Having proper life insurance is one of the most important things that you can do for your family. It should be on the top of your to-do list. But, just like as your life continues to change, so will your need for life insurance.
As one gets older, the need for senior adult life insurance coverage does not go away. It does, however, change. One type of life insurance coverage that is often marketed to those who are older is final expense coverage.
What is Final Expense Life Insurance
Final expense life insurance is a type of coverage that provides funds for the cost of a funeral, burial, and other related expenses that are considered to be one’s “final expenses.”
This coverage is sometimes referred to as “burial insurance” or “funeral insurance.” It was designed for people ages 50 – 85 to purchase a smaller life insurance policy offering lifetime coverage at a reasonable price.
Policies generally range from $2,000 – $35,000 with some exceptions.
The policies offer cash value accumulation however that is not the objective of the policy.
Policies are generally easier to be approved for with little or no medical requirements.
Often when we pass away there are debts we still owe. It could be a credit card balance, a personal loan, or a car payment.
Additionally, there is almost always the expense of a funeral. Generally, a funeral will cost around $10,000 – $15,000.
It is strongly recommended to purchase a whole life insurance policy to cover the estimated cost of the funeral to relive their family from the financial stress of paying for their funeral.
Is final expense insurance the same a burial insurance?
Yes, same product, different name. Proceeds are tax-free and payable directly to your named beneficiary.
What is the difference between a final expense insurance policy and a prepaid funeral plan?
Final expense insurance is purchased to pay for your burial or “final expenses”. Depending on your plan you are 100% covered from day one should you pass away.
A prepaid funeral plan is designed for you to make payments over many years to “fund” your final expenses. Should you pass away after one or two years your beneficiary will only receive a small portion of your needed funds.
We do not recommend prepaid funeral plans to fund your final expenses.
What exactly is “Guaranteed Whole Life Insurance”?
This policy is also known as a “graded death benefit” policy.
There are no health questions nor medical exam required.
Approval is guaranteed, however full coverage for an illness is not available for two years.
Benefits are “graded” for the first two years if you pass away due to an illness.
You will receive your premiums returned plus an interest amount if you pass away from an illness in the first two years of your contract.
- Heart Attack
- HIV Positive
- Alzheimer’s disease
- Insulin dependent diabetes
Types of Final Expense Insurance
A whole life insurance policy will protect you for your entire life without any rate increases if you continue to pay the premiums. Most people purchase a whole life policy for final expenses.
If you are unhealthy, or uninsurable, there are whole life insurance policies that are guaranteed to be approved when you apply. There is often a waiting period of two years to qualify for your full death benefit, however. Your independent agent will provide you with your options and complete details.
Many people purchase a final expense policy in the range of $10,000 – $25,000. Any money left over from the cost of the funeral will be distributed to a spouse and or children. All proceeds from a whole life insurance policy are currently 100% tax-deductible.
How Does Final Expense Life Insurance Work?
Similar to other types of life insurance, the owner of a final expense life insurance policy is able to name a person, or persons, as their policy beneficiary to receive the death benefit proceeds. Typically, the beneficiary will be a spouse, family member, or close friend that the individual trusts to carry out the payment of his or her final expense payments.
Also like other life insurance options, final expense coverage can be either term or permanent. Term policies will provide coverage for a set amount of time, such as 10 years or 15 years. Therefore, should the insured person pass away when the insurance policy is in force, the named beneficiary will receive the proceeds for the purpose of paying the insured’s final expense costs.
A permanent final expense life insurance policy will not have an expiration on it. Therefore, as long as the premiums are paid, a permanent policy will remain in force. In addition to the life insurance coverage that is provided with a permanent plan, this type of policy will also include a cash value component where cash can accumulate on a tax-deferred basis over time.
Typically, final expense life insurance is offered at a lower amount of premium than most other types of life insurance coverage. Policyholders are usually allowed to make easy monthly payments – which can be convenient for retirees who are typically living on a fixed income.
