Final Expense Insurance : What Is It? Is It Right For You? Pros And Cons
A Final Expense Insurance is a type of insurance that offers protection for your family from taking the burden of final expenses such as medical expenses, burial, and even funeral. This type of insurance offers you coverage for your whole life and also comes with a small death benefit. These insurance are also, in some cases, known as burial insurance. These insurance policies offer a face value of $2000 to $35000.
In this article, you will learn some of the essential details of final expense insurance, as well as how final expense insurance works. Next up, we will also discuss the various benefits that you will get with the help of this insurance policy. Finally, we will help you decide whether you really need final expense insurance or not. Hence, to learn more, read on through to the end of the article.
What Is Final Expense Insurance?
There is one thing that surely everyone will face at the end of their life – Death. Although talking about death is a hard topic for many, still, hardly anyone can deny that it can come at any time. Hardly anyone considers that the costs associated with dying and even the funeral and burial are not cheap at all. This is where the final expense insurance comes into play, as it offers death benefits.
According to CNN Underscored,
“Final expense insurance is life insurance that’s designed to cover the costs of your final disposition as well as any funeral or celebratory services that take place. These policies can also be referred to as burial insurance or funeral insurance, and are typically offered in lower amounts than traditional life insurance policies.”
As per eligibility factors, everyone can have final expense insurance, and the buyer does not need a medical exam to buy a policy. Furthermore, monthly premiums for such insurance are also quite affordable since the coverage amounts are as low as $2000 to $35000.
In this insurance type, your beneficiaries will get a cash payout with which they will cover your final expenses. Depending on the issuer of the insurance, the policy will earn dividends as well, and you will need to pay a fixed premium for the insurance. Furthermore, a buyer can get this insurance coverage until the age of eighty.
How Does A Final Expense Insurance Work?
According to Investopedia.com,
“Final expense insurance is a type of whole life insurance. Once you have your policy, the premiums cannot increase, and the death benefit cannot decrease. Unlike a term policy, a whole life policy does not expire when you reach a certain age. A whole life policy also accumulates cash value that you can borrow against during your lifetime.”
Here, you have to understand that if you have any unpaid loans when you die, the amount of money that your beneficiaries will receive will be lowered.
However, just because you apply for final expense insurance, it does not mean that you will get it. Although there is no medical exam, you will still need to answer many health questions. Furthermore, the premiums that you will pay depend on your age, health, and gender, and it also depends on the law of the state where you reside.
The older you are and the less healthy your condition is, the better the chance for you to get accepted for final expense insurance and the higher the rate that you will get. As per various data, it has been found that men have to pay higher rates than women in final expense insurance due to their shorter life expectancy. The rate is even higher if you use tobacco.
What Are The Advantages Of Final Expense Insurance?
There are plenty of advantages associated with final expense insurance. Some of them are discussed below:
- It will relieve the worries of your family members as it provides them with money which they can pay for the expenses related to your death.
- If you cannot get any other insurance due to your age or health, a final expense insurance will allow you to ease some burdens of your loved ones.
- Final expense insurance policies are affordable and offer guaranteed coverage.
- You can borrow from your policy and use the money as collateral during your lifetime since these policies build a cash value over time.
- The premium that you never pay changes, and hence it helps you to budget better.
Do You Really Need A Final Expense Insurance?
CNN Underscored puts it rightly –
“Final expense life insurance isn’t right for everyone, but seniors who want to live the rest of their days knowing their final expenses will be covered and that their loved ones won’t have to struggle to pay for funeral expenses while they grieve should explore if final expense life insurance is appropriate for them.”
You need to understand here that if you have a good amount of savings and investments and you also possess regular life insurance, you will not need final expense insurance. However, if the costs of funeral, burial/cremation are rising, you might want to consider final expense insurance. With this, you can guarantee that your family will be able to pay the bills when you pass away.
If you cannot afford to buy a regular life insurance policy, then final expense insurance is a good option for you. Nevertheless, a final settlement can take even months, depending upon the state where you are in. Hence, your close ones can be in a financial bind for a few times after your passing away.
Wrapping Up
You can see from here that there is actually no difference between final expense insurance and a life insurance policy. The only big difference is that insurance companies sell final expense insurance policies as affordable options.
The biggest part is that there is a death benefit associated with the insurance, and it covers the expenses of the funeral and burial or cremation. What do you think makes final expense insurance better than simple life insurance? Share your answer with us in the comments section below.
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