Because of media advertising, most consumers have an idea of what final expense insurance is but they aren’t clear about its features and benefits. Certainly, a TV advertisement can’t convey a whole lot about an insurance product over the duration of a minute and a half. Here we’ll discuss these features and benefits in order to answer the question “why buy Final Expense Insurance?”
What is Final Expense Insurance For?
The purpose of final expense insurance is to provide the funds that will be needed to pay your final expenses when you die. Although most advertising just talks about a funeral or cremation, there can be more expenses that your surviving loved ones must deal with:
- Unexpected Funeral Expenses: Currently the average funeral will cost about $8,000 to $10,000, but other expenses are likely to pop up. For example, frequently family members who are living out of state may need financial help with travel expenses and hotel accommodations because of the timing of the funeral.Let’s face it, many people have less than a paycheck in savings, so having to pick up and travel to another state to observe a funeral can be a considerable financial setback, so having additional final expense funds would soften their financial blow to their savings account.
- Nursing home expenses: Many seniors will spend some time in a nursing before they pass away and will likely have an outstanding balance when they leave or die. These expenses could be paid for using a portion of the death benefit in your final expense insurance.
- Outstanding Debt: Although individual personal debt is not likely to be passed on to surviving family members if the debt is guaranteed by you and your spouse, he or she will become responsible for it after you pass away. Adding this debt to your final expense insurance death benefit makes sure there will be sufficient funds to pay off your debts.
What are the Features and Benefits of Final Expense Insurance?
Final expense insurance policies are typically written using whole life insurance. Whole life is the perfect type of insurance for final expense policies because of the many features and benefits it provides.
Feature: Whole life insurance will stay in force for the insured’s lifetime as long as the periodic premiums are paid.
Benefit: We all know we will pass away someday, we just typically don’t know when. Having lifetime insurance coverage provides you with the peace of mind that results when you know for sure your policy will be in force when your time comes.
Feature: Once your policy is issued and your periodic premium is established, the amount of your payment cannot change.
Benefit: When you know your insurance payment cannot change because you’ve gotten older or have become ill, you can count on the payment being the same, month after month and year after year.
Feature: Since your final expense policy is written using whole life insurance, your insurance policy builds a cash value account that will grow year after year.
Benefit: Financial emergencies can affect anyone. Since your final expense policy accumulates cash value, you can borrow against that cash value for any reason without being concerned about your credit score. In fact, there is no requirement that your loan is repaid. The insurance company will deduct any outstanding loans from the death benefit before paying it to your beneficiary.
Feature: When you die, your beneficiary will receive the death benefit in a lump-sum payment tax-free.
Benefit: Since the death benefit is tax-free, you won’t need to worry about passing on a tax liability to your beneficiary.
How do I qualify for Final Expense Insurance?
Final expense insurance is very easy to qualify for and obtain because the insurer will not require a medical exam or blood and urine test. You can complete the application with your independent agent on the phone, and when approved, you can typically sign it electronically which means no stranger needs to visit your home.
If, because of certain health conditions, you are unable to qualify for level benefit final expense insurance, your agent can send your application in for a guaranteed issue insurance policy.
What is Guaranteed Issue Final Expense Insurance?
Guaranteed issue final expense insurance is used when an applicant does not qualify for traditional level benefit insurance. This type of policy, although also written using whole life insurance, does not take into consideration any health issues; in fact, there are no health questions on the application.
Since the insurance company is agreeing to accept an unknown health risk, the insurance company will require a two to three-year waiting period before they will pay the full death benefit if you die from natural causes. Accidental death, however, is covered from the first day.
Most companies place a low cap on the death benefit (typically $25,000) and will charge significantly more since the risk is unknown. The good news is most companies will offer a policy to individuals up to age 85 but on the down-side, they are unlikely to offer a policy to individuals under the age of 45.