Final expense

Final expense insurance is a whole life policy that pays medical bills and funeral expenses when you die. It’s also known as burial or funeral insurance. It’s a popular choice among seniors.

Most final expense plans have these features:

• Whole life insurance – no expiration if premiums are paid

• Cash value – insured may be able to take out a policy loan

• Fixed premiums as long as they’re paid

• Simplified issue – usually no medical exam (also called a life insurance exam) is required, just health questions on the application

• Easy application process

• Fast approvals – coverage can often be issued in days

• Affordable rates

Final expense life insurance is popular with seniors because of its affordable price, smaller benefit amounts, and emphasis on covering funeral costs.

Traditional life insurance policies such as term insurance are primarily intended to replace any income lost when a loved one dies. These policies are most important to families during the earlier years when we’re working, paying a mortgage, making car payments, and raising our kids.

Once we’ve retired, paid off the mortgage, and the kids are out of the house, traditional life insurance policies aren’t needed as much. What we do need is a way to pay for any expenses we leave behind when we pass.

According to the National Funeral Directors Association, the median cost of a funeral can be over $9,000. With no way to pay for these expenses, surviving loved ones often experience a financial burden during a time of intense grief.

Many of us have experienced the death of a loved one and remember how stressful it was to juggle our grief, the funeral planning, and the financial obligations we had. The thought of our spouse or children going through the same experience is unbearable.

So how can final expense life insurance help? What can we do to protect our families from this financial burden? How can we make sure they aren’t left with a pile of bills when we pass?

Burial insurance for seniors is a smart and compassionate insurance solution for seniors looking to protect their loved ones from rising funeral costs. It’s typically easy to qualify because it’s issued based on answers to health questions. In many cases, you don’t need to take a medical exam.

Qualifying for a final expense policy is often easier than qualifying for other types of life insurance (such as term insurance). But there are still important questions to ask, such as:

• Does the policy expire?

• Do I have to take a medical exam?

• What features are included in the policy?

• How can the death benefit be used?

Final expense policies don’t expire like term policies because they are a type of whole life insurance. Your coverage won’t expire as long as you pay your premiums.

In most cases, a medical exam isn’t required to qualify because the face amount is typically under $50,000. Coverage is usually issued based on the applicant’s answers to health questions on the application.

Depending on the life insurance company, your final expense policy may have added features such as child riders, accidental death and dismemberment, or support benefits for surviving loved ones such as funeral price shopping. Not all policies are the same, so make sure you review the policy’s benefits carefully.

The hardest thing we must ever face is the death of a loved one. On top of this, surviving loved ones are often left to handle any end-of-life medical expenses and funeral costs. These expenses can add to the sense of grief and stress surviving friends and family members feel. Final expense life insurance was created to prevent this added pressure.

Even though final expense insurance focuses on covering funeral costs, the death benefit can be used for anything: medical bills, credit card debt, mortgage payments, etc. How the death benefit is spent is ultimately up to the beneficiary of the life insurance policy.

The average final expense policy costs between $30-$70 a month and depends on your age, sex, health, coverage amount, and life insurance company you choose. If you have significant health conditions or are over the age of 70, your premium will probably be higher and may cost between $70-$120 a month (though it may be less). Younger applicants who are in good health may qualify for rates in the $20-$50 range. Remember, a cheaper rate usually means fewer features and benefits for surviving loved ones. A few extra dollars a month could make a big difference in the support your family receives when you’re gone.

Cost is often the #1 factor people focus on…but it’s not the most important factor! Instead of focusing on how much the policy is going to cost, look at how many expenses will be left behind and how much they’ll cost your family. Common expenses include medical bills, credit card debt, and funeral costs. We’ll cover each of these costs below.

The current state of the healthcare industry has led to higher prescription costs, expensive medical procedures, and health insurance that doesn’t always cover consumer needs.

Of the 2.85 million people who died in the U.S. in 2019, more than eighty percent were on Medicare before they passed. A disproportionate share of Medicare spending occurs in the last year of life, covering costs related to chronic conditions, inpatient hospitalizations, and hospice care.

