Final Expense Insurance What It Covers and Why It’s Important

When a cherished family member passes away, it is an extremely emotionally taxing and overwhelming time. On top of that, families have to face the financial burden of funeral expenses. This can all cause a lot of stress during an already difficult time. Final expense insurance, also known as burial insurance, covers the cost of funerals, memorial services, and even other costs that can pile up.

Understanding Final Expense Insurance

Final expense insurance is a type of life insurance that provides a death benefit. This insurance is for the purpose of specifically covering end-of-life expenses. These costs can include burial services, cremation costs, burial plot expenses, etc. This insurance plan is much more affordable because it is also only for covering funeral related expenses and some associated costs. 

The average cost of a funeral in the United States can range from $7,000 to $12,000. The final bill varies depending on the type of service and location. According to the National Funeral Directors Association (NFDA), the average cost of a funeral with a viewing and burial in 2022 was $7,848, while a funeral with cremation averaged $6,971. These figures show how big of a financial burden this can be on the bereaved families. That is why this insurance is designed especially to ease this financial strain. The payout can cover not only the funeral, burial, and cremation costs but also any other extra expenses like overdue loans. 

What Final Expense Insurance Covers

The final expense coverage policy covers a lot of costs. These bills can include funeral home services, casket purchase, cremation costs, burial plots or urn costs, headstone or grave marker expenses, embalming, and other preparations of the body. It also involves transporting the body from the hospital or home to the funeral home, then to the funeral service venue, and then to its final destination. Memorial services and ceremony costs are also covered under this policy. 

The payout is often enough to cover additional fees related to administration, such as death certificates and legal paperwork. Sometimes, there can be some pending loans or overdue debts left by your loved one. In some cases, final expense insurance can also cover unpaid medical bills or any remaining debts the deceased might have. This ensures that loved ones don’t have to bear the financial responsibility alone.

Why Final Expense Insurance Is Important

According to a survey, more than 40% of people around the age of 54 have less than $1000 that they have set aside for their funeral or burial costs. It is nowhere near enough for the actual funeral expenses. This is understandable because not many people can shell out a minimum of $6000 for funeral costs. Death is unpredictable. Even when your loved one is passing away from a terminal illness or due to old age, there are already expenses for care and healthcare. That is why you can’t always arrange the money on time for the funeral expenses. That is also why most of the families opt to cremate their loved one, even if that was not their first choice. 

Funeral expenses can also quickly add up. Many families do not have specific savings allotted for these expenses. Final expense insurance can provide peace of mind for both the policyholder and their families. It also ensures that in the event of death, family members won’t get stressed out about finding or borrowing the money.

Many senior citizens, especially those on a fixed income, receive government assistance, or even have retirement funds, can final expense insurance as an affordable option. This option gives financial protection to their loved ones even when they have passed away. The premiums for these policies are also lower than the other types of life insurance. That is why it is feasible and accessible for older adults.

Without the option of this coverage, family members might have to dip into their savings or sell their assets. Some families might even have to take loans to cover these unexpected financial obligations. That is why final expense insurance plays a very important role in ensuring that your family doesn’t have to be even more worried and can grieve in peace. 

Burial Insurance vs. Final Expense Insurance

One very common question is what the difference between burial insurance and final expense insurance policies is. Although these terms are often used interchangeably, there are some differences between them. 

Burial insurance is the insurance that specifically covers the funeral and burial expenses. On the other hand, final expense insurance can cover a wide range of end-of-life expenses. These expenses can include funeral expenses, medical or hospice bills, and any other outstanding or payable loans. So, the final expense insurance comes with a lot more flexibility. The beneficiary has a lot more freedom to use these funds as they see fit. For example, if the family has to pay outstanding bills, they can choose a lower-cost funeral. They can use the remaining funds to settle debts, medical bills, or other expenses that need sorting. Burial insurance policies, however, can come with some preset conditions about how the payout can be used. 

Final Expense Insurance vs. Traditional Life Insurance

Final expense insurance is also distinct from traditional life insurance in many ways. Traditional life insurance can be for a specified term or whole life. It is designed to provide financial support for basically all the expenses that a family might require. These include daily expenses, educational fees for your children, mortgage payments, utility and grocery bills, etc. The idea here is to give your family a couple of years worth of financial support that is equal to your annual income. It gives them time to land on their feet and helps them get their affairs in order before they can think about taking over financial responsibility for the family or themselves. These policies also have death benefits that are of larger amounts. These payouts are usually more than $100,000.

In comparison, final expense insurance policies are designed to cover a smaller range of expenses. This payout can range between $5,000 and $25,000.The beneficiaries can cover full funeral costs and additional smaller bills like medical, funeral home, or hospice bills, as well as any debts. So, this option is more affordable and also targeted. That is also why it is suitable for senior citizens or those who don’t need a larger life insurance policy. It can also be a choice if you don’t want to go through the more extensive qualification criteria that are normal in life insurance policies. 

Types of Final Expense Insurance

There are usually two types of final expense insurance plans. These are known as simplified issue final expense insurance and guaranteed issue final expense insurance.

Simplified Issue final expense insurance is a policy that requires the applicant to answer some basic health-related questions. No medical exam is needed, however. This allows insurers to make sure the assessments of the risk are fully completed. Assessing risks can also lead to lower premiums. However, if the applicant has serious health conditions, they may not qualify for this type of policy. So, you have to be in relatively good health to get this type of insurance.

