Final expense insurance

Final expense insurance is a straightforward option designed to help cover end-of-life costs, such as funeral expenses, medical bills and outstanding debts. Typically available to people aged 50 to 80, this type of policy doesn’t require a medical exam, making it accessible for those who might have difficulty qualifying for traditional life insurance. While final expense insurance offers a simple solution for covering end-of-life costs, it’s important to understand its details and limitations. Bankrate’s insurance editorial team will help you explore how this life insurance product works and whether it’s the right choice for you or a loved one.

What is final expense life insurance?

Final expense life insurance, sometimes referred to as guaranteed issue, guaranteed acceptance, funeral or burial insurance, is a type of whole life insurance designed to cover end-of-life expenses like funeral costs, medical bills and outstanding debts. It’s typically available for people between the ages of 50 and 80, making it a popular choice for older adults who want to ensure their final expenses are covered without placing a financial burden on their loved ones.

There are generally two main types of final expense insurance:

• Guaranteed issue final expense insurance: This type of policy doesn’t require a medical exam or any health questions, making it ideal for individuals with serious health issues. However, guaranteed issue policies usually come with a graded death benefit period. For example, with Transamerica’s Graded FE Express Solution, if the policyholder passes away from non-accidental causes within the first two years, the death benefit is limited to 110 percent of the premiums paid instead of the full payout. After this two-year period, the full face value is available, regardless of the cause of death. Coverage for guaranteed issue policies is generally capped at $25,000.
• Simplified issue final expense insurance: Final expense policies that offer slightly higher coverage amounts may feature simplified issue underwriting processes, which do require answering a few health questions but do not involve a medical exam. Additionally, these policies often don’t have a graded death benefit, meaning full coverage typically kicks in immediately upon approval. For instance, Transamerica’s FE Express Solution provides full death benefits immediately for qualifying applicants. Simplified issue policies may offer higher coverage amounts, with some up to $100,000, as seen with Fidelity Life’s RAPIDecision Final Expense, which provides coverage options ranging from $5,000 to $40,000.

Final expense insurance is known for its accessibility and ease of qualification, providing peace of mind that loved ones won’t be burdened with financial stress after death. While premiums are often higher than those for traditional life insurance with the same amount of coverage due to the simplified approval process, the application is quick, and many policies are approved in just days. 

Additionally, most final expense policies come with fixed premiums, though it’s important to review individual policy terms, as rates are not always guaranteed across all plans.

What are the steps involved to get a final expense life insurance policy?

Getting a final expense life insurance policy is typically a simple process, especially since most policies don’t require a medical exam, and many don’t even ask health questions. Here’s a step-by-step guide to securing your policy:

1. Assess your needs: Begin by considering the expenses that may arise after your death, such as funeral costs, outstanding medical bills or other debts. Knowing how much coverage you’ll need will help guide your decision.
2. Compare policies: Shop around and compare different final expense policies from various insurers. Look at the coverage amounts, premiums and any added benefits, as well as the insurer’s reputation. Some companies, like Mutual of Omaha, advertise that you can apply in as little as five minutes and receive instant coverage.
3. Apply for coverage: Depending on the policy, you may need to answer a few health questions, though some policies won’t require any. For example, guaranteed issue policies offer coverage without any medical questions.
4. Instant or quick approval: In many cases, approval is instant, and you could be offered a policy on the spot. Once approved, your coverage can start immediately, ensuring your loved ones are protected as soon as possible.
5. Pay your premiums: After your policy is approved, you’ll start paying premiums to keep it active. Be sure to stay current on your payments to avoid a lapse in coverage.

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What are some final expenses?

