Final Expense Life Insurance: The Ultimate Guide

Your guide to all the ins and outs of Final Expense Life Insurance

It’s never a bad idea to think about the future. Whether it’s devising a college fund for your kids or a final expense life insurance, it’s important to know your loved ones will be cared for after you. One sure way of preparing is to get a Final Expense Life Insurance Policy.

What is Final Expense Life Insurance?

Final Expense Life Insurance, also known as Burial Insurance or Final Expense Whole Life Insurance, is used for funeral expenses after your death. Although, it’s not a legal requirement. The small death benefit that you get can be used for whatever you wish. It is a small contingency plan that might not help pay off your mortgage but will pay your bills.

If you’re thinking, how is this different from life insurance, then we’ll settle the final expense insurance vs life insurance debate below.

What is the difference between Final Expense Life Insurance and Life Insurance?

There is not much difference between final expense life insurance and normal life insurance. According to a financial planner and insurance fraud expert, Richard P. Sabo, final expense life insurance companies sell these policies as they’re smaller and more affordable. Thus, they have a higher chance of people buying them. “They market the final expense insurance to people who are older and starting to think about their funeral costs, and they make it look like they need to do it in order to take care of their family,” Sabo notes. 

Understanding Final Expense Life Insurance

Just like with every other life insurance, the premiums for final expense depend on your age and health. And in places where it’s allowed by state law, they can also depend on your gender. The older and less healthy you are, the higher will your final expense life insurance rates be for any type of insurance. And since men have a shorter life expectancy, they tend to pay more than women. Some insurers even offer a lower rate if you don’t consume tobacco.

Moreover, some policies start from birth till the age of 85. And some policies have a minimum age of 45 and a maximum age of 85 at which you can apply. For example, John Hancock final expense life insurance policy is for the ages 55-80. 

Furthermore, it is possible that the largest death benefit you can select may get smaller the older you get. While you’re younger than 55, policies have a chance to go up to $50,000 but only go up to $25,000 once you cross 76. This is why we can call it the senior final expense life insurance program. However, before you get discouraged, some insurers offer the same rates to all applicants regardless of their age.

As per the final expense life insurance definition, it is a type of whole life insurance final expense policy and is fairly simple to understand. It’s a type of permanent life insurance. According to the final expense whole life insurance reviews, once you have your policy, there’s no chance of your premium increasing or your death benefit decreasing. The main difference between a term policy and a whole life policy is that whole life policies don’t end when you reach a certain age. That’s what the permanent part means. A whole life policy also accumulates cash that you can choose to withdraw. However, if you have any unpaid loans then your beneficiary would receive the amount after deducting those loans.

How does Final Expense Life Insurance work?

This program is better suited for seniors who are retired and wondering what they can do to make sure their family isn’t burdened with funeral costs. So they call a life insurance agent. However, even though the plans have a great death benefit, the premiums don’t fit their budget. And with their age and health, they can’t invest in something expensive. So they look for something that has a death benefit small enough for the premiums to be affordable. And that’s where final expense life insurance for seniors comes into play. 

As CEO of Choice Mutual, a final expense life insurance company, Anthony Martin says, “The insurance companies built these policies to absorb the risk of some serious medical issues. This means that most seniors, despite poor health, can still secure a policy.” Thus, you can also call it a senior final expense life insurance plan. This type of policy also works like a savings account. The value goes up the more you put in it. Additional benefits are rewarded in the case of an accidental death. The entire policy need not be paid all at once. If you prefer it that way, term policy payments can be arranged which will either pay monthly or yearly.

How is it different from prepaid or preneed funeral packages?

Final expense life insurance also helps cover fees, outstanding debts and remaining expenses. Unlike prepaid or preneed funeral packages that only cover the funeral costs. This type of insurance is also helpful for your beneficiaries to use in any way they seem fit. While a funeral package is usually payable only to the funeral home. But this death benefit goes straight to the beneficiary of your choice. 

Smaller Death Benefits

As stated above, having a smaller death benefit makes the entire policy more affordable. And this senior final expense life insurance program is also permanent. So it doesn’t matter when you die, as long as you’ve paid your premiums, your family will get the death benefit you want them to have. It can be used to pay off the funeral costs, bills, or even take a vacation. 

But of course, we have to keep in mind the death benefits are small. However, if you already have a means to pay for the funeral, then maybe the final expense life insurance isn’t for you. Let’s look at the pros and cons of the policy.

Pros of Final Expense Life Insurance

  1. These policies are available for people with poor health or medical issues.
  2. It has an easy application process. Only a questionnaire and prescription history is required.
  3. The premiums stay the same for many policies. (This is true for other types of life insurance programs as well)
  4. The insurer cannot decrease your death benefit unless you request for accelerated death benefit or borrow against the cash value.
  5. The death benefit can be used for any purpose by your beneficiaries.
  6. A guaranteed death benefit unless premiums haven’t been paid.
  7. Nontaxable death benefit.