The second type, Guaranteed Issue final expense insurance, has no requirement for any medical exams or health-related questions. If you have any pre-existing medical conditions or if you are in poor health, this insurance can be a good option for you. The premiums for guaranteed issue final expense insurance are comparatively higher than those for simple issue one. But, there is also a waiting period of normally two years or so. So, the full death benefit is paid out during that waiting period. 

Why Final Expense Insurance Is Ideal for Seniors

Final expense insurance policies are favored among senior citizens because they are affordable and the qualification criteria are easier to follow. Policy amounts are also much lower than those of traditional term life or whole life insurance policies. The policy amounts for final expense insurance range from $5000 to $25,000. That is why the premiums are also much more manageable. Also, the monthly payments are very low and feasible.

At a senior age, people may also neither need nor want a big life insurance policy. This is especially good if they have paid all their debts already or they already have a payment system set in place. Final expense insurance allows them to make sure that their funeral will not add an extra burden on their family, caretakers, or loved ones. These policies are also straightforward. The payout amount is set, and it is an organized way to prepare for end-of-life expenses without the complications of whole-life insurance. 

Additionally, this insurance is also ideal because it suits their needs and demands better than a traditional life insurance policy. There is no long time period or term. There are no big premiums either to worry about. Final expense insurance has fixed costs and a set pay, and it is also more suitable for seniors in retirement. 

Benefits of Final Expense Insurance

There are many benefits of final expense insurance, for example;

Affordability

These policies are usually a lot more affordable than traditional life insurance policies. It makes them feasible for senior citizens and also for people who are on fixed incomes.

Easy Qualification Criteria

The qualification criteria are flexible. Simplified and guaranteed issue policies make it easier for people to qualify. Whether you don’t have any terminal conditions and you just want to prepare for the unpredictable, or you suffer from pre-existing health conditions, you can find a policy type that suits your lifestyle. 

No Medical Exam

Many policies do not require a medical exam for qualification. This not only simplifies the application process but also makes it relatively quicker. 

Peace of Mind

There is no denying that signing up for a final expense insurance policy can sound morbid. But it is also practical and gives you peace of mind. It also lets you protect your loved ones beyond life and gives you peace of mind to know that all your funeral expenses can be easily covered.

Faster Payout

The death benefit payout is designed and created to pay quickly. After the policyholder's death, there is not a lot of time until the final rites. Therefore, it is important that beneficiaries get the payout as soon as possible. Funeral expense insurance policies make sure that with a faster payout, the funeral arrangement can go on without any long delays. Many families find the quick payout feature really feasible and valuable. It ensures that funeral costs can be covered immediately and bills can be paid on the spot or even in advance. That not only decreases the financial stress of arranging loans but also means you don’t need to sell any assets or resort to breaking open your savings account in a stressful time. 

Choosing the Right Final Expense Policy

When anyone is selecting the final expense policy, it is very important to analyze your personal needs and financial situation first. Some things that you should keep in mind are:

Amount of Policy

You should sit down with your insurance agent or provide and talk about how much coverage you need. The average costs of funerals range from $7000 to $12000. Apart from that, you also have to consider other expenses like potential medical or hospice bills, any payable debts or loans, etc.

Policy Premiums

You should always choose premiums that would fit into your budget. There are policy types, such as simplified issue funeral expense insurance, that have comparatively lower premiums than guaranteed issue policy types. Look for a policy with premiums that fit your budget.

Waiting Period

You should be aware of the waiting periods of the policy that you are selecting. Ideally, your insurance provider should be very transparent with you about it. For example, for guaranteed issue funeral expense insurance has a longer waiting period. The payout is not that immediate. If the policyholder passes away during this period (usually within the first two years), the full death benefit may not be paid out.

Insurance Company and Provider’s Reputation

One of the most important factors that you should choose carefully is your insurance provider. Always choose the insurance company that has a positive reputation among their clients. They should also be known in the insurance industry as reliable and credible. You should make sure that the company also deals with payouts promptly and professionally. Other than that, they should also be honest about any hidden terms or conditions. You can search for their customers’ reviews and maybe even reach out to a few to talk. Investing your money to be paid out after you are no longer alive to ensure that it is actually being paid out properly is definitely a risk. That is why the insurance company or provider that you are choosing should be trustworthy. 

Conclusion

In essence, final expense insurance is a simple and affordable way to ensure that you can take care of your own funeral and burial costs even after you are no longer here. It also helps you not burden your family and loved ones and lets them grieve without any added worry. By understanding the types and terms of funeral expense insurance, you can make a confident decision about your coverage and beneficiaries. It also offers peace of mind to both you and your loved ones. Whether you're considering a simplified or guaranteed issue policy, final expense insurance provides you and your family financial protection during life’s most difficult time.

For more detailed information on policy options and affordable final expense insurance, consult with a licensed insurance provider to find the best fit for your needs. At AWH, we are licensed to provide insurance to government employees, veterans, individuals, and business owners. You can contact our insurance agents for any questions, demonstrations, or confusion you might have. Even if you haven’t decided what kind of insurance policy you qualify for or even need, you can book an appointment with us for a free evaluation session. We will not only help you decide the type of insurance policy that suits both you and your family’s requirements but also give you the best benefits and easy payout. Contact us today to let go of your stress about finances and make your future secure with us. 

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