What Is Final Expense Life Insurance?
Final expense life insurance, also known as funeral insurance or burial insurance, helps cover your funeral costs, celebratory services, or medical expenses after you die.
Because they’re intended for your final expenses, final expense insurance plans are usually lower in value than regular life insurance policies. For example, a typical final expense life insurance plan could have a benefit of $5,000 to $25,000, whereas the overall average face value of life insurance policies in the U.S. was $168,000 in 2018.
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Plan Ahead to Protect Your Loved Ones With Burial Life Insurance
Funeral and burial services can become expensive. According to the National Funeral Director Association, the median cost of a regular funeral in 2021 was $7,848. If you choose to be cremated, the cost is slightly lower, at $6,970.
That said, prices can vary dramatically depending on things like your choice of casket, burial site, and graveside service. As an example, a standard casket costs around $2,000, but if you opt for a luxury casket made of copper, bronze, or mahogany, it could cost as much as $10,000. A final expense policy could help with these costs, minimizing or eliminating the need for your loved ones to pay out of pocket to lay you to rest.
Final Expense Life Insurance vs. Other Life Insurance At a Glance
|Final Expense Life Insurance||Term Life Insurance||Whole Life Insurance|
|Coverage Period||Lifelong||Set period; usually 10-30 years||Lifelong|
|Coverage Amount||Limited; usually under $50,000||Up to maximum life insurance amount||Up to maximum life insurance amount|
|Coverage Purpose||Pay for burial and funeral costs||Pay for: burial and funeral costs, income replacement, debt settlement, estate planning, and more||Pay for: burial and funeral costs, income replacement, debt settlement, estate planning, and more|
|Eligibility||Health questionnaire, but no exam||Medical exam; exceptions for no-exam policies||Medical exam; exceptions for no-exam policies|
Unlike other types of life insurance, final expense insurance is designed to cover the funeral expenses and other end-of-life costs. As such, coverage amounts are much lower and these policies typically have more relaxed eligibility criteria.
In contrast, term and whole life insurance policies are typically purchased to provide financial protection for the policyholder’s loved ones in the event of their death. These policies offer higher coverage amounts that can be used to settle debts like mortgage payments, pay for a dependent’s college tuition, and replace their income for living expenses.
How Does Final Expense Life Insurance Work?
Final expense life insurance can be used to cover nearly anything related to your burial or funeral costs, including:
- Funeral expenses
- Burial or cremation services
- Post-funeral gatherings
- Flowers, music, obituary, etc.
- Medical bills
- Nursing home or other residential care
- Savings for family’s future
- Donations to charity under the name of the deceased
Policyholders pay a set premium that guarantees a payout upon their death. The policy is a type of permanent life insurance. This means it does not expire and insurers cannot cancel the coverage if your health worsens or as you get older, as long as you keep paying your premiums to keep the policy in force.
Final expense insurance has more relaxed eligibility criteria than standard term and whole life policies. However, most still have age and health restrictions. For example, most insurers will not accept applicants over 85 years old and also will not accept those with a terminal illness. However, exact requirements vary by insurer.
Additional Benefits of Final Expense Life Insurance
In addition to offering coverage for future burial expenses, final expense life insurance may feature additional benefits that you can access as a living benefit or add to your policy for increased coverage.
Final expense life insurance is a permanent life insurance policy, so like other permanent life policies, it offers cash value. Cash value is money that accumulates over time as the policyholder pays premiums. It can be used to help pay plan premiums, or the policyholder can borrow against the accumulated cash value through a loan or withdrawal.
Riders and Endorsements
Some insurers may offer riders such as child riders and accidental death and dismemberment endorsements. These could provide extra benefits or coverage beyond the basic policy, though it typically requires an additional premium payment.
How Much Does Final Expense Life Insurance Cost?
Final expense life insurance premiums typically range from $30 to $75 per month, with factors like your age, your health, and how much coverage you want driving the premium. Typically, those who are older or have more serious health issues will see higher premiums. Though this type of life insurance does not utilize a full medical exam, it does still take some health factors into consideration. In addition, how much coverage you want will impact your actual premium.