End-of-life expenses can be costly. Often, family members are unaware that funerals can cost tens of thousands of dollars. A few costs that people may forget to consider include:

• Funeral home expenses: Funeral homes — which can organize everything such as embalming, casket, liner, limo, hearse, visitation and more — typically charge thousands of dollars for their services. The final cost will depend on what options a family chooses, but the median funeral cost is $8,300, according to the most recent data from National Funeral Directors Association.
• Embalming: Embalming typically costs an average of $845. You can avoid this charge if you wish to cremate your loved one or bury them immediately.
• Reception costs following the memorial: Your preferences dictate the cost of the funeral reception. Some families spend a few hundred dollars on food at home, while others rent out event spaces for thousands of dollars.
• Casket: Perhaps the largest end-of-life expense, caskets typically cost between $2,000 and $10,000, while burial vaults cost an average of $1,695.

Funeral costs add up quickly. Final expense policies allow your loved ones to focus on grieving rather than worrying about funeral bills.

Does final expense insurance cover outstanding debts?

While final expense insurance is primarily designed to cover funeral and burial costs, it’s important to note that the beneficiaries can use the death benefit however they see fit. This means that if there are outstanding debts, such as credit card debt, a car loan or a mortgage, the death benefit could be used to settle these liabilities. However, the relatively low death benefits associated with final expense policies might not be sufficient to cover substantial debts. If you have significant financial obligations, you may want to consider a life insurance policy with a higher death benefit.

How much does a final expense policy cost?

If you’re considering purchasing a final expense policy, you may be wondering how much your premiums will be. Generally, premiums for final expense policies are affordable because the death benefit is often low. Final expense premiums usually come in at under $100 a month with the typical coverage amount being $25,000. However, it’s important to understand that individual quotes can vary significantly based on your specific situation.

For example, Fidelity Life offers the following quotes for a 60-year-old male in good health (quotes were for coverage ranges, not specific coverage amounts):

• RAPIDecision Final Expense: Starting at $55.04 per month for up to $10,000 in coverage.
• RAPIDecision Life: Starting at $34.41 per month for up to $50,000 in coverage.

Keep in mind that you may receive different quotes depending on your own age, gender, overall health and policy type selected.

It’s also important to note that while most final expense policies offer fixed rates, not all do. For instance, Globe Life’s final expense insurance has premiums that increase over time. This is why it’s critical to read the fine print carefully and understand the terms of your policy to avoid any surprises later on.

When comparing policies, look beyond the monthly premium and consider the long-term cost and coverage to ensure you’re getting a policy that meets your needs without unexpected price increases down the line.

Another thing to keep in mind is how long you think you will need this coverage for because if you live longer than expected, your total cost in paid premiums may outweigh the death benefit. Consider this example: According to Gerber Life Insurance’s quoting tool on their website, a 70-year-old woman may be able to qualify for a $10,000 guaranteed life policy for approximately $75 per month — or $900 per year. If she expects to live only a few years, the cost may be worth it to leave her beneficiaries some money for her end-of-life expenses. However, if she lives past age 80, her paid premiums begin to nearly equal the death benefit amount. If someone’s life expectancy is estimated to be longer than a few years, simply putting money into a savings account may be a better solution.

Does final expense insurance offer flexible payment options?

Final expense insurance policies typically offer a certain level of flexibility when it comes to premium payments. The most common payment schedules are monthly bank draft, quarterly, semi-annually and annually. These options allow you to choose a payment plan that fits your financial situation best. However, it’s important to mention that missing a payment could lead to a lapse in your coverage. Fortunately, insurers include a grace period, usually around 30 days, which allows you to make up for a missed payment without losing your coverage. Be sure to review the specific terms of your policy to understand how long your grace period is and avoid any disruptions in your coverage.

What are some alternatives to final expense insurance?

While final expense insurance can be a good option for those looking to cover end-of-life costs, there are other life insurance options that may provide more coverage for your dollar. It’s often beneficial to first explore traditional life insurance policies, such as term, whole or universal life insurance, before deciding on final expense insurance. These types of policies typically offer higher coverage amounts and may be more cost-effective if you’re in relatively good health.

