Final expense insurance is a type of life insurance, specifically whole life insurance. It comes with a pre-determined fixed premium and death benefit, and it is guaranteed not to expire as long as premiums are being paid, unlike term life insurance policies. It is significant in that it builds a cash value over time from which the beneficiary can take a loan whenever the need arises.
Applying for the policy is straightforward and there is no need for a medical exam of your condition, neither will your carrier have access to your medical records. But still, as it is mentioned above, specific health-related questions will need to be answered, so that means that not everyone will necessarily qualify instantaneously for final expense insurance.
Final Expense Insurance Costs
The premium is determined by the amount of death benefit wanted, the lower monthly premium the lower death benefit will be. Still, the premium costs you pay are typically less than the funeral expenses. The average cost of a funeral with a burial is around $7,000 and the average funeral cost with cremation is around $5,000.
In addition to basic service fees, these costs may include:
- $350 for the transfer of remains
- $750 for embalming
- $255 preparing the body
- $2,500 casket
- $925 for using the funeral home
- $340 hearse
- $150 service vehicle
- $175 printing package
A small amount of death benefit maybe won`t be enough in the long run, but at least it will cover possible debts and any additional medical costs, or any other left after the owner of the policy has died.
Advantages and Disadvantages of Final Expense Policy
Final expense insurance is beneficial to older people and everyone else who desires to bypass a health exam, and the option of a cash value provides a number of additional benefits to everyone.
Here are some advantages of purchasing final expense insurance:
- Policies are widely available, even to applicants with health issues
- No medical exam is called for
- Policy premiums are fixed
- The death benefit is guaranteed
- The policy is guaranteed to never expire as long as the premiums are being paid
- The death benefit can be used for any purpose and is not taxable
Disadvantages of final expense insurance are:
- Relatively low death benefits, which may not turn out to be beneficial if the insured person is younger
- One missed premium payment may terminate the policy
- You will be required to pay premiums for the rest of your days
All in all, final expense insurance policies are primarily for people who cannot qualify for a better option because premiums can be higher than other insurance types.
However, individuals with serious medical conditions may not be eligible for final expense insurance. Available for them are guaranteed issue policies that, as a rule, have a 2-year waiting period before the benefits can be paid. That is to say that if the insured person passes away during the waiting period, the beneficiaries do not stand to receive the death benefit, but instead, they will receive a return of the paid premiums plus interest.
Final Expense Common Questions and Answers
How much does Final Expense insurance cost?
The more coverage you want, the more it costs. A $10,000 policy would obviously cost about twice as much as a $5,000 policy would. Simplified Issue plans cost less than Guaranteed Issue plans for the same coverage amounts. For both types of plans, rates are guaranteed never to go up, once they’re issued. Rates and availability can also vary by state, as well as by insurance carrier.
How long does it take to get my policy?
Most final expense life insurance companies are prepared to approve and issue policies so that you can be covered within minutes, either in person or right over the phone. Your application can be taken and “voice signed” right over the phone as well. The physical policy is usually mailed to you within a day or two, but if approved, and your payment goes through, you can sometimes be covered before you hang up the phone.
How are life insurance death benefit proceeds taxed?
Other than in rare circumstances, none of which are likely on a final expense policy, the death benefit proceeds from life insurance policies are received by your beneficiaries 100% income tax-free!
Am I too old to qualify for coverage?
Final expense policies are available all the way up to age 85.
What can the death benefit from the policy be used for?
The proceeds of a Final Expense policy can be used for anything at all. It’s totally up to your beneficiaries. Obviously, most people use the proceeds to help with final expenses, like the cost of the funeral, and any outstanding medical, legal, or other bills. But, they can also be used to augment your legacy for your loved ones, leaving behind a little cash for them for any purpose you like.
What methods of payment are available?
Insurance companies decide which methods of payment they’ll accept, and that does vary from company to company. All of them will take a standard “ACH” form, which allows them to debit your bank account for the premium each month. Some of them will also take credit cards, at least for your first premium, while others won’t. Finally, some will allow you to pay using a debit card or a social security debit card, while others won’t. We know the rules at each company and can help guide you.