Final Expense Life Insurance 101: The Complete Easy-to-Read Guide!

What is Final Expense Life Insurance?

Final expense insurance is a type of life insurance that covers the costs of a funeral and other end-of-life expenses, such as medical bills, legal fees, or debts. It is usually a small whole life policy that is easy to qualify for, even for older adults or people with health issues.

Final Expense Insurance, Burial Insurance, and Funeral Insurance are different names for the same type of coverage.

The beneficiaries of a final expense insurance policy can use the policy’s payout to pay for any expenses they choose, not just funeral-related ones. The average funeral can cost $10,000 or more, so final expense insurance can help relieve the financial burden on your loved ones.

Do You Need Final Expense Insurance?

Whether you need final expense insurance or not depends on your personal and financial situation. Final expense insurance can be a good option for you if you are over 50 and need money to cover your funeral costs and any other associated expenses and you are on a fixed budget or income. It can also be helpful if you don’t have any other life insurance coverage or if you can’t take your employer’s insurance with you when you retire.

However, suppose you have substantial savings, investments, and regular life insurance. In that case, you probably don’t need final expense insurance, as you can use those assets to pay for your end-of-life expenses. Final expense insurance typically provides a small death benefit, usually between $5,000 and $20,000, which may not be enough to cover all your needs.

In this guide, we’ll take a closer look, including the benefits of having it, how to determine if you’re eligible, how much it costs, and how to choose the best final expense policy for your needs.

Let’s get started!

Understanding Final Expense Insurance

Final expense or burial insurance is a type of life insurance that is specifically designed to cover the costs associated with final expenses, such as a funeral or memorial service, embalming and a casket, or cremation. It can also be used to cover other debts or expenses left behind when someone dies, such as medical bills, credit card debt, or legal fees.

Final expense or burial insurance is one of the most thoughtful gifts you can give your loved ones, as it can help relieve any costs they face due to your passing. However, there are no restrictions on how the payout can be used, so your beneficiaries can choose to use it for any purpose they wish.

What Makes Final Expense Life Insurance Different?

Final expense life insurance is different from other life insurance in several ways. Some of the main differences are:

• It has a smaller benefit amount, usually between $5,000 and $20,000, while other life insurance policies can have much higher benefit amounts, depending on your needs and goals.
• It’s designed to cover your funeral and end-of-life costs, such as medical bills, legal fees, or debts, while other life insurance policies are designed to provide your loved ones with long-term financial security, such as income replacement, mortgage protection, or estate planning.
• It is typically easier to qualify for than other life policies, as it often does not require a medical exam and has a simplified application process. In contrast, other life insurance policies may have stricter underwriting criteria and require a medical exam and a detailed health history.
• Final expense life insurance is a type of whole life insurance, which means it has a fixed premium, a guaranteed death benefit, and a cash value component, while other life insurance policies can be either whole life or term life, which means they have a fixed or variable premium, a guaranteed or adjustable death benefit, and may or may not have a cash value component.

What are the Benefits of Final Expense Life Insurance?

Some of the benefits of final expense or burial insurance are:

• Does not require a medical exam and has a simplified application process, making it easy and quick to qualify for.
• A fixed premium that never increases and a guaranteed death benefit that never decreases, giving you peace of mind and stability.
• It builds cash value over time, which you can borrow from if you need to.
• Provides your beneficiaries with a tax-free payout that they can use for any purpose they choose, not just funeral-related expenses.
• Peace-of-mind. It helps you plan your final arrangements and relieve your loved ones from the financial burden of your end-of-life costs, such as funeral expenses, medical bills, credit card debt, or legal fees.

Eligibility for Final Expense Life Insurance

Final expense life insurance is often easier to qualify for than other types of life insurance, making it an accessible option for seniors.