However, these are not the only pros of this policy plan.

Intangible pros of Final Expense Life Insurance

Of course, nobody should consider something as important as life insurance while just looking at the financial pros and cons. There is peace of mind, time, energy and stress to consider while deciding which plan is better for you.

To help you make that decision, here are a few intangible benefits that might sell you on the prospect of leaving your loved ones in the hands of the final expense life insurance.

  • Eases the process of grieving.

When planning a funeral for their loved ones, people tend to go overboard. Viewing this as the final expression of love for them, they tend to spend more than they can. This can cause financial and emotional strain on people while they’re already going through a trying time. 

However, if you plan for funeral insurance, you are making sure your loved ones have the space to grieve without stressing out about the funeral costs.

  • Your funeral will be an accurate representation of your life.

Just like it is in preneed or prepaid funeral plans, funeral insurance requires you to discuss your funeral details and service arrangements with a trusted beneficiary. This way, you can make sure the funeral you are getting is what you wanted. 

  • Gives you the time to think about what you want.

Planning for your ultimate demise is never easy. What’s worse is not planning for it. At least this way you can ensure your loved ones don’t have to worry about the hassle of the funeral and the service. Planning for it gives you the time and space you need to go over your options. 

Whatever you think suits you and your family best, you’ll have the time to explore that option further and make sure it is what you want. This is the main reason why it’s a good final expense life insurance for seniors.

  • Immediate access to the funds for your family.

Some funeral packages take a few days to reimburse the payment. But with funeral insurance, you get the money almost immediately. This way you don’t have to worry about paying from your own pocket.

Cons of Final Expense Life Insurance

  1. Misleading or confusing information is used to market these policies by insurers.
  2. Incomplete information is also sometimes provided by insurers.
  3. Since the value of death benefit is low, you could lose more paying premiums than your beneficiaries would receive on your death, if you live longer than anticipated.
  4. If you don’t die while the policy is in force, you’ll lose money while paying term premiums.
  5. Some people end up letting their policies lapse, resulting in zero death benefit for their heirs.
  6. Some insurers use scare tactics while marketing final expense life insurance and play with senior’s fears of burdening their loved ones.
  7. Some insurers selling final expense life insurance bulldoze people into buying more expensive policies even when they have no major health problems.

Types of Final Expense Life Insurance

There are three types of final expense life insurance; one is a guaranteed issue final expense life insurance, second a simplified issue life insurance and the third is an in between option people can opt for when considering final expense.

  • Guaranteed Issue Life Insurance

These policies only require a few questions that will determine whether or not you have a terminal illness. But they will still cover high risk individuals. Which is why this type of a policy plan is more expensive than the other and offers lower maximum coverage. This is typically valued at or below $25,000.

  • Simplified Issue Life Insurance

This type of policy is usually for people who may not qualify for fully underwritten life insurance policy. These people are only considered to be at moderate risk. There is no medical exam involved but you will have to fill out a detailed questionnaire. This is the more affordable type of insurance with coverage up to $50,000.

  • Graded Benefit Life Insurance

And this type of final expense life insurance has a partial waiting period. Don’t understand what I mean? Let me elaborate. 

If the insured dies during the first year of the policy, the beneficiaries might get 30-40% of the death benefit. And if the insured dies during the second year the policy is in force then the beneficiaries might receive 70-80% of the death benefit. But if the insured dies after those first two years then the policy will pay the entire 100%.

If your health conditions are only semi serious then you qualify for a graded benefit life insurance. According to top experts, it is important to get offers from multiple insurance companies to see which policy suits your health best. 

How to apply

All life insurance companies require you to fill out an application. Depending on the company and the type of policy, the application can be 1-2 pages long or can be 5-10 pages long. The longer application will ask questions about weight, height, age, family history, blood group etc. These types of questionnaires usually require a medical exam with blood and urine samples. 

To find out about coverage, you can call or fill out a form for most companies, after which you will be issued a quote. This quote will be provided to you directly from your insurer or other legal representative. Policies may also be sold to you directly through phone. But most coverage plans require some sort of face-to-face interaction. 

Some Pre-Qualifying Questions

Example of questions you might get asked on the questionnaire:

  • Have you tested positive for HIV or AIDS?
  • Are you currently bedridden, hospitalized, in a care facility, or receiving hospice care?
  • Do you have disease of the heart, including heart attack or heart surgery?
  • Do you have congestive heart failure?
  • Do you have diseases of the circulatory system, including stroke?
  • Do you have cancer?
  • Have you had alcohol or drug abuse?
  • Do you have Alzheimer’s disease or dementia?
  • Are you taking medication or been treated by a physician for any of the conditions above in the last 2 years?

