No one likes to think about their own funeral. But most people have heard that they'll be expensive. And we do not want our loved ones stressed by big expenses while mourning. We want to ease their burdens, even after we're gone.
Final expense life insurance is a type of permanent life insurance whose proceeds enables you to pay for your funeral and end-of-life expenses after your passing. It's less expensive than other types of permanent insurance, but it typically offers lower coverage levels ($25,000 to $50,000 max) than traditional kinds of life insurance coverage and many people can get a significantly higher coverage level, for the similar or discounted, with term life insurance.
Here we'll walk you through the details you should know to help make the best decision for your family.
Final expense life insurance versus term life insurance
Dying could be expensive. The median price of a funeral within the U.S. is much more than $7,300, based on the National Funeral Director's Association. Include the price of end-of-life medical care as well as your passing could quickly put your family inside a stretched financial position.
These end-of-life cost is what final expense life insurance is meant to cover. Often, it's discussed instead of term life. Many insurance brokers or salespeople even offer both.
So, what are the differences?
Final expense life insurance coverage is a kind of permanent insurance which means it remains essentially provided premiums are paid – that pays a lump sum payment whenever you pass to help your beneficiaries cover funeral expenses along with other end-of-life expenses. Due to lower benefit levels than term or other kinds of permanent insurance (typically only $5,000 to $25,000), most final expense policies are sold without a health check and are relatively affordable compared to other kinds of permanent insurance. Term life insurance, however, is within effect for any set period of time – the “term.” These policies are medically underwritten, meaning oftentimes you'll need a short health check, and provide higher coverage levels. Haven Life, for example, offers policies as much as $3 million. Term life can help all your family members purchase funeral expenses. But it will also help your family cover other important expenses like the mortgage, day-to-day bills and college tuition. A term life policy can help to eliminate the impact from the loss of your earnings.
In many cases, specifically for healthy, younger individuals, term life insurance is a better financial option than final expense life insurance. Rates for final expense insurance are relatively full of light of the coverage levels, and those levels often don't cover all a family's financial needs.
What does final expense life insurance cover?
Final expense life insurance is meant to cover funeral and burial costs, hospital bills, credit card debt, along with other end-of-life expenses. But your beneficiaries don't have to use it that way.
The final expense life insurance coverage company won't be requesting receipts showing how your family uses the proceeds. The advantage will be paid out in a lump sum payment to be used as needed by your family.
If you want to ensure that the policy can be used for funeral expenses, some funeral homes will allow you to list them as the primary beneficiary on the final expense policy. They'll get the funds directly to invest in your funeral and burial.
Cost of final expense life insurance
On average, final expense insurance policies offer $10,000 to $20,000 in coverage and cost $30 to $70 a month, depending on your gender, health insurance and age. Younger applicants may be eligible for a lower rates, but applicants over 70 can pay $70 to $180 a month.
Comparatively, a 40-year-old woman in excellent health could qualify for a 20-year, $250,000 Haven term policy, from MassMutual, for less than $20 per month. A 30-year policy would boost the premium to around $32 monthly and canopy her until she's 70 years old.
In most cases, term life can provide 10 to 20 times the coverage of final expense life insurance coverage for a similar cost or less.
Alternatives to final expense life insurance
If covering funeral and end-of-life expenses is the biggest concern, final expense life insurance coverage isn't your main option. Prior to making a decision, consider these alternatives.
Term life insurance
Term life insurance coverage offers high coverage levels at affordable prices.
If you're young and healthy, term life can better protect your family within the years they need it most – when your children are still financially dependent, while you as well as your spouse build up retirement funds.
While term life doesn't last forever like permanent insurance, if you are young and building assets, your loved ones might be not as likely to feel financially stretched with a $7,000 to $10,000 funeral should you die in senior years. That's particularly true if you have retirement or other funds put aside that will help to pay for the cost.
Pre-need insurance or pre-need funeral insurance coverage is a unique kind of permanent final expense life insurance offered by some funeral homes and funeral directors.
Instead of the final expense policy paying out a lump sum payment to your loved ones, pre-need insurance covers the price of a predetermined funeral and cremation or burial. You need to do the look using the funeral home in advance to get the funeral you want and save your loved ones time and effort planning after your passing.
This insurance coverage is often cheaper than final expense insurance, but is not always as straightforward as it sounds. Over 10, 20 or even 30 years, a great deal can change. The funeral home you secure your policy with could close or change ownership. Offered services could change. Which shifts could create confusion for your loved ones.
While $7,000 to $10,000 is a lot of money, if you are young and also have years in order to save or are a senior who's well prepared for retirement, it is an amount you could self-fund.
Simply layout your wishes for your loved ones and inform them where to go ahead and take money from to pay for the funeral. Your money can stay invested together with your other assets, to continue to build your family's wealth, but there if you want it.
When is final expense life insurance coverage the ideal choice?
As a life insurance policy that isn't medically underwritten, final expense life insurance coverage is fast and easy to get. Even though the possible lack of medical exam does result in higher costs when compared with coverage levels, minute rates are generally affordable and therefore are the best choice for some individuals.
A final expense life insurance coverage may be a better fit for you if:
- You have been declined life insurance coverage because of health reasons
- You're a senior who doesn't be eligible for a term life insurance
- You're a child taking care of an aging parent with no way to pay for their funeral expenses; you are able to remove a final expense life insurance coverage on your parents.
If you want to make certain you are making the right choice, always cost compare final expense insurance with other options, like term life insurance. Take time to understand how much coverage your loved ones would actually need should you passed, what you are getting, and whether you're entitled to a phrase policy.
Choose the best life insurance coverage for you
If you're purchasing life insurance coverage to help financially protect your family, you want to provide the degree of coverage they'll need. And with most final expense policies maxing out at $25,000 to $50,000, this type of insurance may leave them short.
Final expense life insurance might be a wise decision a high level senior or cannot be eligible for a medical underwriting through a term life policy. It could also be a great choice for adult children caring for aging parents who wish to reduce the stress of their parent's eventual funeral costs.
If you're healthy and also have a clear medical history, then you'll typically get much better value with a medically underwritten term life insurance policy. It's not hard to obtain a rate quote, and you may buy the policy online as you prepare.
Get your family the security they require, to ensure that funeral expenses and other costs aren't a burden throughout a difficult time for your loved ones.