The eligibility for final expense life insurance in the US may vary depending on the policy and the insurer, but some general criteria are:

• You must be between the ages of 50 and 85, although some policies may have a lower or higher minimum or maximum age limit.
• You must be a US citizen or a legal resident.
• You must answer a health questionnaire, which may include questions about your medical history, current health conditions, medications, lifestyle, and tobacco use.
• You must not have any terminal or chronic illnesses, such as cancer, heart disease, diabetes, or kidney failure, that would make you ineligible for immediate coverage or subject to higher premiums.
• If you have serious health conditions as listed above, a Guaranteed Issue plan is available.

How to Determine Eligibility

The process to determine eligibility for final expense life insurance may vary depending on the insurer, but some common steps are:

• Get a free quote online or over the phone based on your age, gender, location, and desired coverage amount.
• Choose a policy that suits your budget and needs, and review the terms and conditions.
• Fill out an application form, which may include a health questionnaire, your personal information, your beneficiary information, and your payment information.
• Have a phone interview with a representative from the insurance company, who may ask you some additional questions about your health and lifestyle¹⁴.
• Wait for the underwriting process, which may take a few days or weeks, depending on the insurer and the type of policy you applied for.
• Accept your offer and receive your policy, which may be mailed or emailed to you, and start paying your premiums.

Cost of Final Expense Life Insurance

One of the key considerations when choosing final expense life insurance is the cost. The cost of final expense life insurance will vary depending on several factors, including your age, health, and the amount of coverage you want.

Factors That Affect the Cost of Final Expense Life Insurance

The cost of burial life insurance may vary depending on the policy and the insurer, but some common factors that affect the cost are:

• Age: Older applicants will have higher premiums than younger applicants because they have a higher risk of death.
• Health: Applicants with pre-existing conditions or poor health may pay more for coverage or be denied coverage altogether because they have a higher risk of death.
• Lifestyle: Applicants who smoke, drink, or engage in high-risk activities may pay more for coverage or be denied coverage altogether because they have a higher risk of death.
• Gender: Women may pay less than men for coverage because they have a longer life expectancy.
• Amount of coverage: The higher the death benefit, the higher the premium because the insurer has to pay more when the policyholder dies.
• Policy terms and conditions: The type of policy, the length of the policy, the payment frequency, and the benefits offered may affect the cost of coverage because they determine how much the insurer has to pay and when.
• Place of residence: The cost of living, the state regulations, and the competition among insurers may affect the cost of coverage because they influence the demand and supply of insurance products.

Comparing the Cost of Final Expense Coverage

It’s important to compare the cost of coverage from different life insurance companies because they may offer different rates, benefits, and terms for the same amount of coverage. Comparing burial insurance quotes from different companies can help a person find the best deal for their budget and needs.

Lowering the Cost of Final Expense Life Insurance

There are some ways to lower the cost of burial insurance, such as:

• Lose weight: Being overweight or obese may increase your risk of death and your premiums, so losing weight may help you qualify for lower rates or better coverage.
• Stop smoking: Smoking is a major risk factor for many diseases and may increase your premiums by up to 50%, so quitting smoking may help you save money and improve your health.
• Shop around: Different insurers may offer different rates, benefits, and terms for the same amount of coverage, so comparing quotes from multiple companies may help you find the best deal for your budget and needs.
• Pay via bank draft: Some insurers may charge you extra fees for paying your premiums by credit card or check, so paying via bank draft may help you avoid those fees and lower your cost.
• Pay annually: Some insurers may offer you a discount or a free month of coverage if you pay your premiums annually instead of monthly, so paying annually may help you save money and reduce the hassle of monthly payments.
• Choose cremation: Cremation is usually cheaper than burial, so choosing cremation may help you lower your final expenses and your coverage amount, which may lower your premiums.
• Choose an informal service: A formal funeral service may be expensive and involve many costs, such as flowers, transportation, and catering, so choosing an informal service or a memorial may help you lower your final expenses and your coverage amount, which may lower your premiums.

[DISCLAIMER: We are not recommending any of these options. They are presented for informational purposes.]

What Final Expenses are Covered?

