At different times of our lives, we buy different types of insurance policies to suit our needs. When we buy a house, we purchase a homeowner’s insurance policy. When our teenager starts driving our car, we beef up our auto insurance policy.
As we grow older, we take out life insurance policies, so our families are financially covered in case the worst happens. However, a lot of people don’t think about buying final expense insurance, which is a huge mistake on their part.
But what is final expense insurance? Why is it important for people in their middle and old ages? Let’s find out.
What Is Final Expense Insurance?
Final expense insurance is a policy that comes under the umbrella of whole life insurance policies. Most people buy these policies to cover the excessive amounts of money funeral homes charge for burial and cremation services.
However, your beneficiaries can use this money for almost anything — overdue utility bills, hospital fees, credit card bills, or even taking a vacation or giving the money to charity.
13 Things You Need To Know About Final Expense Insurance
Death is a heartbreaking reality. However, the financial burden associated with the death of a loved one is a difficult part of the grieving process that one needs to take care of before they pass away.
On average, the burial and cremation rates in the US range between $5,000 to $15,000. How can a grieving family arrange so much money for the burial expenses of their loved ones?
Luckily, final expense insurance takes care of all that and more. Here are 13 things you need to know about final expense insurance.
1. There Are Two Types Of Final Expense Insurance.
Most people drag their feet when they decide to get final expense insurance because they don’t want to subject themselves to a lengthy medical exam.
A medical exam also means that they run the risk of being rejected because of their health conditions. However, final expense insurance doesn’t work that way.
It is divided into two types: Guaranteed Issue Life Insurance and Simplified Issue Life Insurance. If you’re wondering what the difference is, we’ve got your back!
Simplified Issue Life Insurance is a type of final expense policy that requires you to fill a detailed questionnaire about your medical history and current physical health.
There’s a chance that you might get rejected if you have a terminal illness or any other critical condition. However, you don’t need a medical exam for this type of final expense policy.
Guaranteed Issue Life Insurance is a type of final expense insurance that you’re almost guaranteed to get, regardless of your medical conditions.
The insurance company will not ask you to submit yourself for a medical exam or fill a detailed questionnaire in order to get a Guaranteed Issue Life Insurance policy.
2. You Can Choose Who Receives The Benefits.
When seniors of any age start getting their affairs in order, a lot of people tell them to purchase a burial insurance policy.
While that is a good option, it is a very limited one. You will need to decide which funeral home you wish to be interred by, and your policy will send the death benefits to that place. With Final Expense Life Insurance, you can choose to give the money to a beneficiary of your choice.
Doing so will give you the peace of mind associated with knowing a loved one will take care of all your wishes after you are gone.
In addition, your beneficiary can use the leftover money for anything else they need it for, be it overdue bills, hospice fees, or going for a shopping trip to alleviate their sadness.
3. You’ll Need To Wait Two Years For The Maximum Benefits.
After you purchase the policy, you’ll need to pay premiums for two years before you can take advantage of the full extent of the final expense insurance policy.
Suppose the policyholder dies before the two-year waiting period is over. In that case, the beneficiary will only receive the amount the policyholder paid by way of their premiums in that time and nothing more.
However, that’s still not a loss because the beneficiary will still receive some amount of money that they can use to cover some essentials after the death of the policyholder.
4. It’s Cheaper If You Buy It When You’re Young.
While someone in their thirties is typically not thinking of their death, you do get cheaper premiums if you purchase a final expense insurance policy as a young person.
Since life is very unpredictable and anything can happen at any time, responsible persons make sure that they are prepared for any eventuality at any time.
If a small amount of money is charged from your account every month, you won’t even know the difference. However, if the worst happens, your family will thank you for planning ahead and saving them from a potential financial disaster.
5. Why It’s Critical To Get Final Expense Insurance.
Funeral costs in the US have risen to a point where most families cannot even afford them.
Instead of organizing fundraisers after a loved one dies or opening a GoFundMe, a better idea is to purchase a Final Expense Insurance policy to cover the high fees charged by funeral homes for internment.
Since a funeral can cost up to $15,000 in the US, it’s important that your loved ones don’t have to empty their pockets to cover your funeral costs.
The best part about Final Expense Insurance is that once your beneficiary pays for your funeral, they can use the leftover money for whatever they want.
6. There Are No Delays In The Payout.
While other types of insurance policies typically have a required waiting period, there’s no such thing associated with a Final Expense Life Insurance policy.
The beneficiary will receive the payout soon after the policyholder’s death occurs. This allows the beneficiary to make the necessary arrangements for the policyholder’s funeral or memorial and the costs associated with it.
This additional perk saves the survivors a lot of time and money, allowing them to mourn the passing of their loved ones in peace.