• Term life insurance: Term policies provide coverage for a set period — usually 10, 20 or 30 years — and often offer larger death benefits at relatively affordable rates. If you’re able to qualify for term life insurance, you may receive significantly more coverage for your money compared to final expense insurance. The downside is that once the term expires, you would need to reapply for coverage, often at a higher rate due to age or health factors.
• Whole or universal life insurance: These types of permanent life insurance policies provide coverage for your entire life (up to a coverage age of 95 to 121) as long as premiums are paid. While typically more expensive than term or final expense insurance, these policies typically also include a cash value component that grows over time. This can be a better option if you’re looking for both lifelong protection and the ability to accumulate accessible funds during your lifetime.

Final expense insurance is generally more suited for individuals with health issues that may make them uninsurable under traditional policies. If you have significant health concerns or have been denied other life insurance coverage, final expense insurance offers an accessible option with minimal or no health requirements.

However, keep in mind that some final expense policies ask if you have a terminal illness, and coverage may be denied in such cases. Even policies that don’t ask this question often include a graded death benefit period. This means if the policyholder passes away from non-accidental causes within the first few years, the payout may only be a return of premiums plus interest rather than the full death benefit.

Additionally, some non-insurance options to consider include:

• Savings: Some individuals may prefer to set aside funds in a savings account or certificate of deposit (CD) for funeral expenses. This allows for greater control, but it’s important to ensure your heirs can access the account quickly.
• Pre-pay funeral options: You can also work directly with a funeral home to pre-pay for your funeral. This allows you to plan every detail in advance, but it comes with the risk of the funeral home going out of business or unforeseen changes in your circumstances.

Frequently asked questions

• Where can I find inexpensive final expenses insurance?

  Not all insurers offer final expense insurance, so finding inexpensive final expense insurance involves a few steps. First, you’ll want to research final expense offerings from various insurance providers and see how they compare. Also, check the carriers’ financial strength ratings. Once you’ve found a carrier you feel fits your needs, consider working with an independent insurance agent who can provide insights into different policies and help identify the most cost-effective options. It’s important to assess your specific needs and choose a policy that aligns with them.

• How long does my final expense policy last?

  Most final expense insurance policies are considered permanent, meaning they last for your entire lifetime as long as you keep up with your premium payments. However, it’s important to know that not all final expense policies are guaranteed to last forever. For example, Globe Life’s final expense policy terminates once the policyholder reaches age 90.

  When shopping for a final expense policy, be sure to check whether your policy has an age limit to avoid any surprises later on. For most policies, if no age limit is specified, your coverage should remain in force for life, again, as long as your premiums are paid on time.

• Does being a smoker matter when I buy final expense insurance?

  Whether or not being a smoker affects your final expense insurance premiums depends on the provider and the specific product. Some final expense policies ask about smoking habits as part of their application process, which could lead to higher premiums due to the associated health risks. For example, smoking, vaping or using tobacco products might place you in a higher risk category, resulting in higher rates.

  However, there are some policies, particularly guaranteed issue final expense insurance, that don’t ask about smoking or other health factors at all. In these cases, your smoking status wouldn’t affect your ability to qualify or the premiums you pay. It’s always a good idea to review the specific requirements of each policy to understand how your smoking habits may impact your coverage and costs.

• Does final expense insurance build cash value?

  Final expense insurance policies, like other whole life insurance policies, typically do build cash value over time. However, the cash value that accumulates is usually minimal and not substantial enough to borrow against. In most cases, the primary purpose of these policies is to cover end-of-life expenses rather than to serve as a source of cash.

  That said, some final expense insurance providers may offer the option to receive the accumulated cash value if you choose to cancel your policy. Keep in mind that if you do this, you’ll forfeit the death benefit, meaning your beneficiaries won’t receive a payout when you pass away. It’s always a good idea to review your policy’s specific terms to understand how the cash value component works.