It is not necessary that you get rejected even if you answer “yes” to these questions. Coverage is provided to people even if they have health issues. There are plans which incorporate health conditions to cater to the customer’s needs. Your final expense life insurance agents can help you determine which one is more suitable for you.

How to know if Final Expense Life Insurance is right for you?

As we’ve already seen above, final expense life insurance can easily benefit anyone. But to make sure that it’s the right fit for you, we’ve devised a few points.

  • A grown family

Final expense might be a good idea for you if you have a grown family. This is so you can take out some money to pay for the premiums at a time when your family isn’t depending on you. Then all your family would need is some ready cash to pay for your funeral costs, burial costs etc. Which final expense would provide.

  • Pre-existing health conditions

If you have pre-existing medical conditions, final expense might be the way to go. It’s a quick application process that wouldn’t require a medical exam. It’s easy to understand and a fairly simple process. Moreover, nothing will happen to the death benefit if you keep up your premium payments.

  • Affordability

If affordability is an issue then you’ve come to the right place. As we’ve already discussed, one of the major pros of this insurance plan is the affordability factor. Another advantage is that premiums aren’t likely to increase over time. So you don’t have to worry about that. Although that means the face value is smaller, it’s enough to pay off all the costs you might leave behind for your family.

How much coverage should you buy?

Once you’ve decided whether this plan is right for you or not, the question that arises is; how much coverage should you buy? And we have the answer for that too.

To determine how much coverage you need to buy, you only need to follow 4 simple steps.

Step #1: How much are your household expenses?

To estimate household expenses, all you need to do is take the total amount of an average month’s expenses and multiply by 3. These average expenses would include any house payments, food and transportation expenses and utilities. The answer you get is the amount your family would need to survive for 3 months. So for example, if your household expenses are $2000 for a month, your family would need $6000 for 3 months. ($2000 x 3 = $6000)

Step #2: Estimate funeral expenses.

Funeral expenses are usually determined by the type of services you decide to opt for. But to understand, let’s assume your funeral expenses have an average of $9000. 

Step #3: Find out total final expenses.

To find out the total final expenses, add the above two figures together. In our case, it is $6000 and $9000 which make $15000. This is the minimum coverage required if you want to account for both funeral and family expenses. (These figures are only an assumed average)

Step #4: Take inflation into account.

The cost calculated above then needs to be multiplied to the inflation factor listed next to your age range to get the total estimated cost. 

Age Multiplier for Men Multiplier for Women
40-44 3.38 3.92
45-47 3.00 3.45
48-50 2.74 3.13
51-53 2.52 2.86
54-56 2.31 2.61
57-59 2.13 2.39
60-62 1.97 2.17
63-65 1.83 2.02
66-68 1.70 1.87
69-71 1.59 1.73
72-74 1.49 1.61
75-77 1.41 1.51
78-80 1.34 1.42
81-83 1.27 1.34
84-86 1.23 1.27
87-89 1.17 1.22

Funeral Costs: What To Expect

National Funeral Directors Association statistics released a breakdown of the cost of an average common funeral. These findings show that an average funeral can cost about $7,360. However, if you add a vault that some cemeteries require, your cost can go as high as $8,755. Please note that not all online calculators account for extra charges like casket, vault etc. Hence, it is very important to inquire about these potential extra charges beforehand if you choose to go the prepaid plan way.

These estimates don’t include the cost of flowers, obituaries, grave plot or monument. They also don’t include advance fees that might increase the estimated costs even more if your funeral providers use third party vendors. The cost analysis has been broken down into two parts: burial and cremation.

Funeral With Burial:

  • Metal Casket: $2,400
  • Basic Services Fee: $2,100
  • Vault: $1,395
  • Embalming: $725
  • Facilities/Staff for Ceremony: $500
  • Facilities/Staff for Viewing: $425
  • Hearse: $325
  • Removal or Transfer of Remains: $325
  • Miscellaneous Preparation: $250
  • Printing for Memorial: $160
  • Service Vehicle(s): $150

Funeral With Cremation:

  • Basic Services Fee: $2,100
  • Cremation Casket: $1,000
  • Embalming: $725
  • Facilities/Staff for Ceremony: $500
  • Facilities/Staff for Viewing: $425
  • Third-Party Cremation Fee: $350
  • Removal or Transfer of Remains: $325
  • Urn: $275
  • Miscellaneous Preparation: $250
  • Printing for Memorial: $160
  • Service Vehicle(s): $150

With these costs in front of you, you can make an informed decision about which way to go.

Top 10 Final Expense Life Insurance Companies in 2020

Here is a list of some of the best final expense life companies in the USA offering unmatchable value in terms of price if you’re looking for final expense life insurance leads.

Why are these the best?

