Final Expense Life Insurance
Final expense life insurance coverage is sometimes known as burial coverage or burial final expense insurance. Whatever it's called, it can prevent unnecessary stress for your family. Do you know who is going to pay for your funeral? Do they know how they will afford to pay for it? As you can see from the infographic on the left, the average funeral in America costs over $7,000. This is one way to take the financial stress out of an otherwise stressful situation. Protect your family with final expense life insurance.
We find that people buy this type of insurance for many different reasons.
- To pay for funeral expenses. (This is the number one reason!)
- To pay for outstanding debts.
- To pay for final medical expenses.
- Some folks want to have the coverage so that their family won't have to come up with the money. It gives them peace of mind.
- Others know they are the ones who will have to pay for the funeral. They buy the policy for their parent, grandparent, or other relative.
- Whatever your reason, a final expense policy will give you and your loved ones much desired security.
How does it work?
- You apply for a policy and name a beneficiary. Your beneficiary should be the person who will take care of your final needs and expenses.
- Once you are approved you will receive your policy. Give the pertinent information to your beneficiary. (The insurance company, the policy number, and the company's phone number at the minimum.)
- When the time comes, many funeral homes will have your beneficiary sign an assignment form for the cost of the funeral. This allows the funeral home to be the first one paid from the proceeds of the insurance policy. It allows your funeral to proceed even before the claim has been made.
- When the claim is completed, the funeral home is paid and your beneficiary will receive the balance of the funds, if any, from the policy.
What are these final expense policies?
There are several kinds of insurance policies that can be used for final expenses. They are all permanent life insurance- either universal life or whole life. It doesn't make sense to even consider a term policy for final expenses, because you can outlive the policy. If that happens, you may find that insurance has become too costly and you can't afford it. Buying a policy for your lifetime where the premium remains the same prevents this from becoming a problem. If you're buying a policy to be used for final expenses you want it to last for your entire lifetime.
Universal Life Insurance Policies
As you can see from the infographic, universal life final expense insurance is a better buy than whole life insurance. However, it also has more requirements. An important note is that the policy face amount minimum is $ 25,000. If you want less coverage, then a universal policy is not an option for you.
Universal life insurance policies are able to be structured many different ways. For final expense coverage, we usually set them so that there is little or no cash accumulation. This helps keep the premium lower. They are structured so that the face amount of the policy and the premium never changes. This way, you know what your out of pocket will be, without surprises!
To qualify you must go through full underwriting:
- You will need a paramedical exam.
- You will give blood and urine.
- The company may order your doctor records.
A fully underwritten policy may take as long as 6-8 weeks to put in force. It often depends on how long it takes your doctor's office to send the records. The underwriter can request more information on any of the medical or lifestyle questions on your application.
If you are willing to go through the process, this will most likely be your best price option. Remember you must purchase at least $25,000 of coverage. Your underwriting rating determines the price you will pay for coverage. The better the rating, the lower the cost.
Whole Life Insurance Policies
Some facts about whole life final expense policies:
- They have face amounts of $2,000 up to 40,000.
- They are available in most states from age 25 up through age 89.
- Although they cost more than universal policies, they are much easier to get as the underwriting criteria is less strict.
- Final expense whole life policies have simplified underwriting. That means you have to be able to answer a number of health questions in the negative. That means you do not have those medical issues.
- There is no health exam required.
- In some instances you will be interviewed by the insurance company where they will ask the same questions that are on the application.
You can get final expense life insurance in place in a very short period of time, sometimes within a day of your application. This can take the worry away quickly. We find many seniors are not willing to go through complete underwriting, and prefer the final expense products specifically for this reason. Of course, if you want less than $25,000 of insurance, this is your best option.
These policies have either immediate coverage or graded benefits. Immediate coverage is just what it sounds like, you are insured on day one. If you approved for a graded policy, your face amount will phase in over two to three years.
One thing to keep in mind is that each carrier has slightly different underwriting guidelines. So based on the questions asked, you may qualify with one insurance company, but not with another. This is where an independent life insurance agent is of extra benefit . They know the carriers and can steer you to the one(s) that will accept your application.
All life insurance policies in this country have two exceptions you need to know about:
- They will not pay for death due to suicide in the first two years of the policy.
- During the first two years the insurance company has the right to investigate if the insured dies. If material fraud is found, the death benefit will be forfeited. (For example, imagine someone has cancer, but didn't admit it on their application. Then they die from the cancer in the first two years, the insurance company will investigate. If they find proof that the applicant knew about the cancer, they will not pay the claim).
Guaranteed Issue Insurance Policies
Guaranteed Issue policies are also whole life insurance. If you can't qualify for either of the above type of policies, you can purchase a guaranteed issue policy.
There are no medical requirements and all applicants are approved. You would only consider this type of policy if you can't qualify for either of the others.
- Coverage is available from age 25 through age 80.
- Ages 25 to 44 can purchase $5,000 to $10,000 of coverage.
- Ages 45 to 80 can purchase $2,500 to $25,000 of coverage.
- Guaranteed issue policies are more expensive than either universal life or whole life final expense policies.
- There is usually a two year waiting period before the policy would pay the death benefit. Before that time the premiums would be returned to the beneficiary.
Which Is Best for my Situation?
There are some companies that mail order insurance plans. Be wary. Read the small print. Some of them have premiums that increase every five years, so by the time you are in your seventies and eighties, the coverage is least affordable. Some of them have policies that end at age eighty.
It's almost impossible to find accurate quotes on the internet for this type of coverage. Most insurance calculators are for term life only. We don't suggest you try to find prices on your own.
The best idea is to talk to an independent agent. Your agent will find you the best policy or policies to fit your needs. Your agent will have access to many different companies when quoting your insurance. They will help you find the lowest cost policy where the company is likely to approve you.
Looking for $15,000 of insurance? It looks like a whole life policy will fit, but if you are willing to go for full underwriting, maybe you can get $25,000 or a bit more of coverage for the same premium. Ask your agent, as the universal policies have stricter underwriting criteria.
Tell your agent the truth! That way nobody has any surprises...like a decline or a postponement! Your agent will be able to find you the best company to apply with if they know your situation. They can give you quotes from multiple carriers and tell you why one may be better for you than another.
Find an agent that specializes in senior life insurance. They will know the carriers, the plans, the differences between carrier underwriting guides. Let them help you find the right product. There is no extra cost for using an agent. As a matter of fact, most companies will not let you apply directly.
Use your agent's experience, knowledge and expertise to get the best final expense life insurance for you!