Types of Final Expense Life Insurance
|Simplified Issue||Guaranteed Issue|
|Best For||Moderate risk of early death||High risk of early death|
|Typical Coverage||Up to $35,000||Up to $25,000|
|Medical Exam||No exam, but still must complete health questionnaire||No exam, no questionnaire|
There are two main types of final expense life insurance policies available. Some insurers may also offer additional benefits, such as accelerated death benefits or riders.
Simplified Issue Life Insurance
Simplified issue life insurance is a good compromise for people who may not be eligible for a traditional life insurance policy but are at moderate risk of early death. It doesn’t require a medical exam, but if you have certain terminal illnesses or aggressive forms of cancer, you may not be eligible.
For final expense simplified issue life insurance, many companies provide up to $35,000 in coverage, though some insurers may offer higher coverage amounts. This is higher than most other final expense policies. Overall, simplified issue life insurance could be a good option for those who can’t get a traditional life insurance policy, but still want to cover their final expenses without a medical exam.
Guaranteed Issue Life Insurance
Guaranteed issue life insurance provides coverage to everyone except those who are terminally ill. However, premiums for guaranteed issue life insurance are sometimes higher, and coverage amounts are typically lower.
Guaranteed issue life insurance usually has a waiting period called a graded death benefit, usually lasting 2 to 3 years before your full benefits kick in. If you happen to die before then, your loved ones may get your premiums back, plus interest, but not your full death payout.
Because guaranteed issue life insurance offers coverage to even high-risk individuals, it could be a good choice for those who may not be eligible for simplified issue life insurance. For example, it could be an option if you’re in poor health and don’t have a nest egg to rely on, or if you don’t need a lot of coverage for your final expenses.
The Pros and Cons of Final Expense Life Insurance
Advantages of Final Expense Life Insurance
- Relaxed eligibility criteria around health and age. There are minimallimits regarding pre-existing conditions and age, so older people and those in poorer health are more likely to be eligible for coverage.
- No medical exam. Some insurers utilize a health questionnaire, but final expense policies do not require full medical underwriting and medical exams.
- Quicker approval process. Because you don’t need to get a medical exam to get approved for a final expense policy, the process can move a lot faster.
- More affordable than other insurance policies. Final expense insurance is meant for covering your funeral and end-of-life costs, so it doesn’t have as much value as regular life insurance. Since the policy doesn’t pay out as much, you don’t have to pay as much into it.
- Fixed premium rate for duration of policy. Unlike some other insurance policies, which might increase in premium cost as you age or get sick, final expense life insurance is locked in at the rate you start with.
- Provides lump sum to help immediately cover end-of-life expenses. Final expense policies can help your loved ones handle your final arrangements without going into debt. With a final expense policy, they may be able to cover most or all of the costs of your funeral services, final medical bills, graveyard plot, and casket.
Drawbacks of Final Expense Life Insurance
- Smaller death benefits. If you have bigger expenses, like a mortgage, a final expense policy likely will not be enough to cover the money owed. It also usually is not a big enough sum to provide beneficiaries with a substitute for your income.
- Lower lifelong coverage can lead to paying more in premiums. Because the coverage amount and premiums are set at the induction of the policy, if you live long enough, you may end up paying more in premiums over time than the death benefit amount.
- Graded benefits, or a general waiting period for full coverage. Depending on the specific policy and when the policyholder passes away, death benefits may be limited or voided altogether. This may be problematic for those who are in very poor health and need full benefits right away.
- Not every final expense policy offers a cash value component. And the policies that do may have it in a limited capacity, making it less effective than the cash value of a traditional permanent life policy.
- More expensive than traditional life insurance options. For those who are young and healthy, final expense life insurance is much more costly than standard term and whole life options.
Should You Get Final Expense Life Insurance?
Final expense insurance is a good option for people who might not be eligible for traditional life insurance because of health issues, pre-existing conditions, or advanced age. However, if you have a comfortable nest egg or have prepaid your funeral arrangements, final expense life insurance may not add any additional benefit or protection to what you already have in place.
Consider Final Expense Life Insurance If…
- You no longer have dependents. If your children are grown and able to support themselves, they don’t necessarily need a big life insurance payout in the event of your passing. However, final expenses can be costly. Final expense insurance could be a good way to make sure your beneficiaries have assistance with paying for your burial costs.
