What Is Final Expense Insurance?
Final expense insurance is the euphemistic term for a type of life insurance that has a relatively low death benefit, usually between $ 5,000 and $ 25,000. This type of policy, which may also be called “burial insurance” or “burial insurance,” is intended to cover the insured's funeral expenses.
Final expense insurance is generally easier to qualify for and more affordable than other types of life insurance.
Here's what you need to know about final expense insurance so you can decide if it's right for your needs.
What is final expense insurance?
In 2019, the average cost of a funeral, including viewing and burial, was $ 7,640, according to the National Association of Funeral Directors.
This calculated median does not include all expenses associated with a burial, such as the cost of a burial plot, travel expenses (if the deceased needs to be moved to a different location), food and drink expenses for a funeral reception, and much more in short, your final expenses may be much higher than what you or your family anticipate.
Final expense insurance can provide your family with the funds necessary to pay for the funeral. This type of whole life insurance promises a death benefit no matter when you die, as long as you are up to date with your premium payments.
However, although final expense insurance is marketed for burial expenses, your beneficiaries can use the benefit for any financial need they have, including paying medical debts accrued during their final illness or any other financial obligation.
Because final expense insurance offers a relatively low death benefit, premiums tend to be cheap, even for policyholders ages 50 to 85, the demographic most often targeted by funeral insurance. Most policyholders can expect to pay between $ 2 and $ 5 per week for their final expense insurance premiums.
Final expense insurance vs. Pre-necessary insurance
Final expense insurance is similar to another product known as "pre-necessary insurance" or "prepaid funeral plan," but it is important to understand the differences.
Although a final expense policy allows you to choose the beneficiary of your choice and the death benefit can be used for whatever the beneficiary chooses, pre-need insurance generally names the funeral home that will handle your burial as your beneficiary and therefore so much profit. it can only be used for funeral expenses.
Pre-need insurance is often marketed as a way to "lock in" funeral expenses at the time of purchase, as many of these policies guarantee specific costs for services and products, such as a casket, even if prices rise. with inflation over the years. before his death.
Since both final expense insurance and prior needs insurance can be called funeral insurance, it is important to understand the differences between them.
If you are considering purchasing pre-necessary insurance, make sure you understand your rights and requirements for this type of funeral insurance.
The NFDA provides a statement of funeral pre-planning rights for consumers, as well as a checklist of important stipulations that any pre-needs policy should include.
How does final expense insurance work?
To enroll in a final expense policy, you will need to answer a few health-related questions. Unlike buying regular or long-term life insurance, you won't need to undergo a medical exam or provide the insurer with access to your medical records.
That said, if you have severe or multiple health problems, you may not qualify for this type of policy.
Some insurers offer policies with a modified benefit or a gradual death benefit, rather than a tiered benefit, for those who cannot pass the health assessment questions. These policies generally have a two to three year waiting period until the full death benefit is paid. If the insured dies within this period, the beneficiaries will receive a refund of the premium or only a portion of the death benefit.
Subscribing to a final expense insurance policy could mean that you will pay premiums for the rest of your life. While premiums tend to be affordable, the ongoing expense of premiums is something to consider in your decision. Also, like many other types of life insurance, the lack of a one-time premium payment can cancel your policy.
Considering the ongoing nature of premium payments and the likelihood that you will become ill or disabled at some point during your final days, it is important to ensure that you can continue to pay your premiums during difficult times. However, since final expense insurance is a type of whole life insurance, you can also access the cash value of your policy through a cash loan or refund.
Do I need final expense insurance?
People who already have a life insurance policy may not need a final expense policy if the whole life policy is large enough to cover all of your insurable needs, including burial costs.
However, if you don't have life insurance, either because your life policy has expired or because you can't qualify for a traditional policy, you may find that final expense insurance will cover your needs, especially if you don't want to burden your family. paying for his funeral.
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