What is Final Expense Life Insurance, and how does it work?

Final expense insurance is a sort of whole life insurance that pays for medical bills and funeral costs after you pass away. A burial or funeral insurance policy, often known as a final expense policy, is popular among seniors.

The following features can be found in most final expenditure plans:

  • If premiums are paid, whole life insurance does not expire.
  • Cash value – the insured may be eligible for a policy loan.
  • Premiums are fixed as long as they are paid.
  • Simple issue: a medical exam (also known as a life insurance exam) is usually not required, only health questions on the application.
  • Application procedure is simple.
  • Fast approvals – in many cases, coverage can be provided in a matter of days.
  • Low-cost options

Seniors’ Final Expense Life Insurance

Because of its low cost, limited benefit amounts, and emphasis on covering burial costs, final expense life insurance is popular among seniors.

Traditional life insurance policies, such as term insurance, are designed to replace lost income in the event of the death of a loved one. These policies are especially critical for families in their early years, when they are working, paying a house, making car payments, and raising their children.

Traditional life insurance policies aren’t as necessary once we’ve retired, paid off the mortgage, and the kids have moved out. What we do need is a mechanism to pay for any bills we leave behind when we die.

A funeral can cost more than $9,000, according to the National Funeral Directors Association. Surviving loved ones are frequently burdened financially during a time of intense bereavement since they have no way of paying for these expenses.

Many of us have been through the loss of a loved one and recall how difficult it was to balance our emotions, funeral planning, and financial obligations. It’s impossible to face the thought of our spouse or children going through the same thing.

So, how might life insurance for ultimate expenses help? What can we do to alleviate the financial strain on our families? How do we ensure that they don’t end up with a mountain of debts if we pass?

For seniors who want to safeguard their loved ones from growing funeral costs, burial insurance is a wise and compassionate insurance solution. It’s usually simple to qualify because it’s based on replies to health-related questions. You may not need to take a medical exam in many circumstances.

What Are Seniors’ Concerns About Final Expense Insurance?

Final expenditure policies are frequently easier to qualify for than other types of life insurance (such as term insurance). However, there are still some crucial questions to consider, such as:

  • Is there a time limit on the policy?
  • Is it necessary for me to take a medical examination?
  • What features does the policy cover?
  • What is the best way to use the death benefit?

Is there a time limit on the policy?

Because final expense policies are a sort of whole life insurance, they do not expire like term policies (learn how whole life insurance works). As long as you pay your premiums, your coverage will not expire.

Is it necessary for me to take a medical examination?

Because the face value is normally under $50,000, a medical checkup is usually not necessary to qualify. In most cases, coverage is granted based on the applicant’s responses to health-related questions in the application.

What features does the policy cover?

Your last expense policy may have additional features such as child riders, accidental death and dismemberment, or assistance benefits for surviving loved ones such as funeral price shopping, depending on the life insurance company. Because no two policies are same, thoroughly analyse the policy’s benefits.

What is the best way to use the death benefit?

The death of a loved one is the most difficult thing we will ever face. Furthermore, surviving loved ones are frequently left to pay for end-of-life medical and funeral expenses. These costs might add to the sadness and stress that survivors’ friends and family members are experiencing. To avoid this added stress, last expense life insurance was designed.

Despite the fact that final expense insurance is designed to cover burial costs, the death benefit can be used for anything, including medical bills, credit card debt, and mortgage payments. The beneficiary of the life insurance policy has the final say on how the death benefit is spent.

What Is the Cost of Final Expense Insurance?

The cost of a last expense policy varies depending on your age, gender, health, quantity of coverage, and the life insurance provider you choose. If you have serious health problems or are above the age of 70, your premium will almost certainly be higher, costing between $70-$120 per month (though it may be less). Younger applicants in good health may be eligible for rates between $20 and $50. Keep in mind that a lower cost usually equals less features and perks for surviving family members. A few extra dollars per month could make a major difference in how well your family is supported while you’re away.

People frequently prioritise cost over all other considerations… However, it is not the most crucial component! Rather than focusing on the cost of the coverage, consider how many expenses will be left behind and how much they will cost your family. Medical bills, credit card debt, and funeral expenditures are all common expenses. We’ll go over each of these expenses in detail below.

Medical Expenses

Higher prescription expenses, costly medical procedures, and health insurance that doesn’t always cover customer needs are all consequences of the current status of the healthcare system.

More than eighty percent of the 2.6 million persons who died in the United States in 2014 were on Medicare when they died. Chronic illnesses, inpatient hospitalizations, and hospice care account for a disproportionate amount of Medicare spending in the final year of life.