When purchasing a final expense life insurance policy, it is important for an applicant to determine the type of coverage that they need – term versus permanent – as well as the amount of coverage that will be appropriate for their specific needs. In addition, it is also wise to ensure that the insurance company that is offering the coverage is financially stable and has a good claim-paying reputation.
Qualifying For Final Expense Life Insurance
Qualifying for final expense life insurance is typically easier than qualifying for more traditional forms of coverage. There are actually two ways in which these types of plans can be underwritten. These include either a simplified issue or a guaranteed issue.
With a guaranteed issue policy, the applicant is not asked any medical questions at all on the application for coverage. Therefore, anybody who applies will be approved for this particular type of coverage.
Although the premiums on these plans are typically higher than they are on most other types of life insurance plans, those who possess adverse health conditions can still obtain life insurance coverage with pre-existing conditions – so this can provide a great deal of peace of mind to those who would otherwise not qualify for life insurance benefits.
A simplified issue final expense life insurance policy application will ask some questions regarding the individual’s health and medical status. However, the person will not be required to take a medical exam in order to apply for coverage.
Not having to take a medical exam is a great benefit for anyone that is in poor health or has severe health complications. Unlike a traditional insurance policy, you won’t be declined for life insurance coverage, regardless of your health. If you’re in poor health and have several health conditions, these could be the best option or getting insurance protection for your loved ones.
Even if you’ve been declined for life insurance in the past, or you’ve received expensive quotes, there are still several affordable options for life insurance coverage. You can’t put a price tag on the peace of mind that life insurance will bring.
Why Consider Purchasing A Final Expense Policy?
When purchasing life insurance, it is important to choose the right type and the right amount of coverage for your specific needs. Therefore, be sure to add up all of the potential final expenses that may be required.
Given the high cost of a funeral today, along with the many other related costs, the additional debt could leave loved ones with a great deal of undue stress. A final expense life insurance policy can help to ease this as well as paying outstanding medical bills and other personal debts and credit cards, and maybe even leave a little extra money to family members.
Although all types of life insurance can be important – depending upon one’s needs – final expense coverage can fill the specific need of ensuring that loved ones are not burdened with having to come up with a substantial amount of money at an already emotional time.
Top 5 Final Expense Insurance Companies
The leading companies that offer final expense coverage are:
Also known as American General, enjoys a strong financial rating.
Final expense life insurance helps your beneficiaries paying off:
- Doctor/Medical bills
- Personal credit card debts
- Burial/ Funeral expenses
- Financial help to children
American General offers a guaranteed issue whole life insurance plan for ages 50 -85.
Want some excellent news? You do not need a medical exam nor are there any medical questions.
You are guaranteed to be accepted – even if you have been turned down for life insurance elsewhere.
American General’s whole life insurance offers coverage ranging from $5,000 – $25,000.
Premiums are guaranteed and will not increase the life of the policy.
Coverage will stay the same and never decrease.
You will also enjoy a cash value component with your whole life insurance policy. You may borrow funds from your cash account if desired.
Graded Death Benefit for the First Two Years
This policy offers graded death benefits.
Should you pass away within the first two years of owning the policy, your beneficiaries will receive 110% of the premiums paid up to your last premium payment.
You won’t get full benefits until after the two-year period has passed.
If death occurs due to illness your family will receive full benefits, even during the first two years.
This plan also includes Living Benefits at NO EXTRA COST!
The following situations are covered:
- Chronic Illness: American General returns all premiums paid if you’re unable to perform 2 of the following 6 basic daily activities: bathing, continence, dressing, eating, toileting and transferring.
- “Severe cognitive impairment” which includes dementia or Alzheimer’s disease also applies.
What if I have a terminal illness?
You will be eligible for up to 50% of your death benefits when diagnosed by your doctor.
NOTE: Death must reasonably be expected to occur within 24 months of the terminal diagnosis.
Rated A-, Excellent from A.M. Best
Assurity offers a simplified level benefit plan offering an affordable final expense policy.
