Understanding Life: What is final expense insurance – and do I need it?
The kids are out of college. The house is paid off. As you cross many of life’s biggest expenses off your list, you may not need as much life insurance coverage as you once did to protect your family. But final expense insurance can help with one cost that everyone still needs to cover: their burial.
Sure, we know thinking about your own funeral isn’t pleasant. For your family, though, burial insurance can help them avoid even more unpleasant financial issues after you’re gone. The average cost of a funeral can be $10,000 or more, and end-of-life expenses like medical bills can push that number even higher. For many people, a final expense policy is an affordable way to earmark money specifically for those costs. Here’s a closer look at how final expense life insurance works – and whether it’s the right fit for you.
How final expense insurance works
Put simply, final expense insurance is designed to cover the actual cost of your death. This can include funeral services, items like a casket and hearse, or medical and credit card bills. You can make your partner or child the beneficiary for your policy, or even assign it directly to the funeral home that you want to handle your arrangements. Planning for those expenses ahead of time is important to make sure you don’t saddle your family with bills later. For example, some states have “filial responsibility laws,” where an adult child is responsible for paying a parent’s medical costs after they die.
Unlike traditional term or permanent life insurance, final expense coverage amounts are typically lower, ranging from about $5,000 to $40,000. Final expense is usually permanent insurance, which means you can keep the policy for as long as you keep paying it. In some cases, the policy will build cash value that you can take out later. For people who need a guaranteed way to pay for their end-of-life costs, final expense insurance is an attractive option because:
- It’s affordable. Since the coverage amounts are relatively small, final expense offers some of the lowest premiums around, especially if you’re older. A $10,000 policy costs around $50 per month on average, although that rate can vary depending on your age, health, and other factors.
- It’s easy to qualify. Worried you can’t get insured because of a pre-existing condition or other health issues? You’re in luck. Final expense insurance doesn’t require an exam, and some carriers won’t even ask questions about your health. As a result, even people with major health concerns may be able to find coverage. Final expense is also available well into your later years, with many carriers willing to insure people up to age 85.
- It offers fast access to cash. Once you die, your family or other beneficiary will typically receive the payout quickly so they can cover expenses that occur right away, like a funeral. Keep in mind some policies have a “graded period” of two to three years after you buy the policy. If you die during that time, your family may not receive the full payout. Consider it one more reason to buy coverage sooner rather than later.
Is final expense insurance worth it?
Wondering if you need final expense insurance? Putting yourself in your family’s shoes and planning ahead can help you determine if you need coverage, and how much. Consider the costs your family might have to shoulder if you died, including:
- Funeral and burial costs
- Medical bills
- Credit card or other debts
In addition, you may want to set a little money aside for your children or grandchildren to help with things like the cost of schooling.
For people over the age of 50, final expense insurance can be a smart way to cover that last big financial outlay. It can be hard to save enough to cover all your bases. With final expense insurance, you can pay a little each month for a bigger financial cushion for your family.
Since final expense policies generally top out at $40,000, a traditional life insurance policy is a better way to go if you still have dependents at home or other significant expenses. You can buy term life insurance into your 60s and beyond with many carriers. Final expense can also supplement a traditional life insurance policy, giving your family added peace of mind when they need it most.
Want to learn more about final expense insurance? Explore your options here.
At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.