According to the National Bureau of Economic Research, government programmes such as Medicare and Medicaid only cover roughly two-thirds of the elderly’s healthcare costs. The analysis revealed that healthcare spending for persons aged 65 and up was around $18,424 per person, per year, based on data obtained through the Medicare Current Beneficiary Survey between 1996 and 2010.

In 2016, Medicare covered hospice care in the following categories for an average of $153 a day, per person:

  • Routine home care — $193 per day for services needed on a daily basis by patients.
  • Continuous in-home care — $41 per hour for crisis services or at least eight hours per day to manage acute symptoms.
  • Continuous in-home care — $41 per hour for crisis services or at least eight hours per day to manage acute symptoms. Inpatient respite care costs $173 a day and is intended to relieve unpaid caregivers for no more than five days at a time.
  • General inpatient treatment costs $744 per day for services that aren’t available elsewhere.

Co-payments, prescription drugs, emergency treatment, inpatient facilities, nursing care, and other end-of-life expenses may still be the responsibility of the patient. As a result, many people are faced with a major financial commitment that they may not be able to meet on a consistent basis. Final expense life insurance can assist shield loved ones from the financial burden of unpaid medical bills.

Debt

According to Experian FileOne and Credit.com study, 73 percent of American consumers die in debt. The average remaining total balance is $61,554. (including mortgages). Unfortunately, this debt does not simply vanish. Before any assets are transferred to surviving family, the estate pays off as many obligations as feasible.

According to the report, the following is the typical split of consumer debt:

  • $14,793 in personal loans
  • $17,111 in auto loans
  • $4,531 in credit card debt
  • $25,391 in student loans

When family members rely on the deceased’s assets to fund last expenses, they are frequently surprised to discover that there isn’t enough money left after all of the deceased’s debts have been paid.

Traditional life insurance is frequently used to provide adequate money for your family when you pass away, and it is commonly proportionate to the income your family would lose if you died. The most popular type of income replacement insurance is term insurance, which can have face amounts in the millions of dollars.

Life insurance with a final expense is different. Because it focuses on paying for a very particular debt: burial or cremation arrangements (read more: how does cremation work? ), it’s uncommon for a final expense policy to be more than $20,000.

Families frequently assume that their loved one’s estate will cover the funeral expenses or that the funeral will be inexpensive. However, most families are unaware that the average funeral costs $9,000 or more. Final expense insurance can assist families avoid emotional overspending by reducing these costs and ensuring that they have a certain amount accessible.

Costs of a Funeral

An adult funeral with viewing and burial cost $8,755 on average in 2017. (including a vault). Expenses for funerals and cremations can run into the thousands of dollars, frequently within days after a loved one’s death. The cost of a casket alone can range from $2,000 to $4,000, depending on the material and style selected. Depending on the funeral home, simply opening and closing the grave can cost anywhere from $300 to $1,000. Final expense insurance, sometimes known as burial or funeral insurance, is intended to cover these expenses.

Over the years, the escalating costs of funerals have been well-documented:

In 1960, a funeral without a vault cost slightly over $700 on average.

That figure has climbed to $2,737 by 1985.

In 2019, the fee increased even further to $7,640, with a vault costing $9,135.

These figures indicate a 991 percent increase in funeral prices over the last four decades.

When you factor in the cost of a burial marker ($200-$400 for a simple material), a published obituary, and other memorial-related expenses, the total can easily reach $10,000 or more.

Is Final Expense Insurance Necessary?

Final expense life insurance is ideal if you’re over 40 and need money to meet your final bills and burial fees. The premiums are more inexpensive for those on a fixed budget because the death benefit of the policy (usually $5,000-$20,000) is smaller than that of regular insurance.

As a result, it’s an appealing choice for seniors wishing to cover their final expenses. It’s a type of long-term insurance that doesn’t expire as long as payments are paid, and it builds up a monetary value over time.

However, this form of insurance isn’t just for the elderly (learn more about affordable life insurance over 50, life insurance for seniors over 60, life insurance for seniors over 70, and life insurance for seniors over 80). Anyone concerned about leaving their loved ones unprepared after they pass away should consider purchasing life insurance. Parents’ life insurance can also be purchased by children. Obtaining various quotations, including a final expenditure quote, will assist you in determining the best sort of life insurance for you.

You may not require final expense insurance if you are independently rich or have sufficient savings. Just keep an eye on rising funeral costs and make sure you’re up to speed on the most recent figures.

You may not be able to qualify if you are over the age of 85, in hospice care, or currently hospitalised. Certain medical conditions, such as terminal sickness or AIDS, may potentially exclude you.