Benefits of Final Expense Insurance
Final Expense is a type of permanent life insurance. With a guaranteed death benefit, as long as you pay your premiums, or to the policy's maturity date. Which is age 100, or 121 in some policies. It offers a tax-free death benefit, designed to pay off end-of-life expenses; such as medical care and funeral costs.
You must be 50 to 85 years old to apply. The sooner you apply the better premium you can lock. So when your health situation changes your premiums won’t. With premiums starting as low as $20 per month for a $5,000 coverage.
As a senior or retired you might no longer need a traditional life insurance policy. But there is still one considerable expense you’ll need to arrange for: your funeral. With the median cost of a funeral, burial services, vault, and medical bills around $10,000. Accord
ing to the National Funeral Directors Association. This can be a financial burden for the grifting family.
Back in 2019, independent research reported: 40% of American families couldn’t cover an unexpected expense of $400. Final Expense insurance will provide cash-in-hand to y
our loved ones. In a time when is needed the most. Claims for traditional life insurance can take months to be issued. However, a final expense claim only takes from 24 to 72 hours.
Who is Final Expense for?
As our health tends to decline with age, so do life insurance rates. Final Expense policies have a shorter underwriting process. Either with no medical exam or a guaranteed acceptance. Is then a better fit for candidates who typically are ineligible for traditional life insurance, case in point:
Individuals above 60 years old
Individuals with a serious health condition, such as cancer, HIV, or Parkinson's disease
Final-expense policies have a cash value component. Which is the amount of money you would receive if you gave up the policy to the insurer. Part of the premium built the cash value, which can borrow against and have lower interest rates than a traditional bank.
Types of final expense insurance
There are two principal types of final expense insurance. The differences are in maximum benefit amounts, pricing, and the number of medical information required to apply.
Guaranteed issue life insurance. It offers almost certain application approval. Insurers would ask “knockout questions”, about terminal illnesses that disqualify you for coverage. Regardless, many providers will offer coverage no matter your health status. That's the reason why a guaranteed issue is more expensive than a simplified issue. And offers lower maximum coverage amounts, generally from $5,000 to $25,000.
Simplified issue life insurance. Ideal for people who may not qualify for traditional life policy but are only considered moderate risk. You’ll be required to answer a detailed medical questionnaire. But there’s no medical exam involved. You can get a simplified issue insurance policy with coverage up to $50,000.
Methods of payment
Depending on your health and financial situation, you'll have the above-mentioned options:
Lump-sum: Particularly unhealthy individuals might need to make a lump-sum payment. Though it can also be helpful if you're concerned about keeping track of your payments. Following the lump-sum pay off you’re now covered for life.
Fixed period: Preferred if you're working and have an extra income for premiums. But are unsure about your ability to cover payments after retirement. You’ll be required to pay higher rates for permanent coverage for 10-20 years.
Periodically: You'll commit to a regular payment until you pass away. The premiums could be lower, but you would pay a higher total amount depending on how long you live. You’ll be able to pay either: monthly, quarterly, semi-annually, or annually, depending on the insurance provider.
What does final expense life insurance cover?
Related to the type of burial or cremation the insured individual wishes for, being:
Funeral directors services
Funeral home fee
Memorial service costs
Embalming
Casket
Cremation
Urn
Burial plot
Burial vault
Headstone
Obituary
Flowers
Final expense insurance is intended for funeral expenses. However, if you are worried about how your policy will be allocated. As the beneficiary isn’t required by law to spent it according to your wishes. Here are some steps you can take to ensure your death benefit will be used as you planned:
Name someone you trust as your beneficiary: Should be someone who will be financially affected by your death and would use the death benefit accordingly.
Spell out your final wishes: You can write out your wishes or lay them out to a financial advisor. This will specify how you’ll like your final ceremony to be carried on and the way your policy's money should be employed.
Alternatives to Final Expense Insurance
Pre-need funeral insurance is sold by the funeral home or an associated insurer. They are the policy's beneficiaries. However, it can vary from state to state, with some areas where the funeral home can’t be named the beneficiary.
You provide an installment payment for a period. And the dea
th benefit ties to the cost of a particular set of services, offered by the funeral home. Nevertheless, the prices aren’t locked. When the funeral home's costs of services increase, above the policy death benefit. Is your family that would have to pay the difference. On the contrary, if prices fall, your family won't receive any left death benefit.
If you desire to change the funeral later on or move and need to change the funeral home, you may not be able to. In that case, you might opt to cancel the policy, and you could receive a part of the premiums back or not a bit.
You can't check the financial strength of a funeral home as you can with an insurance company. If you've paid to a funeral home and goes out of business before you die, you won't receive your money back.
Is worth mention that funeral insurance isn't intended as an extra income to the policy’s beneficiary. In such circumstances, you would need a whole or term life policy.