial stability, customer service reputation, policy features, premium costs, and any available riders that might be beneficial.
Comparing quotes from multiple providers can also help ensure you find the best rate for the coverage you need.
Understanding final expense insurance and how it functions within broader financial planning is crucial for those considering this type of coverage.
By alleviating the financial burden of end-of-life expenses, final expense insurance can offer peace of mind to policyholders and their families.