A final expense life insurance policy is a type of whole life insurance policy that covers the expenses associated with the end of life, such as:

• Funeral arrangements: This may include the cost of the funeral service, the casket or urn, the flowers, the transportation, the obituary, and the cemetery plot or cremation fees.
• Medical bills: This may include the cost of any medical treatments, prescriptions, or hospice care that the policyholder received before their death.
• Legal fees: This may include the cost of any legal matters, such as probate, taxes, or debts, that the policyholder’s estate or family may have to deal with after their death.

The beneficiaries of a final expense life insurance policy can use the policy’s death benefit to pay for any of these expenses or any other expenses they may have. The policy’s death benefit is usually between $5,000 and $35,000, depending on the policy and the insurer.

What does a Funeral Cost in the U.S.?

The cost of a funeral in the US can vary depending on the type of service, the products and services chosen, and the location.

However, according to some sources, the average cost of a funeral and burial is between $7,360 and $9,420 in 2021, which includes a standard-sized casket, a burial service, a viewing, and a vault.

The average cost of a funeral and cremation is between $4,000 and $6,970 in 2021, which includes a cremation service, a viewing, and an urn.

The average cost of a composting procedure for burial is about $5,500 in 2021, which is a new and eco-friendly option that turns the body into the soil.

These costs do not include other expenses, such as flowers, obituaries, transportation, or catering, which may add to the final bill.

The National Funeral Directors Association provides additional information.

How Much Burial Life Insurance Do You Need?

The right amount of burial insurance coverage depends on your personal and financial situation, your preferences, and your budget. Here are some steps to help you decide:

• Estimate your final expenses: This includes the cost of your funeral, transportation, legal fees, and any other end-of-life costs. You can use online calculators or consult with a funeral director to get an idea of how much these expenses may be.
• Determine how much money you will leave behind: This includes any savings, investments, assets, or life insurance policies that you have. You may want to subtract any debts, taxes, or liabilities that you or your estate may owe from this amount.
• Decide if you really need burial insurance: If your final expenses are higher than the money you will leave behind, or if you don’t want to burden your family with these costs, you may need burial insurance. However, if you have enough money or other life insurance policies to cover your final expenses, you may not need burial insurance.
• Decide your budget: Burial insurance premiums vary depending on your age, health, coverage amount, and insurer. You may want to find a policy that fits your budget and offers enough coverage for your needs. You can compare quotes from different insurers online or with the help of an agent.
• Consider the funeral you want: You may want to think about the type of service, burial, or cremation you want and how much it may cost. You may also want to communicate your wishes to your family or write them down in a will or a pre-need contract. This may help you choose a coverage amount that matches your preferences and avoid any conflicts or confusion among your loved ones.
• Find out if you want other expenses covered: You may want to consider if you want your burial insurance policy to cover any other expenses, such as medical bills, legal fees, or debts, that your family may have to deal with after your death. You may want to add these expenses to your coverage amount or look for a policy that offers additional benefits or riders.
• Find an insurer and see how much they’re willing to cover: Different insurers may have different eligibility criteria, coverage limits, and premium rates for burial insurance. You may want to find an insurer that offers the coverage amount you want, accepts your health condition and charges affordable premiums. You may also want to check the insurer’s financial strength, customer service, and reputation before buying a policy.

These steps may help you decide on the right amount of burial insurance coverage for you. However, you may also want to consult with a licensed agent or a financial planner who can help you assess your needs and options more accurately and professionally.

How to Find the Best Final Expense Insurance Plan

Finding the best final expense insurance plan depends on your personal and financial situation, your preferences, and your budget. However, here are some general tips to help you:

Compare multiple options:

Different insurers may offer different prices, coverage amounts, policy types, contract terms, and benefits for final expense insurance. You may want to compare quotes from various insurers online or with the help of an agent to find the best deal for you.

Choose a permanent policy:

Final expense insurance is meant to cover your end-of-life costs, so you may want to choose a policy that lasts for your entire life and does not expire or increase in price. Permanent policies, such as whole life or universal life, may offer this feature, while term policies may not.