- You have pre-existing health conditions or are otherwise not in the best of health. Final expense insurance does not normally require a health exam or discriminate based on most pre-existing conditions. This means you may be eligible to get coverage even if you are not in the best health.
- You want affordable coverage. Final expense insurance can be more affordable than a regular term or whole life policy, making it a good choice for people who may not be able to afford higher premiums that come with poorer health.
Consider An Alternative Life Insurance If…
- You need more coverage. If you need to leave a larger death benefit behind to replace your income, settle debts, and more, you should consider a different type of life insurance that would allow for higher coverage amounts.
- You are in relatively good health. If you are in relatively good health, you may find term life insurance options more affordable because medical underwriting is less likely to reveal any issues that would cause an insurer to increase premiums.
How To Buy Final Expense Life Insurance
Purchasing a final expense life insurance policy typically runs through the following process.
1. Determine how much coverage you need.
When you’re thinking about applying for a final expense policy, add up your estimated funeral cost and any other outstanding bills you think you might have. Think through how and where you would like to be buried or cremated and get estimates from the funeral home. Keep any large debts you may leave behind and add that into your coverage estimate.
2. Shop around and compare your options and quotes.
Determine whether you need a simplified issue or guaranteed issue final expense life insurance policy. From there, look up and compare your options for available insurers in your area and get quotes. Consider plan details like whether there are any additional riders or endorsements you’d like to add, the insurer’s reputation and history of customer satisfaction, and estimated premiums.
3. Formally apply for your selected plan.
Although final expense life insurance policies do not require full medical underwriting with a medical exam, applications may ask you questions about your health history, age, weight, and family history, which are factors used to calculate your premiums. You may also need other identifying information, like your driver’s license, address, phone number, and more.
4. Receive confirmation of plan activation and pay your first premium.
Once your application is approved, you will receive confirmation that you can pay your first premium and have the policy go into effect. The insurer will send you an explanation of benefits and more policy details, either through the mail, electronically, or both.
Alternative Options to Consider
Final expense life insurance is not the only option for covering burial and funeral costs. Other choices may be a better fit for your needs, including term life insurance, pre-need insurance, pre-need funeral trust, and a self-funded burial.
Term Life Insurance
Term life insurance is a life insurance policy that has a specified term date, usually ranging anywhere from 10 to 30 years. Because these types of policies lock in their rates for the duration of the term and usually offer higher death benefits, they typically have higher premiums than a final expense insurance policy.
This is likely a good option for people who are younger or still in good health. Those who are older or in poor health may face higher rates or be denied coverage altogether.
Pre-need insurance, also known as pre-need funeral or pre-need burial insurance, is a type of policy offered directly by funeral homes. Rather than needing to choose a beneficiary, your policy can be paid out directly to the funeral home. This could help those who do not have a clear beneficiary in mind, or if choosing a single beneficiary to receive the payout could be problematic.
You may decide on your arrangements beforehand as well, meaning family members don’t need to be involved. However, most pre-need insurance policies do not allow arrangement adjustments.
Pre-need Funeral Trust
With a pre-need funeral trust, you can contribute money to a special trust account that keeps earning interest. This money can go directly toward a funeral home or you can choose another relative or third-party entity to manage it. Whatever money you pay into the trust remains yours. This means it is possible to use it if you need the finances while you’re still alive.
For those who do not need financial assistance for funeral and burial costs, forgoing final expense insurance altogether to have a self-funded burial could be a good choice. This is a good option if you have a comfortable savings cushion and do not need the extra safety of an insurance policy or trust.
What This Means For You
If you struggle with finding affordable standard life insurance options or otherwise do not need to leave a larger death benefit behind when you pass, final expense life insurance could help keep you covered. Designed specifically for end-of-life costs, it is more widely accepting of applicants who are older or in poorer health, offering lower coverage at lower premiums for these individuals.
This type of policy can help your loved ones cover the costs associated with your funeral services, burial or cremation costs, and any outstanding medical bills. Speak with a trusted insurance agent to help you find a final expense policy that would fit your needs.