What Is Final Expense Insurance?

Table of Contents:

1. Understanding Final Expense Insurance
2. Selecting a Beneficiary
3. Is Final Expense Insurance Right for You?

What’s the difference between burial insurance, funeral insurance, and final expense insurance? It’s all in the name. According to Investopedia, they’re all just different ways of saying the same thing — though some terms are obviously more direct than others. Providers may have a preferred term, but each one refers to final expense life insurance.

Understanding Final Expense Insurance

Final expense life insurance provides a limited amount of coverage for seniors who want to save for end-of-life expenses. These may include the various fees tied to burial, cremation, and funeral services, as well as lingering costs from a policyholder’s lifetime (like medical and credit card bills). As a result, terms like “burial insurance” aren’t technically an accurate way to describe these policies. There are no limitations, in fact, on how a final expense insurance death benefit can be spent. Unlike other death benefits, however, payouts from final expense policies aren’t typically substantial enough to provide long-term care for the policyholder’s surviving loved ones.

Providers offer two slightly different types of final expense insurance plans. Both kinds provide whole life (as opposed to term life) coverage. As long as beneficiaries pay their premiums, they are covered until their death.

Simplified issue life insurance

Simplified issue plans are available to individuals between the ages of 45 and 80, and the application process is far simpler than most other types of life insurance. Shopping for a traditional term or whole life policy means undergoing a thorough medical exam to determine eligibility and costs. Applicants for simplified issue plans only need to fill out a short questionnaire, though certain providers may request to review their medical and prescription histories in more detail.

Guaranteed issue life insurance

Anyone between the ages of 50 and 85 who pursues a guaranteed issue plan is all but certain to be approved for coverage. Prospective policyholders will not have to undergo a medical exam, fill out a questionnaire, or even consent to a medical records check. Because of the near-certainty of coverage, guaranteed issue plans are more expensive than the alternative and provide less substantial coverage. In rare instances, a provider may reject an applicant as a result of certain terminal illnesses.

Selecting a Beneficiary

Policyholders have several options for ensuring their death benefit is used in accordance with their needs and wishes. The safest is to formally name a beneficiary who’ll manage the funds. This could be a child, spouse, friend, or anyone that’s familiar with the policyholder’s end-of-life wishes and dependable enough to execute on them. Policyholders can even designate certain funeral homes as their beneficiary — so long as they don’t require up-front payment. In these instances, death benefits go directly to the funeral home, where they’re used to cover a range of expenses.

The National Funeral Directors Association reports that the average cost of viewing and burial services was more than $7,600 in 2019. That sum includes a range of fees like embalming and transportation, but does not account for others like memorialization. A headstone alone can add hundreds or thousands to a funeral bill and leave a family struggling with financial hardship during an emotional period.

Those figures suggest that even a fairly modest funeral or memorial can easily deplete the funds from a final expense insurance death benefit. Nevertheless, policyholders who select funeral homes to manage their end-of-life expenses should take care to pick secondary beneficiaries as well. These individuals will manage any leftover funds and, if necessary, assist the primary beneficiary.

Is Final Expense Insurance Right For You?

Depending on your age, health, and financial situation, you may have the opportunity to select from a broad range of life insurance options. Final expense insurance is usually most appealing to seniors whose age or pre-existing medical conditions would disqualify them from enrolling in other policies. Additionally, it’s often considered a safe option for seniors with limited savings who would otherwise struggle to cover their end-of-life expenses.

While the speedy and simple approval process is often a selling point for final expense insurance, it’s important to carefully reflect on all of your options. The right provider may offer a standard term or whole life insurance policy that will provide a larger death benefit and more manageable premiums throughout your lifetime. Don’t rule out the alternatives before you’re absolutely certain that you have found the ideal type of life insurance.
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