Look for fixed premiums:

You may want to look for a policy that has fixed premiums that do not change over time or depend on your health condition. This way, you can avoid any surprises or affordability issues in the future.

Consider your health status:

Your health status may affect your eligibility and premium rates for final expense insurance. Some insurers may require a medical exam or ask health questions, while others may not. Some insurers may also offer guaranteed issue policies that accept anyone regardless of their health condition, but they may charge higher premiums or have lower coverage amounts. You may want to find an insurer that views your health favorably and offers you the best rates.

Think about the coverage amount you need:

The coverage amount you need for final expense insurance depends on how much you expect your final expenses to be and how much money you will leave behind. You may want to estimate these costs and choose a policy that matches them. Final expense insurance policies typically have lower coverage amounts than other life insurance policies, ranging from $2,000 to $50,000.

Check the insurer’s reputation and financial strength:

You may want to check the insurer’s reputation and financial strength before buying a policy from them. You can look at their ratings from independent agencies such as A.M. Best or Standard & Poor’s, their customer reviews and complaints from sources such as Better Business Bureau or Consumer Affairs, and their history of claims handling and customer service.

These tips may help you find the best final expense insurance plan for you. However, you may also want to consult with a licensed insurance broker who can answer all your questions, assess your insurance needs, offer recommendations for the best life insurance solutions, and determine the best type of final expense insurance for you.

Final Expense Insurance FAQs

In this section, we’ll answer some of the most frequently asked questions about final expense life insurance.

What is the difference between life insurance and burial insurance?

Life insurance and burial insurance are both types of insurance that pay a death benefit to your beneficiaries when you die. However, there are some differences between them:

• Purpose: Life insurance is designed to provide financial security to your loved ones after your death, such as paying off debts, replacing income, or covering education costs. Burial insurance, also known as a final expense or funeral insurance, is designed to cover your end-of-life costs, such as a funeral, burial, cremation, or other debts.
• Coverage amount: Life insurance policies typically have higher coverage amounts than burial insurance policies, ranging from tens of thousands to millions of dollars. Burial insurance policies typically have lower coverage amounts, ranging from $2,000 to $50,000²³.
• Policy type: Life insurance policies can be either term or permanent. Term policies last for a specific period of time, such as 10, 20, or 30 years, and expire if you outlive them. Permanent policies last for your entire life and do not expire as long as you pay your premiums. Burial insurance policies are usually permanent policies, such as whole life or universal life, that last for your entire life and do not expire.
• Underwriting: Life insurance policies usually require a medical exam or health questions to determine your eligibility and premium rates. Your age, health condition, lifestyle, and family history may affect your insurability and cost. Burial insurance policies usually do not require a medical exam or health questions or have minimal underwriting. They are easier to qualify for and have faster approval times. However, they may have higher premiums or lower benefits than life insurance policies.
• Beneficiaries: Life insurance policies allow you to choose any person or entity as your beneficiary, such as your spouse, children, charity, or trust. You can also change your beneficiary at any time. Burial insurance policies may have more restrictions on who can be your beneficiaries, such as your funeral home, estate, or family member. You may also have less flexibility to change your beneficiary once you choose one.

These are some of the differences between life insurance and burial insurance. You may want to consider your needs, preferences, and budget when choosing the best type of insurance for you.

Can I buy burial insurance for my parents?

Yes, you can buy burial life insurance for your parents as long as you have their consent and insurable interest. Insurable interest means that you would suffer a financial loss or hardship if your parents passed away.

