Final expense life insurance: Is it right for you?

Death is an inevitability for everyone, but it doesn’t come cheaply for everyone. In 2021, the average cost of a funeral, including burial, was $7,848, according to data compiled by the National Funeral Directors Association (NFDA). Costs associated with a vault, opening or sealing the earth, or purchasing a headstone can easily double that amount.

And if you were hoping to avoid these expenditures by going the cremation route, you may be disappointed to learn that it may not be much cheaper. According to the most recent data from the National Funeral Directors Association, the cost of a funeral including cremation averaged $6,971.

Due to the inevitable nature of death, many people opt to get a life insurance policy to cover their loved ones’ funeral costs. Final cost insurance is a sort of life insurance that can be perfect for someone who just needs a modest death benefit to cover final expenses when they pass away, while other people may prefer more robust policies with larger death benefits.

What is final expense insurance?

Death and burial expenses, as well as any other memorial or commemorative ceremonies, are often covered by last-expense insurance. Burial insurance, or funeral insurance, is a type of insurance that covers the cost of a person’s funeral in the event of their death.

Some more aspects of ultimate expenditure life insurance are worth mentioning:

There will be basic health questions on the application.
The low cost of monthly premiums is a direct result of the low cost of coverage, which typically ranges from $5,000 to $35,000.
This protection might be purchased up to age 80.
Payments can be made monthly or annually for most policies.
The money will be given to the people you designate to take care of your funeral arrangements.
Dependent on the policy’s issuer, you may be eligible for cash value growth and dividends.
Your policy’s premium will remain constant throughout its duration.

Final expense life insurance for seniors

Because of the low face value and lack of a medical test, last-expense life insurance is targeted at retirees who no longer have a need for income replacement life insurance.

Final expenditure life insurance is a fantastic choice for seniors and may give anybody who desires reliable coverage for their loved ones peace of mind because it can remain in place until age 100 or beyond. However, before committing to one service, it’s a good idea to do some comparison shopping among at least three different suppliers.

Additionally, there may be a waiting time associated with your last expenditure life insurance policy. If your insurance includes a waiting period, it won’t kick in until you’ve paid premiums for a certain number of months or years (sometimes two). When comparing policies, it’s important to think about things like waiting periods and whether or not they’ll work for you.

How much does final expense insurance cost?

Final expenditure life insurance from Progressive begins at around $53 per month, while premiums vary with age and the death benefit offered by the policy. The greatest way to save money on last-expenditure life insurance is to look around until you discover a policy from a reputable firm that costs as little as possible on a monthly or yearly basis.

We used AIG’s website for last expense insurance quotes to see that a healthy, 65-year-old female retiree could acquire $10,000 in coverage for about $56 per month. This allowed us to generate some comparative scenarios.

In the meantime, the monthly premium for a woman aged 75 would be somewhat over $86 and the premium for a woman aged 55 would be slightly over $40.

Even though final expense insurance is designed for the elderly who have trouble obtaining regular life insurance, our study found that a healthy 30-year-old woman could get $50,000 in coverage for as little as $15 per month. This is because women in their 30s have a much longer life expectancy than men in their 80s. It would even be wise to consider getting a policy on your children, as insurance premiums will never be lower.

If you have major health issues, you may still be able to get last-expense insurance because it is sometimes offered as a guaranteed acceptance life insurance policy. If you are in good health, however, you may also want to compare the costs of various types of last-expense life insurance to those of term life insurance.

When having a chronic illness such as Diabetes, it’s important to understand that not every insurance provider will accept you. Chris Stocker with Diabetes Life Solutions mentions, “Each burial insurance company has their own specific underwriting guidelines. Because of this, you need to understand that if you are not in perfect health, you’ll probably need to shop around to find the best insurance policy. One company may have no problems approving you if you have Diabetes, while another company may decline you. There’s no one perfect company for everybody, unfortunately.”

Though both whole and term life insurance can assist your loved ones pay for your burial costs if you pass away, the latter is often more affordable if you have good health.

A death benefit is paid out by last expense insurance in the same lump sum format as other forms of life insurance. To put it another way, your heirs are free to spend the money from your insurance anyway they like.

Therefore, the purpose of last expense life insurance is to pay for your funeral and other related costs. Expenses incurred in the latter stages of life can range from the price of a funeral and burial or cremation to the price of selling off personal belongings and paying outstanding bills.

Final expense insurance is used to pay for things like funeral costs, which may be expensive, as well as other costs, such as flowers and obituaries.

You can have your last expenditure life insurance policy paid straight to the funeral home, but your beneficiaries can alternatively pay for the services in advance and then get reimbursed. In accordance with the Funeral Rule established by the Federal Trade Commission, if your beneficiaries want to pay for the funeral expenses out of the life insurance proceeds, they are entitled to get an itemized bill for all the products and services they require.

Should you buy final expense life insurance?

Given the high cost of the benefits provided by last-expense policies, it is wise to investigate whether you are eligible for more affordable term life insurance instead. However, if you are unable to obtain term life insurance and are afraid that your loved ones will not have enough money to cover your final needs, final expense life insurance may be a viable option for you, particularly if you are able to obtain a policy without a waiting period.

Matt Schmidt with Burial Insurance Pro notes, “everyone’s financial situation is different. However, having a burial insurance policy in place ensures that your family will receive a tax-free lump sum payment at the time of your death. These products are extremely attractive for a majority of families.”

Not everyone needs last expenditure life insurance, but those in their golden years who wish to spend their remaining days without worrying about whether or not their loved ones will be able to afford a funeral should look into it.