August 18, 2021

What Is Final Expense Life Insurance?

Final expense life insurance, sometimes referred to as burial insurance, works like any insurance policy, but is more specifically put in place to protect your loved ones from the costs of end-of-life expenses such as medical bills, funeral costs, or cremation expenses. At a time when loved ones are mourning, they’re also in charge of making arrangements and paying for the cost of burial or cremation. The cost for these arrangements vary from state to state, with the national average a whopping $9,000. These expenses typically occur within days of a person’s passing, long before the contents of a will are known and before life insurance policies are accessible. Loved ones may also struggle to determine what you wanted:  a traditional burial or cremation, a large funeral gathering or a small memorial, etc.

With a final expense life insurance policy, you can make your burial preferences known and ensure that costs will be covered.

How Does Final Expense Life Insurance Work?

Final expense life insurance policies work similarly to standard life insurance policies, wherein policyholders purchase a specific amount of coverage and pay premiums. 

Many companies provide final expense insurance. While the process for obtaining this type of policy may vary slightly, the biggest difference lies in whether the plan is a simplified issue or a guaranteed issue. With a simplified issue plan, policyholders may need to complete basic medical exams or answer questionnaires regarding their health. A guaranteed issue plan does not require any further examinations or health-related questions to ensure acceptance. In either case, you continue to pay your premiums to keep coverage.

Final Expense Life Insurance Options

BetterLife can help you select a life insurance solution that is specifically designed to meet final expense needs and give your family the peace of mind they deserve.  None of the options below require a medical exam, so regardless of health status, you can apply for coverage today without going through an in-person interview process. See age range qualifiers for each plan below.

Simplified Issue Whole Life

Answer simple yes/no health questions to find out if you qualify for Simplified Issue Whole Life insurance. Choose to pay your premiums over your lifetime, all at once, or during a 10 or 20-year period. Simplified Issue Whole Life is issued up to age 85, depending on the option you choose.

Graded Benefit Whole Life

Graded Benefit Whole Life is an affordable option that offers a unique graded death benefit. This means that if death occurs due to natural causes within the first two years of issue, your beneficiary will receive a return of all premiums plus 5% interest per annum. It has a simplified application with minimal medical questions. Graded Benefit Whole Life is available to people aged 40-85.

Guaranteed Issue Whole Life

Guaranteed Issue Whole Life does not require a medical exam or health questions. A single premium is paid to purchase this policy, which makes it ideal for people who have more significant health issues. Guaranteed Issue Whole Life is available to people aged 40-90.

Funeral Trust Program

While not a form of life insurance, the unique Funeral Trust Program pairs with any of the BetterLife Final Expense policies . It allows you to make sure your death benefit is clearly designated to pay for final expenses.

How Does Final Expense Life Insurance Differ From Whole Life Insurance & Term Life Insurance?

While final expense solutions are technically whole life insurance since they offer permanent protection, the biggest difference between final expense and term life or general whole life insurance policies lies in the amount of coverage. You can typically find whole life insurance coverage starting at $25,000 and term life starting at $50,000. Final expense insurance, however, offers much smaller death benefits, generally starting around $3,000. The reason for offering smaller coverage options is because the primary purpose of a final expense policy is to help pay for funeral, burial, and other final expenses.

Is Burial Insurance and Funeral Insurance the Same as Final Expense Life Insurance? And What Does a Final Expense Policy Cover?

Final expense insurance is often referred to as burial or funeral insurance, and it covers costs associated with death. This can include medical bills, funeral costs, credit card debt, and more. Many beneficiaries use it to cover the price of the funeral home service, the casket or urn, embalming (if required), and the actual burial plot. Despite this, beneficiaries of final expense policies can use the funds they receive for any purpose. If you are concerned that your wishes will not be carried through with these funds, you can pair your BetterLife Final Expense policy with our Funeral Expense Trust to ensure the funds go towards funeral and burial costs.

Medical Exams for Final Expense Life Insurance

Typical life insurance policies require medical examinations, but you can avoid this requirement with final expense life insurance. Those who prefer not to answer medical questions at all can opt for a guaranteed issue plan. And while a guaranteed issue policy may come with higher premiums, it can be the best option for those with pre-existing health conditions.

Final Expense Death Benefit

Final expense death benefits are much lower than the death benefits offered by traditional policies since the purpose of the policy is to simply pay for funeral, burial, and other final costs.. Generally, they offer death benefits of $50,000 or less (which is often more than enough for final expenses), although specific policies and insurance providers may differ.

Final Expense Insurance Cash Value

Like other forms of insurance, final expense policies usually have a cash value that enables the insured to cash out on their policy. However, the amount of the cash value depends on several factors, such as how much has been paid in premiums and what the specific terms offer.

What Are the Benefits of a Final Expense Life Insurance Policy?

A final expense life insurance policy comes with immense benefits, including:

  • Initial premium rates increase as you age, but your premiums stay the same once you have a policy in place. 
  • Policy funds can cover the costs of burial, but beneficiaries aren’t limited in how they can spend those funds. This means the money can apply to medical bills, legal fees, or any other final expenses you may have.
  • The elderly and those with pre-existing health conditions can qualify for coverage without medical exams.
  • The policy eliminates the financial stress often placed on loved ones when a death occurs unexpectedly.
  • The total cost is usually less than whole life insurance policies since you’re applying for much less coverage. Keep in mind, though, that you’re likely getting a better deal (more coverage for a lower cost) if you opt for other types of insurance).

What Are the Disadvantages of a Final Expense Life Insurance Policy?

Although final expense life insurance policies are an excellent option, they may not be right for everyone. Some of the most common disadvantages of these policies are:

  • They do not replace lost income in the same way that whole life insurance policies do.
  • Typically, they do not have large payouts to cover excessive debts or provide funds to care for living dependents or spouses.
  • It can take 2-3 years after the start of a policy for full death benefits to kick in. Our Guaranteed Issue, however, does offer full death benefits immediately.
  • You may pay more in premiums than your beneficiary would receive as a death benefit if you live longer than you initially expected when purchasing a policy. This is not true with Guaranteed Issue, though, as it is a single premium plan (you pay one premium and your insurance is in force until you die).

Who Should Consider Final Expense Life Insurance?

Generally, final expense life insurance is best for seniors who are concerned about burdening their loved ones with the costs of their final expenses. It is also a good option for anyone with specific health conditions that make traditional life insurance difficult to get.

Is Final Expense Insurance a Good Option? And How Do You Know if Burial Insurance Is Right for You?

This often depends on the specific circumstances. It can be a good option if the individual is elderly or ill. For those who expect to live for much longer, though, they may end up paying much more in premiums than the actual death benefit is worth. If you are unsure whether it is a wise choice, reach out to an expert life insurance agent to discuss your unique situation before purchasing final expense insurance.

How Much Does Final Expense Life Insurance Cost?

As with all insurance policies, final expense costs vary greatly. The biggest determining factor will be the amount of the death benefit that the policyholder chooses. If they opt for a $5,000 benefit, for instance, their premiums will be lower than if they choose a benefit of $50,000.

Alternatives to Final Expense Life Insurance

The best alternative (for those who qualify) is a whole life or term insurance policy. Although these policies may cost more in the long run, they have larger and better benefits for healthy individuals. Those who do not qualify because of their age or a pre-existing health condition may also consider setting aside funds from their retirement or savings to aid in their final expenses. 

Talk to one of our BetterLife agents to discuss your situation or to learn more about final expense life insurance today.