7. Your Premium Doesn’t Change With Time.
After you’ve purchased the Final Expense Insurance policy, your premium won’t really change.
This fact means you don’t have to worry about inflation and the economic climate affecting the amount of money you pay your insurance provider every month. You’ll pay the same premium every month until the age of 100!
This quality is why so many seniors opt for Final Expense policies. Since most of these people have retired, they don’t have the means to pay rising premiums every month.
8. Your Policy Will Not Expire After Some Time.
Final Expense Insurance policy is a great choice for seniors because it doesn’t expire after a certain time period. What does an expired policy even mean?
Final Expense Life Insurance, as we mentioned earlier, is a type of Whole Life Insurance. This type of insurance extends throughout the policyholder’s life and does not expire at any given time.
However, Term Life Insurance is a major type of insurance that allows you to purchase policies that are active only for a certain timeframe. If the policyholder dies within that timeframe, the beneficiary will receive the lump sum.
If not, their policy will expire. The policyholder then has three choices for a Term Life Insurance plan: They either renew their policy, convert it to a permanent plan or let the policy expire.
All of these options come with their challenges, which is why one should opt for Final Expense Insurance plans as they allow you the peace of mind associated with a whole life insurance policy.
9. It’s A Lot More Affordable.
Most insurance brokers will tell you that there’s not a lot of difference between a Life Insurance Policy and a Final Expense Plan.
Why is that? It is because both of them work the same way. However, Final Expense insurance policies are a lot more affordable than other types of life insurance policies.
If you’re a senior who has paid off the mortgage on their home, sent the kids off to college, and don’t have any significant expenses that your family might need help with, you won’t really need a life insurance policy.
That’s a sigh of relief for a lot of people researching life insurance policies! However, burial expenses are something that everyone has to deal with at some point.
So, if you want to make sure you don’t burden your family with out-of-pocket expenses in their time of grief, you can take out a simple and affordable life insurance policy like the Final Expense plan.
10. You Can Have Poor Health And Still Qualify.
Most seniors get discouraged when Life Insurance companies either turn them away due to poor health.
Sometimes, they give them an insurance package, but with premiums that are too expensive to pay every month. These soaring premiums are often due to very old age or poor health. However, you shouldn’t give up the search yet!
Insurance companies created Final Expense Insurance policies for people with poor health or seniors who cannot afford Life Insurance policies on their own.
While the payout for Final Expense Insurance is small, it will still cover the essentials without emptying your pockets in your lifetime. You don’t even need to submit for a medical exam, which means your health conditions don’t have a lot of effect on your premiums.
11. A Child Can Take It Out For Their Parents.
Suppose an aged couple has only one child who cares for them but is not financially stable enough to pay for costly funerals out of their own pockets.
What the child can do is take out Final Expense Insurance policies for their parents. If the child pays the premiums on time, the insurance carrier will award them a lump sum for their parents’ burial if it occurs after the waiting period.
These types of situations allow you to fully grasp how crucial Final Expense Insurance is and why it is the best option for so many different situations.
12. Which Is Better For You — Simplified Issue Or Guaranteed Issue?
Don’t really understand its specifics and would just like a simple overview of which type of Final Expense policy is better for you? We’ll explain it.
If you have some health conditions that are not life-threatening, you can opt for a Simplified Issue plan. You can answer the questions in their detailed questionnaire, which will then determine your premiums.
On the other hand, if you have some serious terminal illnesses or life-threatening conditions, it might be a better idea for you to get the Guaranteed Issue plan. This is because you don’t need to have a medical exam or even fill a questionnaire to qualify for this type of policy.
13. There Are Different Benefit Levels.
Typically, all Final Expense Insurance plans have benefits below $50,000. On average, most seniors take out policies for benefits ranging between $10,000 to $20,000. This amount is just enough to cover funeral costs and any leftover bills from hospitals, pharmacies, or different service providers.
You should also note that insurance carriers modify your plan according to your health which means that people with serious health concerns will have lower benefits and will also have a waiting period.
If the policyholder passes during this time frame, the beneficiary will receive the amount paid in premiums along with a small additional percentage. Most companies usually pay 10% over the amount of the premiums to the beneficiary.
The Bottom Line
Most seniors don’t have huge expenses unless they have a terminal illness or require assistance for any reason. With that being said, we know that most life insurance policies have very high premiums too.
Why would a senior with minimal expenses want to pay exorbitant amounts of money every month if they have no needs except to cover the costs of their funeral and internment?
That is where Final Expense Insurance comes in. We hope these thirteen facts about this type of insurance helped you understand what it means and why it’s so essential for people over the age of 45!