Final Expense Insurance – What are the benefits?
Life insurance is an important component of a good solid financial plan – and having the right type of coverage can mean the difference between loved ones who are financially secure and those who may struggle to pay the decedent’s debts.
Final expense insurance is a type of life insurance coverage that covers the cost of burial, a funeral, and other related costs. Often referred to as “funeral insurance” or “burial insurance,” final expense generally provides a benefit of between $5,000 and $50,000.
How Insurance For Final Expenses Work
The policy holder on a burial life insurance policy can name a person (or persons) of their choice as the beneficiary. The beneficiary – in many cases a family member or other loved one – makes the life insurance claim upon the insured’s death and is then responsible for using the proceeds to carry out the policy holder’s wishes.
Many final expense life insurance policies are offered at a lower cost than more traditional forms of life insurance coverage – and final expense plans can allow the policy holder to make affordable monthly or annual premium payments. This makes final expense coverage easy to carry for many – even those on a fixed budget.
Why Is Final Expense Life Insurance Important?
While all types of life insurance are important, final expense coverage can fill the particular need of covering sudden and high-priced expenses upon the policy holder’s death. In a time that is already emotionally stressful, final expense life insurance can help to ease the financial burden of paying funeral and other related expenses. With these financial obligations covered, loved ones of the decedent can more fully focus on the other pressing issues during this time.
Final expense insurance can also help to ensure that loved one won’t be saddled with ongoing debt such as funeral costs and medical expenses that could essentially wipe out savings or require ongoing payments in the months or years to come.
Types of Final Expense Life Insurance
Final expense life insurance policies can either be “term” or “permanent.” Term life insurance will cover an insured for a set period of time or until the insured reaches a certain age such as 70. In this case, if the insured dies while the policy is still in-force, the benefit proceeds will be available to the beneficiary. However, should the policy expire, the insured will need to obtain a new policy.
Permanent life insurance policies cover an insured for the remainder of his or her life, provided that the premiums are paid. There is no set time limit on a permanent life insurance policy. In addition, these plans will also typically include a cash value component where the policy holder can accumulate savings that grow on a tax deferred basis.
In many cases, final expense life insurance is underwritten as either “simplified issue” or “guaranteed issue.” With a simplified issue policy, the applicant is asked several questions regarding their health and medical condition. However, the applicant is not required to take a medical exam.
A guaranteed issue life insurance policy in one in which the applicant is not asked any medical questions at all. Therefore, with these types of plans, anyone who applies will receive coverage. It is important to note, however, that the premiums on these policies are typically higher.
Final Expenses Can Really Add Up
In addition to other debts that a decedent may have, final expenses such as a funeral, burial, and other such items can really add up. Today, the average cost of a funeral is approximately $6,000 – but when items such as flowers, an obituary notice, and a limousine are included, the cost can actually exceed $10,000.
Because final expenses can be substantial, it is a good idea to create a “funeral checklist” in order to get a better idea of exactly how much could be due. Just some of the final expenses that may be owed by a decedent include:
- Cemetery / Burial Plot
- Headstone (and engraving)
- Funeral Service
- Visitation Service
- Probate Expenses
- Legal Fees
- Hospital and/or Medical Expenses
- Outstanding Debt
- Payoff of Mortgage, Auto Loan, and/or Credit Card Balances
Rather than have a burial plot, some alternatively choose cremation. There are several different types of cremation services. For example, direct cremation does not typically include a funeral or memorial services. This is one reason why cremation costs can be quite a bit lower than having a traditional funeral and burial.
Who Can Qualify for Final Expense Life Insurance?
Most applicants are able to qualify and afford final expense life insurance. Unlike many other types of life insurance, final expense coverage does not typically require that an applicant take a medical exam. Therefore, even if an applicant does not qualify other types of life insurance coverage due to adverse health conditions, it is likely that they will be able to purchase a final expense policy.
In addition, because the face amount on final expense policies is usually smaller than on other types of life insurance, the premium payment may be more affordable. This makes final expense coverage within reach financially for many who need this coverage.
Tips for Purchasing the Right Final Expense Insurance Policy
When purchasing any life insurance plan, it is important to choose the right type and amount of coverage for your specific needs. By having final expense insurance, a policy holder can be assured that there will be funds available to provide the proper funeral and burial arrangements.
Prior to purchasing a final expense policy, there are several factors that should be considered. These include:
- Type of Coverage - Applicants will need to decide whether they want to purchase term – or temporary – coverage, or a permanent life insurance plan.
- Benefit Amount – In order to ensure the proper benefit amount, it is important to have an approximate idea of how much funeral and other related charges are in the local area.
- Insurance Carrier – It is also important to ensure that the insurance company offering the policy is financially stable and has a good reputation for paying its claims.
With the high cost of funerals today – as well as the many related expenses – additional debt can only add to loved ones’ grief. In this regard, obtaining final expense life insurance can be considered a financial planning tool as well as a gift to loved ones during their time of financial and emotional need.
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