Final Expense
Life insurance is thought to be a way to prepare for the worst, preventing tragedy from leading to financial distress. But it also serves the purpose of planning for the inevitable. You also want to make sure your loved ones are taken care of when you pass away. Therefore, life insurance policies release a death benefit – funds disbursed to your loved ones to help them cover funeral and personal expenses. Final expense insurance is designed for this purpose, as it helps you prepare for what you will leave behind going forward.
How is Final Expense Different from Other Types of Life Insurance
Final expense insurance is a form of whole life insurance policy. Once you get it, it’s yours for life. This is different from a term life insurance policy, which is only effective for a finite period. It’s easier to qualify for than most life insurance policies, as factors such as your age and current health status do not work against you.
The policy size is smaller compared to other types of plans. A term life insurance policy, for example, can have a $250,000 death benefit. However, that’s only if you pass away within a certain period, which for many policies is 20-30 years. It’s possible to outlive your policy and not be able to renew it due to age or health concerns.
On the other hand, final expense has a death benefit that can be as low as $2,000 up to $50,000. The premiums are lower the younger you are. Women also have lower premiums than men because of women having a longer life expectancy. If a 50-year-old woman purchased a policy with a $10,000 death benefit, her premiums will be roughly $25 per month. If a man of the same age purchased that policy, he can expect to pay $50 per month. If the same individuals got this policy at the age of 80, the woman’s premium would be $93 per month and the man’s would be $126 per month.
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Why Final Expense
Final expense insurance is usually purchased with the intent to cover funeral costs. This is part of why the death benefit is lower compared to other types of life insurance.
The average funeral can cost anywhere between $7,000 and $12,000. This is not a flat rate, but rather a combination of individual costs. How much your funeral costs depend on arrangements:
- Burial or cremation
- Type of casket
- Urn
- Burial plot
- Grave marker
Of course, you can opt for less expensive alternatives such as a direct burial or a direct cremation. Direct burials are typically from $1,000 and $4,000, and direct cremations are generally between $1,800 to $3,500.
The less expensive your funeral is, the more your loved ones can use for personal debts. These funds are untaxed, so your loved ones will get the exact amount that you signed up for.
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