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Final expense insurance

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Losing a loved one is an incredibly difficult experience. During the grieving process, the last thing anyone wants to worry about is paying for a funeral. Traditional burials can cost thousands of dollars, and that can take a serious financial toll on your family members after you pass away. 

To ease the financial burden, many people choose to purchase final expense insurance. While it might seem ominous to plan for your future funeral, it means that your loved ones won’t have to worry about the cost in the midst of loss. Keep reading to learn what final expense insurance is, who needs it and where you can buy it.

What is final expense insurance?

Final expense insurance is a type of life insurance that specifically covers end-of-life costs, like a funeral, cremation or final medical bills. It has a lower death benefit than other kinds of life insurance and does not have a cash value component.

With final expense insurance, you’re covered from the moment your policy is approved until your death. As long as you keep up with the monthly premiums, your policy stays active. When you pass away, your beneficiaries receive your death benefit and can use the money to cover funeral costs.

Types of final expense insurance

There are two types of final expense insurance. Each policy has different health requirements for policyholders and offers different amounts of coverage. 

Guaranteed issue

Guaranteed issue life insurance is a type of insurance that is designed for high-risk individuals. Basically anyone who applies can get approved, regardless of their health, although it costs more and payouts are limited. Instead of a medical exam, applicants complete a short health questionnaire that rules out terminal illnesses. Because people who purchase guaranteed issue life insurance usually have underlying health conditions, most policies have a maximum death benefit of $25,000.

Simplified issue 

Simplified issue life insurance is a good option for individuals who don’t qualify for a standard life insurance policy, but only have moderate health risks. There is no medical exam required, but applicants do have to fill out a detailed questionnaire about their current medical conditions and health history. Simplified issue life insurance policies usually include a maximum death benefit of $50,000.

How much does final expense insurance cost?

The cost of final expense insurance varies based on a few different factors, so the price is different for every individual. However, it is more expensive than other types of life insurance. People who apply for final expense insurance typically have underlying health issues that make them risky to insure. As a result, insurance companies charge more money for coverage upfront.

Factors that impact cost

Some of the biggest factors that impact the cost of final expense insurance include:

  • Age
  • Gender
  • Pre-existing health conditions
  • Amount of coverage
  • Smoking

Who needs final expense insurance?

Final expense insurance is a good option for individuals who have underlying health risks and don’t qualify for a standard life insurance policy. Although the death benefit is low, you can find a policy with enough coverage to fund the cost of a funeral and other end-of-life expenses. This type of policy won’t do much to financially support your family members after your death, but it does offer some immediate relief. 

How to get final expense insurance

Obtaining final expense insurance is fairly easy, and you can typically get coverage very quickly after you submit an application. The only requirement is that you don’t have a terminal illness. If you have terminal cancer, dementia, are on dialysis or have another diagnosis that will shorten your lifespan significantly, you may not qualify for coverage.  

Here are the steps you should take to purchase a final expense insurance policy:

  • Research providers: To start, research a few companies that sell final expense insurance policies. As a starting point, we recommend looking into Transamerica, Gerber, Mutual of Omaha and AIG.
  • Inquire about coverage: Reach out to the companies to inquire about coverage. You’ll typically have a short phone interview with an agent and be asked to provide some basic personal information, like your date of birth, driver’s license number and social security number. You’ll also be asked to briefly explain your medical history to rule out a terminal illness. 
  • Wait for approval: The insurance agent will verify your information and calculate your rate based on the information you provide. The approval process doesn’t take very long, so you should hear back within 24 hours of your interview. If you’re happy with the rate, you’ll sign your policy documents and your coverage will start. 

As with any type of insurance, it’s a good idea to shop around and get quotes from a few different companies. That’s the most effective way to ensure you’re paying the lowest price for the amount of coverage you need.

Alternatives to final expense insurance

Final expense insurance is a good option for people who can’t get standard coverage because of their health. But the real benefit of this policy is that it helps your family members pay for your end-of-life expenses so they don’t have to use their savings. 

Final expense insurance isn’t nearly as comprehensive as other types of life insurance. There is no cash value and the death benefit is very low. It can’t provide additional income during retirement or financial support for your family members long after your death. Additionally, the premiums are fairly expensive for the amount of coverage you get. 

If you’re looking for other ways to pay for your funeral, here are some options:

Term life insurance

Term life insurance offers coverage for a specific period of time—usually between 10 and 30 years. It does usually require a medical exam, so it’s only an option for younger people or those who don’t have any underlying health conditions. If you qualify, a term life insurance policy can give you more coverage than final expense insurance for less money. 

Pre-need insurance

Pre-need insurance is essentially a way to prepay for your funeral while you’re still living. It’s not a traditional type of life insurance — sold directly through funeral homes. With pre-need insurance, you know exactly how much your funeral will cost, and you can do some preliminary planning so it’s not left entirely to your family members. 

The takeaway

  • Final expense insurance is a type of life insurance that covers end-of-life costs.
  • It can be used to pay for a funeral, cremation, or final medical bills.
  • Almost anyone can get approved for final expense insurance, unless you have a terminal illness.
  • Alternative options may provide financially for your loved ones but at more competitive rates and with other advantages if you qualify.

Conclusion

If you’re evaluating or preparing for the cost of your future funeral, purchasing final expense insurance can provide peace of mind. It’s the best option for individuals who can’t qualify for traditional life insurance due to underlying health issues. Unless you have a terminal illness, pretty much anyone can get approved quickly for final expense insurance. Before you choose a provider, it’s worth getting quotes from a few companies to find the lowest rate.

Elizabeth Rivelli

Elizabeth is an insurance writer for coverage.com, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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