First off, all the companies listed above are extremely financially stable. All of these also have A rating on A.M. Best. Having coverage with any of these companies can be a stress free experience since all these are bound to pay you on time.

Moreover, these companies are all market competitive. Thus you can be confident that you’ll get fair funeral prices from any of these companies.

Furthermore, each of these burial companies offers unique underwriting value targeted at specific health issues. Every company serves a different health niche. And if you look at them objectively, each of these companies stands out in their own way for something unique that only they offer. That is why they’re in our list of the best of the best. For example, Mutual of Omaha final expense life insurance product “Living Promise” might be the very best out in the market.

Since every individual is different, there is a high chance what company is better suited for one’s needs might not be such a great fit for another. It is very likely that these companies might not suit everyone as everyone’s needs are different. But essentially, these are the best bunch out there. And if you’re looking for something specific, you are sure to find it from this list of companies.

You can also check out these companies’ final expense life insurance reviews to put your mind at ease when figuring out what to go for.

However, on the off chance that final expense life insurance doesn’t seem like the right fit for you, here is a list of alternatives you can opt for instead.

What alternatives are there for Final Expense Life Insurance?

If your main aim is to pay for funeral expenses, then there other options available besides final expense life insurance.

  • Term Life Insurance

If you’re relatively young, it would make more sense for you to purchase a traditional life insurance policy rather than a final expense one. These types of policies are offered by almost every insurer.

In a term life insurance, you pay premiums for a set amount of time. For example, 35 years. After which your policy will run out and you will no longer be insured. These policies also require a general paramedical exam to ensure that you’re healthy. 

Traditional insurance policies are also more financially rewarding. The per unit cost is more affordable and you can set your benefit amount to pay off more than just the funeral costs. These can even pay off long term debts and protect your family for a longer time.

That’s why if you’re young and healthy, traditional life insurances are better, in terms of financial aspects. And I say young and healthy because if you’re older and aren’t all that healthy, it might not be possible for you to pass the paramedical exam and get insured.

Moreover, because of the exam and other factors, application time of these policies can span over a few months. So if you’re in a hurry, it’s better for you to opt for final expenses term life insurance as it will offer you coverage in only a few days.

  • Pre-Need Insurance

Pre-need insurance is also known as pre-need funeral insurance or pre-need burial insurance. It is a type of permanent home insurance that is only offered by funeral homes and funeral directors. It is a very specific type of final expense life insurance that covers the cost of a predetermined funeral. So essentially, you can also call it a prepaid funeral.

One advantage of this is that you get to be in charge of your funeral. You can decide how much you’ll spend on your funeral and what arrangements you’ll have. This way, you can get the entire funeral out of the way and pay for all of it beforehand. Then when the time comes, there’s nothing to worry about.

However, setting up these plans so far in advance can actually lead you in trouble. The funeral home might change ownership, the inflation rate might mess up your payments or you could lose out on the chance to use an insurance plan that will give you a greater payout using which you could pay for the funeral and leave some for your family. 

  • Pre-Need Funeral Trust

A pre-need funeral trust typically serves the same purpose as a pre-need insurance policy. The money is only used for funeral purposes. However, instead of the funeral homes waiting for the insurance money, your money goes to a trust that accrues interest over time. This can be labelled a cost effective way to fund your funeral. 

However, the interest is usually taxable and they’re irrevocable thus proving difficult to modify. Which isn’t something you want when planning so far ahead.

  • Self-Funded Burial

Final Expense Life Insurance is essentially for seniors who, if not for the insurance plan, may not be able to afford their own funeral. Assuming that you are financially prepared for retirement, you won’t have any problems with not being able to afford your funeral. With this approach, you can make sure you have your burial money saved up. 

This is of course, a long shot and something people need to start preparing from very early on in their career.

And thus, after knowing everything there is to know about final expense life insurance, the question that begs our attention:

Is Final Expense Life Insurance worth it?

To have a cost-effective approach, a term policy should always be your priority. It’s a good way to cover your funeral costs while leaving something behind for your loved ones to depend on. 

However, if you need a quick fix and the idea of a final expense life insurance no exam aspect attracts you then funeral final expense life insurance companies can help you figure out a final expense option. However, it is also advisable to speak to a licensed expert that will help you compare policies and give you final expense life insurance quotes so you can make an informed decision. Insurance is no joke, especially a final expense one. 

Although it is supremely important to devise a plan for your loved ones, it is equally important to make sure that plan is cost effective and suits your needs. 

Now it’s up to you to decide whether final expense life insurance is something that caters to your needs or not.

Nabeel Ahmad

Nabeel Ahmad

Nabeel Ahmad is the founder and editor-in-chief of Insurance Noon. Apart from Insurance Noon, he is a serial entrepreneur, and has founded multiple successful companies in different industries.

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