Final expense insurance, also known as burial insurance or funeral insurance, is a subcategory of life insurance intended to cover funeral expenses and other end-of-life expenses, including final medical bills and legal fees. While it’s one of the things most people underestimate, end-of-life expenses can add up and create a huge financial burden for those left behind. According to the National Bureau of Economic Research, end-of-life obligations are approximately $12,000 per patient. As a result, it’s very important to prepare yourself financially with a proactive plan so that you leave your family with peace of mind after you pass.
Unlike term life insurance, funeral expenses insurance policies offer a low coverage amount and emphasize covering funeral costs. Typically, final expense insurance policies rarely get above $25,000. However, the cost can vary depending on different factors such as age.
Types of final expenses insurance
- Guaranteed issue life insurance—This policy is guaranteed to be issued regardless of your health or financial history. It’s normally restricted to a narrower range of ages such as 50 to 85. Generally, this policy offers low death benefit options and lower maximum coverage amounts, often capped at $25, 000.
- Simplified issue life insurance –This policy requires no medical exam to obtain coverage, although the applicant will be required to answer a few health-related questions.
The cost of final expense insurance
The cost of final expense insurance depends on many factors, including age, health, anticipated funeral expenses, and smoking habits. The older you are, the higher the premiums since companies view it as having more risk on their part. People who smoke will pay higher premiums because insurance companies categorize them in a higher risk pool. Although final expense insurance doesn’t require a medical exam as part of the policy application process, it’s not intended for those who are terminally ill. You can get lower premiums if you buy final expense insurance when you’re younger and in good health.
Benefits of final health insurance
- It’s relatively affordable
Unlike term life insurance or traditional permanent policies, final expense insurance can be relatively affordable. On average, people insure themselves for approximately $25, 000, making the premiums more affordable compared to many insurance policies.
- It covers end-of-life expenses
Considering the “high cost of dying”, buying final expense insurance protects your family from a huge financial burden when you pass. It makes it easier for those left behind.
- It’s not based on medical history
The premiums are not based upon your medical history, but rather the age of the applicant.
You may want to buy final expense insurance if:
- You have pre-existing health conditions—You can qualify for this type of insurance regardless of your health.
- You’re looking for affordable coverage that will at least cover your final expenses.
- Your family is grown and you don’t want them to have a financial burden when you pass.
Generally, final expense insurance could benefit just about anyone who wants to protect their family from the burden of final expenses.