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guide to final expense insurance

Have you thought about your funeral?

It’s a morbid thought, but it’s an important one. Funerals are unfortunately expensive and require financial planning well in advance. However, not everyone can afford to put money aside for funeral expenses – nor does everyone get a chance.

One way to protect your loved ones from the expense of funeral and burial costs is through final expense insurance.

Final expense insurance isn’t something we like to think we need. And the products don’t have a cheery mascot advertising it on television, so you may not be familiar with the terminology behind it. However, it can make one small (but expensive) part of life easier for those you leave behind.

Here’s what you need to know about funeral insurance.

At its core, it is a type of whole life insurance policy used to pay exclusively for your “final expenses.” These expenses include funeral costs, burial costs, and small final debts. You may also hear it referred to as:

  • Funeral insurance
  • Burial insurance
  • Pre-need insurance

These policies largely offer the same benefits, but there are a few substantial differences that will come up later.

What Do These Insurance Policies Include?

A final expense life insurance plan includes:

  • Permanent coverage
  • No medical exams
  • A fixed premium payment
  • Guaranteed cash value growth
  • Death benefit protection ranging from $2,000 up to $50,000

When you purchase a final expense life insurance policy, you’re buying permanent coverage. The premium payments are locked in for the life of the policy.

Because final expense coverage is a form of whole life insurance, there is a guaranteed cash value account that will grow each year. The cash value can be used to help pay for emergency expenses if needed.

The most significant benefit to a final expense policy is the death benefit it provides to the surviving family members. The death benefit is a lumpsum payment that is paid to your beneficiary to help follow your last wishes.

In other words, the money can be used to help pay for funeral costs, burial expenses, or other small remaining debts that would generally fall on the family.

Types of Final Expense Insurance Plans

Final expense insurance plans can be broken down into four different death benefit payout options.

  • Level or Immediate Benefit
  • Graded Benefit
  • Modified Benefit
  • Guaranteed Acceptance

Each of the four listed plans will provide a different benefit from each other. Qualifying for one of the four different plans will primarily be based on your overall health and responses to the health questions listed on the application.

It will also have a significant impact on when and how the death benefit will be paid out should you pass away within the first two policy years. 

Level or Immediate Benefit

The level benefit plan also referred to an immediate benefit plan is reserved for applicants who generally have an overall good history of health. It may also include applicants with minor health conditions that are controlled with medications. Those who can qualify for this plan will receive full coverage starting day one.

This means, should you pass away during the first two policy years or anytime after, 100% of the death benefit will be paid out to your listed beneficiary.  

The level/immediate plan also offers the best rates for final expense coverage.

Graded Benefit Plan

The graded benefit plan is what is commonly known as “life insurance with a 2-year wait“. The graded death benefit plan can provide life insurance coverage to applicants with health issues that would be classified as higher-risk.

In return, the life insurance company will limit the payout of the full death benefit to a percentage for the first two policy years.

For example, if death occurs within the first policy year, the payout would equal 30% of the full death benefit. If death occurred in policy year two, the death benefit would equal 70% of the total death benefit. 

After the second policy year, the coverage will pay out the same as a level benefit plan. 

The exception to this would be if death occurred due to an accident. Should this happen, most companies will pay out the full benefit regardless of the policy year. 

Modified Benefit Plan

The modified benefit plan is very similar to the graded benefit plan. Whereas the graded benefit plan will payout a percentage of the full death benefit in the first two years, the modified plan will only pay out a full refund plus 10% interest if death occurs in both policy years one and two.

Guaranteed Acceptance

Guaranteed acceptance is the fourth plan for final expense insurance. This plan is for applicants with severe health risks that do not meet the guidelines of the other three plans.

Guaranteed acceptance does not require any health questions, and you cannot be turned down for any health reasons. However, this plan has the highest premiums, and there is a strict two-year wait before the full death benefit will payout.

The death benefit in the first two policy years is equal to a full return of premiums plus interest of generally 10%.

>> RELATED: Best Guaranteed Issue Life Insurance Companies

Which Final Expense Plan Will You Qualify For?

With four different final expense plans, which one will you qualify for? For starters, there is no medical exam required to apply for final expense insurance. Qualification is primarily based around the responses to the health questions listed on the application.

Insurance companies will utilize a couple of different underwriting tools to help aid in verifying the answers to the application questions. These tools generally include a check of your MIB record and verification of any prescribed medication known as a prescription check.