Here are some steps to follow if you want to buy a final expense policy for your parents:

• Talk to your parents about their wishes. Be open with your parents about why you want to buy insurance for them, how much coverage they need, and what type of policy they prefer. You may also want to discuss their end-of-life plans, such as whether they want a funeral, cremation, or donation.
• Get your parents’ consent to buy the policy. To buy burial life insurance for your parents, they need to provide their personal information, sign the application form, and answer any health questions if required. Some policies may not require any health questions or exams, such as guaranteed issue whole life.
• Select a plan that suits your budget and needs. Compare different burial life insurance policies from different insurers based on factors such as coverage amount, premium rate, policy type, underwriting process, the waiting period (if any), and customer service. You may want to look for a policy that has fixed premiums, lifetime coverage, no waiting period (if possible), and a reputable insurer.
• Choose yourself as the owner, payer, and beneficiary of the policy. Since you are paying for the premiums of the policy, you can be the owner, who has control over the policy terms and beneficiary designation; the payer, who is responsible for making payments and keeping the policy active; and the beneficiary, who will receive the death benefit when your parents die.
• Review the policy details and finalize the purchase. Make sure you understand all the terms and conditions of the policy before you sign it. Check for any exclusions or limitations that may affect your claim. Pay attention to details such as the grace period (how long you have to pay a missed premium before the policy lapses), contestability period (how long the insurer can investigate and deny a claim based on misrepresentation or fraud), and free look period (how long you have to cancel the policy without penalty after receiving it).

These are some steps to follow if you want to buy burial life insurance for your parents. Buying burial insurance for your parents can be a smart way to protect yourself from financial stress and honor their wishes when they pass away.

Can I get burial insurance if I have cancer?

Yes, you can get burial insurance if you have cancer, but it may depend on your type, stage, and treatment of cancer, as well as the insurer and policy you choose. Here are some factors to consider when getting burial insurance if you have cancer:

• Underwriting: Burial insurance policies may have different levels of underwriting, which is the process of evaluating your health and risk profile. Some policies may require a medical exam or health questions, while others may not. Generally, policies that have more underwriting offer lower premiums and immediate coverage, while policies that have less underwriting offer higher premiums and delayed coverage.
• Look-back period: Burial insurance policies may have a look-back period, which is the time frame that the insurer will review your medical history for any cancer diagnoses or treatments. Typically, most insurers have a 24-month look-back period, meaning that they will deny coverage or charge higher rates if you had cancer within the last two years. However, some insurers may have shorter or longer look-back periods depending on your type of cancer.
• Waiting period: Burial insurance policies may have a waiting period, which is the time frame that you must wait before your full death benefit becomes payable. If you die during the waiting period, your beneficiaries may only receive a partial or no payout, depending on your policy terms. Usually, waiting periods range from two to four years for burial insurance policies. However, some insurers may waive or reduce the waiting period if you meet certain criteria, such as being in remission for a certain period of time.
• Exclusions: Burial insurance policies may have exclusions, which are conditions or causes of death that are not covered by the policy. Some policies may exclude any claims related to cancer recurrence, meaning that if you die from recurrent cancer, your beneficiaries will not receive the death benefit. Other policies may exclude any claims related to pre-existing conditions, meaning that if you die from any condition that existed before you bought the policy, your beneficiaries will not receive the death benefit.

These are some factors to consider when getting burial insurance if you have cancer. You may want to compare different insurers and policies based on these factors and find one that suits your needs and budget. You may also want to consult with an independent agent who can help you find the best options for your situation.

Will Social Security, Medicare, or Medicaid pay for my burial?

Social Security, Medicare, and Medicaid are federal programs that provide different types of benefits and services to eligible individuals. Here is how they relate to burial costs:

• Social Security: Social Security pays a one-time death benefit of $255 to a surviving spouse or child of a deceased worker who paid into the system. This benefit can be used for any purpose, including burial costs12. However, this amount may not be enough to cover the average funeral cost of $7,000-$10,000.
• Medicare: Medicare is a health insurance program that covers medical expenses for people who are 65 or older, disabled, or have certain chronic conditions. Medicare does not cover funeral expenses or the cost of cremation or burial.
• Medicaid: Medicaid is a health care program that covers medical expenses for people who have low incomes and limited resources. Medicaid also does not cover funeral expenses or the cost of cremation or burial. However, Medicaid has rules that allow recipients to set aside money for their own funeral and burial expenses in a separate account or policy without affecting their eligibility for benefits.

