If you watch television at all, especially on the weekend, you've probably noticed commercials with some seniors talking about Final Expense Insurance. For most people, this topic is seldom discussed unless they've had to chip in for Cousin Ed's funeral because he died without life insurance. Final Expense Insurance may sound like a reasonable purchase, but the television ads aren't very specific about what it is.
What Is It?
All life insurance, no matter the product type, is a funding vehicle for a specific event or events that will financially affect you or your loved ones. It is, in simple terms, an affordable solution to a foreseeable financial problem:
- Funeral and burial expenses
- Final medical expenses
- Debt reduction or elimination
- Tuition expenses for surviving family members
- Mortgage reduction or satisfaction
- Income replacement
- Financial legacy
As clearly indicated in its moniker, Final Expense Insurance is life insurance that is specifically designated to pay final expenses at the death of the policyholder. It is typically purchased in amounts sufficient to pay funeral and burial expenses, and other final expenses left for surviving loved ones to deal with.
Although any type of life insurance can be used as a final expense policy, the type of insurance most preferred is Whole Life insurance, because coverage lasts for a lifetime and the premiums are guaranteed never to increase over the life of the policy.
Typically, insurance companies that offer Final Expense products will accept applications for people up to 80 years old and with some companies 85 years old. This is especially helpful for seniors who may have cashed in their regular life insurance policies or let them lapse because of financial difficulties. Also, many people go through life having their life insurance provided by their employer and then discover that they cannot keep it after retirement.
Most life insurance companies that offer Final Expense Life Insurance also offer a "guarantee issue" product. This type of coverage is also referred to as graded benefit life and is an insurance plan that will cover you without regard to your medical history.
Typically, the policyholder must live two or three years before the full death benefit is available. If the policyholder dies during that period, the insurance company will return only the premium paid in up until death plus, in some cases, a small percentage of that amount added to the premium.
Why Purchase Final Expense Life Insurance
Final expense life insurance is the preferred product for people who want to designate a specific death benefit for their surviving loved ones to pay their final expenses. The policyholder wants to make certain they do not leave a funeral/burial expense debt to their survivors. With a moderate funeral costing about $10,000, you certainly don't want to have your grieving survivors responsible for paying for your funeral expenses.
For the many people who have waited until late in life to purchase life insurance, a final expense product may be their only option for obtaining coverage because of medical conditions or limited finances.
When to Purchase Final Expense Life Insurance
Most consumers understand that life insurance rates go up as you age, and for that reason, the earlier in life you purchase coverage, the less you will have to pay for it. Typically, hard-working individuals will put their careers ahead of their health and end up with medical conditions that could prevent them from purchasing a standard life insurance policy later in life. Fortunately, the guaranteed issue products offer a great solution, but with additional cost and a graded benefit period.
To speak with an insurance professional about Final Expense Life Insurance, contact Skyline Risk Management for help with identifying the most appropriate coverage at an affordable price.