Final Expense
What is it?
Final expense life insurance is a permanent life insurance policy designed to cover burial costs and other end-of-life related expenses such as cremation, plots, obituaries, etc. These are designed for the elderly (age 50+) and generally most people qualify. Premiums for these policies are guaranteed to never increase. Most people are surprised how affordable these policies are: usually less than $50 per month. Final Expense comes in two flavors: Simplified Issue and Guaranteed Issue.
Types of Final Expense Policies
Guaranteed Issue
- Key point: Guaranteed issue is for those that cannot qualify for simplified issue as almost everyone is approved.
Much like simplified issue, guaranteed issue is a final expense policy but with a few key differences. Typically, guaranteed issue is considered a last-ditch option. Agents generally consider if you will qualify for traditional life first, then simplified, and lastly for those that cannot qualify for either, guaranteed issue is considered. As the name suggests, this type of policy is “guaranteed” to be issued and almost no one is turned down. No medical exam is required and no medical questions are asked except for a few critical questions just to make sure you’re not going to pass away in the immediate future. Chances are high you qualify.
Coverage amounts are usually capped around $10k – $25k.
Simplified Issue
- Key Point: Simplified issue is for those that cannot qualify for traditional life insurance but are in average health otherwise.
Simplified issue is a type of final expense life insurance (think along the lines of whole life insurance) designed to be more simplified than traditional life insurance. This type of policy is ideal for seniors or those that are middle aged and have some health issues that make getting approved for traditional life insurance difficult. Alternatively, simplified issue can be for those who need coverage asap or simply do not wish to take a medical exam. With a simplified issue policy, a full medical exam is not a requirement. This means that you can expect coverage to start in days, not in weeks or months! Keep in mind that most insurance carriers still require a few medical questions to make sure you are not terminally ill.
Coverage amounts are usually capped around $35k – $50k.
Do I Need Final Expense Life Insurance?
You’re not going to like this answer; but it depends! We cannot in good conscience give blanket advice if it does not apply to everyone. Some people need it, some do not.
In the United States, the cost of a funeral ranges between $6,500 to $9,000 and in North Carolina the average funeral costs are a little bit above $6,000. According to a recent CNBC article, 40% of American’s cannot afford an unexpected $400 expense. In other words, if almost half of the US is living paycheck to paycheck, a funeral could spell financial disaster.
If you are unsure if you should purchase a final expense life insurance policy ask yourself: “Do I currently have a permanent life insurance policy that I’m paying on or is paid in full?” If the answer is yes, then you probably don’t need a final expense policy unless the face amount is less than $10,000, then you might want to reconsider evaluating how beneficial that policy is for you. If you do not have a permanent life insurance policy then you probably need a final expense policy. Another consideration is if you already have your plot and funeral arrangements paid in full. If you fit into that category, then you probably do not need a final expense policy either.
Another question to ask yourself is: “Do I currently have a term life insurance policy in force?” Many term policies allow you to convert your term policy into a permanent policy before the contract expires. This conversion option can serve as a final expense policy depending on when your term expires. You should take into consideration your age when your term expires, though. Life expectancy in the US is just under 80 years old, so if your term expires when you are 60, that could be an additional 20 years of premium payments that you might not need to make.
Each person is different so it’s impossible to give blanket advice. One thing is for sure though, do not count on Social Security or Medicaid to foot the bill, they only offer $255 and up to $1,500, respectively. Unfortunately, NC does not currently offer state assistance for funeral expense, although that could change in the future.
Interested in a Final Expense Policy?
Typical burial costs are nearly $10,000, get the coverage you need to protect your loved ones.