These are how Social Security, Medicare, and Medicaid relate to burial costs. If you are enrolled in any of these programs and want to plan ahead for your funeral costs, you may want to consider other options, such as burial insurance, prepaid funeral plans, or personal savings.

DISCLAIMER: This is not financial advice. You may also want to consult with a financial planner, an estate attorney, or a funeral director who can help you with your end-of-life arrangements.

Is funeral insurance payout taxable?

• Funeral insurance (final expense insurance) is a type of life insurance that pays a death benefit to cover your funeral and burial costs. The taxability of funeral insurance payout depends on several factors, such as:
• Who is the beneficiary of the policy? Generally, if you name a person as your beneficiary, they will receive the death benefit tax-free. However, if you name your estate as your beneficiary, the death benefit may be subject to estate tax or income tax.
• How much is the death benefit? If the death benefit is greater than the amount stated in your policy, or if your employer owns a life insurance policy on you, you may owe taxes on the excess amount.
• When is the death benefit paid? If you choose to delay the payment of the death benefit and earn interest on it, you may have to pay taxes on the interest income.

These are some factors that affect the taxability of funeral insurance payout. If you have funeral insurance or plan to buy one, you should consult with a tax professional who can advise you on how to minimize your tax liability and maximize your benefits. You should also review your policy regularly and update your beneficiary information as needed.

DISCLAIMER: This is not financial advice and is for informational purposes only.

What is pre-need burial insurance?

Pre-need burial insurance is a type of life insurance that allows you to plan and pay for your funeral and burial expenses in advance. It is also known as pre-need funeral insurance or prearranged funeral insurance. Here is how it works:

• You choose a funeral home and a funeral director that offer pre-need burial insurance services.
• You work with them to select the details of your funeral service, such as the casket, flowers, transportation, etc.
• You sign a contract with the funeral home that specifies the cost and scope of your funeral service.
• You buy a pre-need burial insurance policy from an insurance company that partners with the funeral home. The policy amount matches the cost of your funeral service.
• You pay premiums to the insurance company until your policy is fully paid or until you pass away.
• When you pass away, the insurance company pays the death benefit directly to the funeral home, which then provides your funeral service according to your contract.

These are how pre-need burial insurance works. Some benefits of pre-need burial insurance are:

• It locks in today’s prices for your future funeral service, which can save you money from inflation and rising costs.
• It relieves your family from making difficult decisions and paying for your funeral expenses when you pass away.
• It ensures that your final wishes are respected and honored by the funeral home.

Some drawbacks of pre-need burial insurance are:

• It may not cover all of your final expenses, such as medical bills, taxes, or debts.
• It may not be transferable or refundable if you change your mind or move to another location.
• It may have exclusions or limitations based on your health condition, age, or cause of death.

These are some benefits and drawbacks of pre-need burial insurance. If you are interested in buying a pre-need burial insurance policy, you should compare different funeral homes and insurance companies that offer this service. You should also read the contract and policy carefully and understand the terms and conditions before signing anything. You should also review your plan periodically and update it if necessary.

Conclusion

Final expense life insurance is an important coverage to consider for anyone who wants to provide for their end-of-life expenses. With the right policy, you can ensure that your loved ones are taken care of and that your funeral expenses and other end-of-life expenses are covered.

In this guide, we’ve provided an overview of final expense life insurance, including what it is, how it works, and what to look for when choosing a policy. We’ve also answered some of the most frequently asked questions about final expense life insurance.

If you’re considering final expense life insurance, we hope that this guide has provided you with the information you need to make an informed decision. Be sure to work with an insurance agent who specializes in final expense insurance to find the right policy for your needs.

Who has the Best Burial insurance?

Check out some of the companies we reviewed here: Burial Insurance Companies