The policy offers whole life insurance coverage from day 1.
Ages 50- 65: $5,000 – $ 50,000
Ages 66 – 80: $5,000 – $25,000
There is no medical exam required.
Premiums remain the same throughout the life of the contract. The coverage remains level.
There are several health questions on the application. Although “perfect health” is not required to qualify for coverage. You will not be approved if you have cancer, heart disease, or liver disease.
Assurity offers “Graded” and “Modified’ life insurance policies with a reduced death benefit for the first two years.
- Ages: 40 -80
- Coverage: $5,000 – $35,000
A strong company with an AM Best rating of “A” (Excellent) that excels in the final expense arena.
It offers guaranteed coverage between the ages of 50 – 80. Beneficiaries will receive tax-free proceeds and can be used for anything.
Protection is between $5000 – $25,000. Rates remain level throughout the life of the contract.
Guaranteed coverage is available.
No medical exam.
No medical questions.
The type of coverage offered is whole life insurance.
There is a cash accumulation fund that will be available for loans if desired.
Gerber Life offers a graded death benefit for the first two years.
If you pass away for any reason – other than an accident – your beneficiary will receive all premiums paid to date plus 10% interest.
After two years the policy will pay the full amount of the insurance.
If you pass away from an accident you will receive the full death benefit. Although the policy must in force for 90 days before the accident.
These are some of the limitations of Gerber Life’s whole life final expense policy during the first two years:
- An act of war
- Attempted suicide or suicide
- Participation in a civil disorder or riot
- Intention self-inflicted injuries
- Hazardous activities: scuba diving deeper than 130 feet, bungee jumping, parasailing, heli-skiing and others.
- Military service
Mutual of Omaha
Final expense coverage amounts: $42,000 – $40,000
Insurance offered to ages 45 – 85.
There are two rate classes: Level and Graded benefits
Mutual of Omaha, founded in 1909, is a financially strong Fortune 500 company.
Their final expense life insurance policy is known as “Living Promise” and offers Two Whole Life insurance policies:
- Level Benefit Plan
- Graded Benefit Plan
Good news! No medical exam is required for either of these policies. That means you are guaranteed to be approved for one of the plans.
There are several beneficial riders that complement this product.
Premiums will not go up during the life of either policy. Coverage will not decrease at any time.
The Level Benefit Plan
The Level Benefit Plan offers coverage for clients from ages 45-85. Coverage ranges from $2,000 – $40,000. In the state of WA, the minimum coverage is $5,000.
Free Bonus: Accelerated Death Benefit for Terminal Illness or Nursing Home Confinement. You will have a one-time only option to elect the accelerated death benefit.
You must be diagnosed by a certified doctor confirming a terminal illness. (Expected death within 12 months).
This is a wonderful benefit should you experience overwhelming doctor’s bills during your final stages of an illness.
Optional: Accidental Death Benefit Rider.
Graded Benefit Plan
The Graded Benefit Plan offers coverage for clients ages 45-80.
Note: coverage starts later and ends earlier in NY: ages 50-75.
Policy coverage is not as high, with face value ranging from $2,000 – $20,000.
The state of WA has a minimum of $5000.
Graded death benefits occur if the policyholder dies from any cause other than an accident during the first two years. The beneficiaries will receive all premiums paid plus 10 percent.
Full benefits will be paid if the policyholder survives for two years, no matter what the cause of death.
A rated (Excellent) at AM Best
Foresters’ Final Expense Plan offers three types of Whole Life Insurance.
Whole Life insurance offers a death benefit and a cash value accumulation feature.
Under all three plans, you can always access your cash value accumulation portion on “full surrender” (cancelation) of the policy.
How Are Premiums Calculated?
Premiums for life insurance policies are based on age, gender, and tobacco use.
To determine qualification a three-part series of medical questions will be asked.
To qualify for the “Level” plan all questions must be answered “no”.
