Final Expense Insurance
Planning for the inevitability of death is nothing to get
excited about, but burdening your heirs with unnecessary
burial expenses can be avoided. Here’s how final expense
insurance can leave your family with a bit less grief.
While it’s not the most exciting topic to think about, we must accept that the reality that death happens.
Planning for your death might seem morbid and depressing, but thinking about it now saves your
relatives the hassle of planning for it later. Funeral costs range between $5,000 and $12,000. It could be
more depending on what type of funeral you want and could possibly be more if you live a long life. You
can prepay your funeral expenses with a funeral home or purchase final expense insurance to cover the
costs associated with the event.
Final expense insurance or burial insurance is a type of insurance that covers the cost of funeral-related
expenses. The insurance is paid to a beneficiary upon your death and the beneficiary uses the money to
pay for your funeral. It’s similar to life insurance, but has a lower face value than life insurance since the
insurance benefit is meant to cover only the expense of your funeral and burial. Final expense insurance
is typically paid immediately while there’s often a wait period for life insurance. The waiting period for life
insurance means that someone has to pay for the funeral out of their pocket and then be reimbursed with
The insurance can be purchased as a term or whole life insurance policy. A term life insurance policy will
expire after you’ve reached a certain age, even if no benefit has been paid. After you reach that age,
your policy would no longer be effective. If you outlive your policy, you’ll need to have another way to fund
funeral expenses if you want to spare your survivors the expense of paying for the expenses another way.
A whole life policy, on the other hand, lasts until death. Based on your state’s laws, some final expense
insurance plans are guaranteed issue – meaning you can sign up regardless of your health, age, gender,
or pre-existing conditions. Most policies won’t be cancelled as long as the term is in effect unless you fall
behind on your payments.
Some plans require you to have a physical exam before
the policy can be issued. Simplified issue plans are
granted based only on your answers to simple health
questions on the application. You don’t have to take a
medical exam or test to get this type of insurance. You
might prefer a simplified issue plan if you have some
type of medical condition that would keep you from
otherwise being approved for coverage. Simplified
issue plans may have a higher rate than those plans
that are based on a medical exam.
Burial insurance plans may have a low minimum face
value, often $1,000, and maximum face value that’s
lower than a traditional life insurance policy, e.g. $25,000.
The benefit amount is intended to be just enough to cover final expenses. Some policies can only be
used to pay for funeral expenses while other policies may allow a named beneficiary to keep whatever
cash remains after funeral expenses have been paid. To decide how much insurance you need, price a
funeral at today’s cost and then adjust that about upwards to account for inflation.
Some plans have a graded death benefit that pays a small percentage of the face value if the insured
person dies within the first year of the policy. The percentage paid increases for a certain amount of
years. After the second or third year, the full death benefit is paid. One of the good things about final
expense insurance is that the premium and benefits remain the same throughout the policy. This stability
gives you the peace of mind in knowing exactly how much you have to pay every month and what type of
benefit your survivors will receive.
All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to
participate in any particular trading strategy. The Money Alert does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any
information prepared by any unaffiliated third party, whether linked to this web site or incorporated herein, and takes no responsibility. All such information is provided solely for
convenience purposes only. The Money Alert is not affiliated with any of the firms or entities listed unless specifically stated. The Money Alert does not provide investment, tax or legal
advice. Please consult the appropriate professional regarding your personal situation.
Copyright © 2011 The Money Alert.com. All rights reserved.