Life insurance is an ideal choice if you are looking for income replacement – you really want your loved ones to be able to pay the mortgage, be able to afford college, and so forth even when you are no available to keep generating a paycheck. But what if you are much older or actually retired and you don’t have those worries any longer? There is still one major expense you should be aware of: your funeral. If you are searching for insurance coverage that you can exclusively use to deal with the actual cost of your passing, final expense insurance is an alternative worth exploring.
What is Final Expense Life Insurance?
Final expense life insurance is utilized to address the costs of activities specifically connected with your passing. This might include medical expenses, but it almost always often concerns your funeral and burial costs. This includes all funeral and burial services, items (like a casket and hearse), or perhaps cremation if that’s your desired approach.
Here’s What You Should Know about Final Expense Life Insurance
- Final expense insurance is usually a type of permanent life insurance like whole life. This kind of insurance coverage does not run out and is usually more costly per unit of insurance coverage than term life insurance, which provides coverage for a specified length of time before expiring. Permanent life insurance stays in force as long as the periodic premiums are paid.
- Permanent life insurance policies include a cash value account. This cash value accumulates over the life of the insurance policy, comparable to an investment, and is paid out to the beneficiary along with the death benefit when you pass away. You can also get cash out the policy through policy loans or by surrendering it.
- Final expense life insurance has a great deal in common with guaranteed issue life insurance. Contrary to conventional life insurance policies, which entail an investigation into your health and wellness including a paramedical examination. Guaranteed issue insurance policies do not require such extensive research and applicants will usually get insured after answering only a couple of questions.
- Most funeral homes will allow an assignment of the insurance policy death benefit. This means that the cash will go straight to the funeral home to pay the cost of the funeral and burial. (The beneficiary will then receive any money in excess of the cost of the funeral.) When you’re making necessary arrangements, make certain to ask about this and do not presume that the funeral home will take this type of payment method; some funeral homes have to have payment in advance and will not wait until the insurance policy pays the death benefit.
Are there Alternatives to Final Expense Life Insurance?
Yes, there are several alternatives that you may want to consider before making your decision:
Traditional Life Insurance
Traditional life insurance is an ideal alternative for final expense insurance if you’re fairly young and very healthy. This kind of insurance policy is provided by practically all life insurers. You can pay monthly premiums for a permanent insurance policy, as explained above, or buy a term life insurance policy, in which you will pay monthly premiums for a specified amount of time before the expires out and you are no longer covered.
Traditional life insurance calls for a paramedical exam because the insurance company needs a better idea of your overall health, and they’re in a position to offer a more accurate quote, and this frequently comes at a more affordable price than final expense insurance. Simply because of this, traditional insurance coverage is nearly always the more suitable choice.
Nevertheless, there may be situations where traditional life insurance is not a practical option. If you are older or in mostly poor health, it may not be likely that you will pass a parmedical and get covered. Moreover, because an evaluation of your health and wellbeing must be done with these types of policies, there is an underwriting time of between a few weeks and a few months. If you want insurance quickly, a final expense policy is a much better choice because it will provide coverage within a few days.
Guaranteed Issue Whole Life Insurance
As previously mentioned, final expense life insurance has a good deal in common with guaranteed issue life insurance. It eliminates most of the health-related requirements of traditional life insurance, such as the paramedical examination, which means that you’ll get coverage more quickly. Then again, you’ll typically pay much more in premiums than you would with other types of life insurance.
Pre-need Funeral Insurance
Pre-need insurance is a form of permanent life insurance provided by funeral homes. It’s basically a very specific type of final expense insurance, which handles the costs of predetermined funeral services. One of the features is that you’ll get each of your funeral matters out of the way early on, you will know what it costs, and realize how you’re going to pay for it. Then again, setting up these funeral plans so far beforehand can come with a downside, as a lot can change in the meantime (like the funeral home changing ownership) and you won’t have the premium money to utilize for other reasons.
Pre-need Funeral Trust Account
A pre-need funeral trust provides the same objective as pre-need insurance. It establishes money to be utilized exclusively for funeral expenses. However, rather than the funeral home waiting for a life insurance policy to pay out, you make contributions to a trust account that earns interest over time. These trust accounts can be a cost-effective method to fund your funeral and burial, but the interest is usually taxable, and they are irrevocable, so they’re complicated to modify.
The Good Points about Final Expense Life Insurance
Although final expense life insurance does have certain drawbacks that should be considered before making a purchase decision, there are more advantages than disadvantages.
- It is relatively affordable
- It is typically issued quicker than traditional insurance
- You rarely are required to undergo a medical exam
- It provides considerable peace of mind for the policyholder