You may still qualify for either the Modified or Graded Plan, but there are height and weight guidelines.
There are four payment options – monthly, quarterly, and semi-annually and annually.
The Three Types of Coverage Available
Prices and product features are often similar for each life carrier. The maximum coverage offered is $35,000 with any single carrier. You may buy a policy from more than one company if a larger insurance amount is desired.
Foresters Level Benefit Plan
- Premiums low, less than $10.00 per month
- Medical questions required
- Coverage to age 121
- Issued ages: 50 – 85
- Coverage from $2,000 – $35,000 for ages 50 – 80
- Coverage from $2,000 – $15,000 for ages 81 – 85
- Two Rider Options
- Accidental death rider for ages 50 – 80
- Common Carrier Accidental Death Rider (no charge)
Foresters Graded Benefit Plan
- If you pass away during the first two years you will receive all premiums returned PLUS 4.5% interest. OR
- Pass away the first year receive 30% of the face amount
- If you pass away in year two you will receive 70% of the face amount of your policy.
- If you pass away in year three you will receive 100% of the face amount of your policy.
- Issues ages: 50 – 85
- Coverage to age 121
- Medical question required
- Coverage Options
- Ages 50 -80: $2,000 – $20,000
- Ages 51 – 85: $2,000- $ 10,000
- Accidental death benefit rider not available for graded plan.
- A common carrier accidental death rider is available at no charge.
Foresters Modified Benefit Plan
- Foresters modified benefit plan is a whole life insurance policy offering coverage to age 121.
- If you pass away in year one or year two of your policy your beneficiary will receive all premiums paid PLUS 10% annual interest.
- After two years you will receive 100% of your policy’s death benefit.
- Coverage to age 121
- Medical questionnaire
- Issues ages: 50 – 80 (last birthday)
- Death benefits are less than level and graded plans.
- Ages 50 – 80: $2,000 – $15,000
- Ages 81 – 85: Not available
The #1 issuer of final expense life insurance in the US is Lincoln Heritage (source), but the plans above are much better priced.
How Much Coverage Do You Need?
Before you buy one of these plans, one of the most important things to do is determine if a final expenses policy will give you enough protection. These policies are designed for people who only need a small amount of life insurance to pick up some of the smaller bills left behind.
When you’re looking to get life insurance, either through a term life insurance policy or with a final expense plan, it’s vital that you get enough coverage for your loved ones. Regardless of your age or stage of life, more than likely, you’ll need some type of life insurance for your loved ones. There are dozens of different factors that you’ll need to consider when calculating your insurance needs.
The first thing that you should calculate is your debts and final expenses that you would leave behind to your loved ones. The main goal of your life insurance is to give your family the money that they need to pay off those bills that they would be responsible for. Your life insurance will give them the money that they need to pay off any debts that you would leave behind, like your mortgage or car payments. If you’re going to buy a final expense insurance policy, but you still have a mortgage payment, then these plans will not offer you enough life insurance. You will need to apply for a traditional term policy.
The next thing to add to the calculation is a factor in your salary. A large part of the death benefit will be used to supplement the income lost from the insured. While each person is different, most insurance agents suggest getting between seven and ten times your annual income. Final expense insurance is not designed to recover lost income. If you still have family members who rely on your paycheck to get by, then you need to buy a plan which offers more life insurance.
When trying to decide what type of plan you need, you’ll need to add up all of these different factors. Once you reach a certain stage of your life, you may not have any debts or final expenses that you would leave behind, aside from funeral expenses. Additionally, you may not have anyone that relies on your paycheck every month, which means that you could consider getting a final expense life insurance policy, that is going to give you much less coverage.
Not having adequate coverage for your loved ones is the worst thing that you can do for their future. So start your path to coverage and financial protection today!
Are there other questions you need answered? That’s great! Our team of advisors would love to help you get those needs met. Since our agents are independent advisors they can quickly help you get the lowest rate from the carriers that meet your goals. Reach out to us today!