What is final expense insurance?
Final expense insurance will pay for your funeral expenses, as well as any debts accumulated at the end of your life, which could include nursing home costs not covered by Medicare. Senior citizens used to refer to it as burial insurance.
Why do I need it?
Funerals are expensive and the price continues to rise. Even without a plot and headstone, the average funeral costs more than $8,000, and that amount has risen more than 10 times since the 1960s. Most people don’t want to leave this burden to their heirs.
Are there different types of policies?
Yes. You can purchase a whole life final expense insurance policy that covers you until your death. Or you can buy a cheaper term life insurance policy that only provides coverage until you reach the age specified in the policy. Final expense insurance policies offer varying amounts of coverage and premiums. MetLife sells a $2,500 policy costing $10 a month for a 45-year-old woman because she is expected to live to age 82.
When should I buy it?
You can purchase a final expense insurance policy anytime between the ages of 45 and 85. Remember that the cost of the policy is lower when purchased at an earlier age since you will be paying into it over a longer period of time.
How much will it cost?
Even though premiums are usually lower because the amount of coverage isn’t large, its critics still say that this type of insurance is expensive relative to what you get. They recommend exploring other types of insurance such as a traditional life policy if you want to have extra cash to cover funeral expenses.
I am bombarded by TV ads, so is this the only way to buy it?
No. Final expense insurance is also sold through the Internet, by phone or direct marketing.
Is it true that, “You can’t be turned down,” as the TV ads state?
Yes. There is no medical exam required to purchase final expense insurance. So those who have a medical condition that would prevent them from buying regular term or whole life insurance may want to consider final expense insurance instead.
What if I die prematurely?
The death benefit for a final expense insurance policy is graded. If you die within the first few years of coverage due to a previously known condition like heart disease, your beneficiaries will not receive the full amount of the policy. However, they will usually get back what you paid in premiums, plus interest. But if your death is accidental, such as falling down a flight of stairs, most policies will pay the full benefit immediately.
Are there other options?
You could consult with a funeral director about pre-need alternatives. Or you could open up a special bank account solely for this purpose and include it in your will. Social Security provides a small death benefit, and armed forces veterans can seek help through the Veterans Administration.
What are the other end-of-life expenses?
In all probability, your children and or family will inherit other end-of-life expenses, such as the cost of probating a will, paying off a home mortgage if one exists or any expenses for your final care that were not covered by insurance.
What are the advantages?
- Simplicity. You can quickly and easily buy a final expense insurance policy online or on the phone.
- Guaranteed acceptance. There is no medical exam.
- Inexpensive premiums. The younger you are, the cheaper the cost.
What are the disadvantages?
- Price. Final expense insurance is more expensive than traditional policies.
- Waiting period. There is usually a two-year waiting period before the policy takes effect.
- Limited coverage. You have to make sure that a final expense insurance policy will actually cover all of your final expenses. Financial planners suggest you calculate the cost of your funeral arrangements, immediate bills and long-term obligations, and then subtract that sum from the amount already in your bank account. Your final expense insurance policy should make up the difference.
Paying for funeral insurance
Depending on the type of policy or contract you buy, you may either have one, lump-sum payment, or continuing monthly payments. A contract with a funeral home will most likely include a payment plan.
Your coverage may determine what kind of payment schedule you have:
- Single-premium policy – Once you make the lump-sum payment, you have immediate coverage for the full death benefit. If you are over 70, you may only be offered a single-premium payment option.
- Graded death benefit – This means the coverage amount increases over time. If you choose a five-year payment policy, you may have a death benefit that is 30 percent of the face amount in the first year, 70 percent the next year, and 100 percent thereafter.
- Traditional whole life policy – The coverage amount stays the same as long as you pay the premiums, but coverage ends if you stop paying. If you are in good health this is the least expense policy to buy.
Tips for considering funeral insurance
- Determine whether you have life insurance or other savings that may be used for funeral expenses. Don’t buy coverage that’s not essential.
- Review your state’s laws on pre-need insurance before you meet with a planner at a funeral home.
- Discuss a burial policy with your family and lawyer.
- Research different companies and options.
- Remember that insurance policies have a “free-look” period. This 30- to 60-day time period entitles you to review your policy and cancel it without penalty if you don’t approve.
When you’re ready to purchase-
We can do the enrollment online in the privacy of your home.
Just call us at 845-380-8509 or email us at [email protected]
or fill out a request for information form on our website.