Understanding Final Expense Life Insurance
Why it matters
- Final expense insurance can be an affordable way to purchase whole life insurance.
- This type of life insurance is usually easy to qualify for and has a guaranteed death benefit, as long as the premiums are paid.1
- The beneficiary of a final expense policy can use the money on more than just end-of-life expenses, as long as the premiums were paid.1
It's only natural to want to help our loved ones whenever we can. Though when it comes to what happens shortly after our passing — the arrangements friends and family will have to make for our burial or cremation — most people would rather not go there. But unless you’ve figured out something the rest of us haven’t, we can’t ignore these financial decisions.
In 2021, the median cost of a funeral with a viewing and burial was $7,848.2 Even if your estate has the funds to pay for the arrangements you’d like, that money likely won’t get to your beneficiaries for several months.1 That’s where final expense life insurance can step in. It’s an easily accessible way to make sure you and your family are covered for the expenses that arise after your passing.
What is final expense life insurance?
Essentially, it’s a type of whole life insurance with smaller face amounts that run between $1,000 and $25,000, though a few insurers can offer up to $50,000 in coverage.3 You might even hear these policies referred to as “burial insurance” or “funeral insurance,” since the idea is to use the death benefit to pay for end-of-life arrangements.1 In reality, there aren’t any restrictions on how the death benefit can be spent.1
This type of life insurance tends to be easier to qualify for than others.1 In most cases, final expense life insurance policies don’t require medical exams, so they can be a good option for someone with a pre-existing condition who can’t qualify for other types of life insurance.3 And since these are smaller face amounts, the monthly premiums are also less expensive relative to policies with larger death benefits.1
What does final expense insurance cover?
While this type of insurance is designed to cover the costs associated with a person’s death — caskets, cremations, receptions, burial costs, etc. — the death benefit can truly be spent on anything. There aren’t any rules mandating what the money must cover, so the beneficiary is free to use it for mortgage payments, taxes, medical bills, savings, vacation expenses, or anything else.1
What are the benefits of final expense insurance?
Final expense life insurance is easy to qualify for, ensures your loved ones have the money they need to cover the costs of your passing, and features relatively low premiums that won’t increase.1
No medical exam
In most cases, there’s no medical exam required for a final expense insurance policy, nor will the insurer need to go through your medical records.3 That means it’s usually quick and easy to be approved for these policies. At most, you may need to fill out a health questionnaire, depending on the provider and type of policy.3
Guaranteed death benefit
Final expense life insurance is a type of whole life insurance, so as long as the premiums are paid on the policy, the death benefit is guaranteed.4 And its value can’t decrease, unless the policy’s cash value has been borrowed against.4 Your beneficiary also won’t have to pay taxes on the death benefit once they receive it.2
Low premiums that won’t increase
The premiums for these policies stay the same throughout the life of the policy.2 And because its death benefit is relatively low relative to other types of life insurance, the monthly premiums are low, as well.2
To wrap up, speak with your financial professional if you’re concerned about how your friends and family will pay for things after your passing. With a final expense life insurance policy, you can be assured they’ll have what they need. And they’ll likely appreciate the thoughtful way you planned ahead on their behalf.
Things to consider
- Final expense life insurance can be a good choice if you’re worried about costs after your passing.
- Final expense policies don’t require medical exams in most cases, so think twice if you assumed life insurance wasn’t an option for you.3
- Speak with your financial professional to understand how final expense insurance could benefit you and your loved ones.
1 “What is Final Expense Insurance?” Investopedia.com, August 2020
2 “Statistics,” NFDA.org, April 2022
3 “How to Use Burial Insurance to Pay for Final Expenses,” Nerdwallet.com, July 2022
4 “Whole Life Insurance Definition,” Nerdwallet.com, August 2022
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.