A family member’s or friend’s death is a trying time for everyone, both emotionally and financially. After the passing of a loved one, final expenses aren’t the first thing people think about; however, funerals, burials, and cremations are expensive. For some individuals, additional expenses in the final years of life can add up to thousands or tens of thousands of dollars. Thankfully, final expense life insurance can take care of these concerns, giving family members and friends the space to grieve without financial stress.
What is burial insurance?
Also called burial insurance, final expense life insurance is a type of whole life insurance policy that covers end-of-life expenses. Whole life insurance — as opposed to term life insurance — lasts for the policyholder’s entire life or until the maturity date, as long as all the premiums are paid. This means that whether the policyholder dies or lives to the policy’s maturity date, a lump sum will be paid out.
It’s important to note that final expense insurance has a smaller death benefit than term life or other whole life policies because it is meant to be only enough to cover expenses at the end of the policyholder’s life. It is not meant to provide financial stability to dependents. So, final expense life insurance is a good option for someone whose dependents are financially independent. These individuals may not personally need the death benefit for financial support, but they would benefit from not having to pay for funeral or end-of-life expenses.
Unique Features of Final Expense Life Insurance
Final expense life insurance is a distinctive form of life insurance that makes getting life insurance easy and affordable for many, especially seniors or people with pre-existing health conditions. Some qualities that make burial insurance unique are:
- No health restrictions
- No required medical exams
- Smaller, fixed policy premiums
- Guaranteed acceptance options
- Policy never expires, as long as premiums are paid
- Death benefit is not taxable
What is covered by final expense insurance?
Unless a trust or funeral home controls the death benefit, beneficiaries have complete discretion over how they will use the payout.
Funeral/Burial Expenses
Ideally, beneficiaries would use the death benefit from final expense life insurance to pay for a funeral or burial, the cost of which varies by state. This is the primary reason most policyholders purchase burial insurance or final expense insurance. However, death benefits can cover other expenses as well.
Cremation
Some policyholders prefer cremation and intend for their beneficiaries to use the life insurance payout to pay for it. Depending on the size of the death benefit, which typically ranges from $2,500 to $30,000, the cost of cremation may only consume a small portion of the funds. Therefore, beneficiaries may use the remaining amount in any way they choose.
End-of-Life Medical Bills
Beneficiaries should use money remaining from burial or cremation costs to cover end-of-life costs – medical or legal. These medical costs include in-home care, hospital or hospice stays, or other out-of-pocket medical expenses. Similarly, beneficiaries can pay estate settlement costs, such as attorney fees, with the death benefit.
Small Outstanding Debts
Typically, money or property from the deceased’s estate is used to cover debts. However, small death benefits from final expense insurance can only cover small debts, such as an outstanding credit card bill. Mortgage debts, for instance, are usually too large for final expense payouts to cover.
How do I get final expense life insurance?
Most people opt for final expense life insurance due to age or pre-existing health conditions. They get these policies because they want to give their family peace of mind, and this is the best way to do it. However, not all final expense policies are made equal and your current age or health status could have a massive impact on premiums and death benefits. Shopping around for the best final expense insurance is vital to finding a policy that fits your life.
If you’d like help finding the right policy for you, contact a TDK broker today. One of our life insurance advisors can help you find and choose the best policy that makes the most sense based on your life, your needs, and your beneficiaries’ needs.