But government programs like Medicare and Medicaid only cover about two-thirds of healthcare spending by the elderly, according to the National Bureau of Economic Research. The report, which is based on data collected through the Medicare Current Beneficiary Survey between 1996 and 2010, found that healthcare spending for people aged 65 and over was approximately $18,424 per person, per year.

Medicare paid an average of $153 per day, per person, in 2016 to cover hospice care, in the following categories:

• Routine home care – $193 per day for services that patients need on a day-to-day basis.

• Continuous home care – $41 per hour for services during crises or at least eight hours a day to manage acute symptoms.

• Inpatient respite care – $173 per day to relieve unpaid caregivers on an occasional basis for no more than five days at a time.

• General inpatient care – $744 per day for care that cannot be provided in other settings.

Patients may still be responsible for co-payments, prescription drugs, emergency care, inpatient facilities, nursing care, and other end-of-life expenses. This leaves many people with a significant financial obligation that they can’t always afford. Final expense life insurance can help protect loved ones from the financial responsibility of any outstanding medical bills.

73% of American consumers die in debt according to research from Experian FileOne and Credit.com. The average total balance left is roughly $61,554 (including mortgages). Unfortunately, this debt doesn’t just disappear. In most cases, the estate pays off as many debts as possible before any assets are distributed to surviving family.

Here’s the average breakdown of consumer debt according to the research:

• Student Loans = $25,391

• Auto Loans = $17,111

• Personal Loans = $14,793

• Credit Card Debt = $4,531

Family members who count on the deceased’s assets to cover the final arrangements are often surprised to learn that there isn’t enough left over once all of the deceased’s bills have been paid.

Traditional life insurance is often used to leave your family enough money after you pass away and is often proportionate to the income your family would lose with your passing. Term insurance is the most common type of income replacement and can have face amounts in the millions of dollars.

Final expense life insurance is different. It’s uncommon for a final expense policy to be more than $20,000 because it focuses on paying for a very specific debt: funeral or cremation arrangements (learn more: how does cremation work? and Cremation vs. Burial - which is best for you?).

Families often expect their loved one’s estate will cover the cost of the funeral or that the funeral won’t cost much. But most families don’t realize the average funeral cost can be $9,000 or more. Final expense insurance can help reduce these costs and prevent families from emotionally overspending, especially when they know there’s a designated amount available.

This type of life insurance is best for seniors because of its focus on covering funeral costs and other end-of-life expenses. You may have seen this type of coverage offered as burial insurance for seniors or funeral insurance, but these are the same as final expense insurance.

Final expense is best for seniors because it’s affordable, usually offers a no-medical exam qualification, and can help with planning certain aspects of their final arrangements (choosing a funeral home, flowers, music, etc.).

Some example questions you may have to answer on the application cover the last two years of your health and include:

• 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 disease 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?

Even if you answer “yes” to one or more of these questions, you may still qualify for coverage. With final expense life insurance, most people can get coverage even if they’ve had health issues.

There are three main types of life insurance beneficiaries: primary, contingent (or secondary), and tertiary. 

The primary beneficiary gets 100% of the death benefit when the insured dies. If the primary beneficiary passes before the insured, the contingent receives the benefit. Tertiary beneficiaries are often a last resort and are only used when the primary and contingent beneficiaries pass before the insured.

Your death benefit can be split among multiple primary and contingent beneficiaries. Make sure you designate the percentages each should receive and verify the information once your policy is issued. You should also notify your beneficiaries of any percentages you’ve put in place to ensure there is no confusion when the time comes.

Whenever possible, choose an adult as your primary beneficiary as this will simplify the distribution of the death benefit. Provide as much relevant information as you can about your beneficiaries (their address, phone number, date of birth, etc.) so the insurance company can locate them quickly when a claim is submitted.

It’s important to periodically review your beneficiary information to make sure it’s up-to-date. Always notify your life insurance company of any change of address or phone number so they can update their records.