To give you some insight into the different health questions you can expect to see on a final expense application, we have put together a list of the health questions for each available plan.  

Final Expense No Exam Health Questions

Answering yes to any of the following questions may qualify for a graded death benefit final expense plan.

Have you ever had, or been diagnosed with, or received or been advised to receive treatment or medication for:  

  • Parkinson’s disease or Systemic Lupus (SLE)?
  • Liver or kidney disease or condition (such as chronic hepatitis or cirrhosis, or the liver)?
  • Chronic Obstructive Pulmonary Disease (COPD), chronic bronchitis, or emphysema?

Answering yes to any of the following questions may qualify for a modified death benefit final expense plan.

#1. Within the past 2 years have you had, or been diagnosed with, or received or been advised to receive treatment or medication for:

  • Alcohol or drug abuse, or have you used illegal drugs?
  • Complications of diabetes such as diabetic coma, insulin shock, retinopathy (eye), nephropathy (kidney), or neuropathy (nerve, circulatory)?

#2. Within the past 2 years have you had, or been diagnosed with:

  • Angina (chest pain), heart attack, cardiomyopathy, or any type of heart or circulatory surgery?
  • Stroke or Transient Ischemic Attack (TIA/mini-stroke)?
  • Brain tumor or aneurysm?

#3. Within the past 3 years have you had or been diagnosed with cancer, or received or been advised to receive chemotherapy or radiation from cancer (excluding basal cell skin cancer)?

Answering yes to any of the following questions may qualify for a guaranteed acceptance final expense plan.

#1. Are you currently: a resident in a nursing home or skilled nursing facility; a patient in a hospital or psychiatric facility; receiving, or have been advised to receive, skilled nursing care, hospice care, or home healthcare; confined to a correctional facility?

#2. Do you require a wheelchair due to a chronic illness or disease, or do you require assistance (from anyone) with activities of daily living such as taking medications, bathing, dressing, eating, or toileting?

#3. Within the past 12 months, have you:

  • Used, or been advised to use, oxygen equipment to assist with breathing (excluding use for sleep apnea) or had, or been advised to have kidney dialysis? 
  • Been advised to have surgery, hospitalization or a diagnostic test (excluding tests related to the Human Immunodeficiency Virus (HIV)) which has not yet been started, completed, or for which results are not known?

#4. Have you ever received, or been advised to receive, an organ or bone marrow transplant, or had an amputation due to complications of diabetes?

#5. Have you ever been diagnosed with, or received or been advised to receive treatment or medication for:

  • Amyotrophic Lateral Sclerosis (ALS), congestive heart failure, or any terminal illness or end-stage disease?
  • Acquired Immune Deficiency Syndrome (AIDS), AIDS Related Complex (ARC), or tested positive for Human Immunodeficiency Virus (HIV)?
  • Alzheimer’s disease or dementia, or been prescribed: Aricept, Cognex, Donepezil, Exelon, Razadyne, or Namenda?

#6. Have you ever had or been diagnosed with more than one occurrence of the same or different type of cancer; or do you currently have cancer (excluding basal cell skin cancer)?

If you were able to answer no to all of the questions listed for graded, modified and guaranteed acceptance application questions, there is an excellent chance that you will qualify for a level benefit final expense insurance plan. 

How is Final Expense Insurance Different from a Pre-Need (Prepaid) Funeral?

Final expense or burial insurance differs significantly from pre-need funerals.

When you buy a pre-need or prepaid funeral plan, you buy a specific package from a funeral home (or chain of funeral homes). The benefit of the product is that there is no bill when the funeral takes place. There’s no need to worry about money at all. However, it does lock you into a specific plan at one particular home.

Final expense insurance differs because it hands you a lump sum of cash (the death benefit) that your survivors can use as they wish. For example, they can use the money to carry out your final wishes, and if there is money left over, they can use it to pay for any leftover final expenses.

A pre-need funeral works best when you want the costs out of the way and have a clear vision of the details. However, it won’t suit those for whom a funeral is a distant possibility and who have plenty of time to change their minds between today and tomorrow.

Who Buys Final Expense Insurance?

These policies typically cater to people 50 and older and become more popular as people age.

However, many people, particularly retired people, live on a limited income. Not only does it make it difficult to save, but it can limit their ability to add an insurance premium to their monthly bills.

In these cases, it is normal for an adult child (usually the named beneficiary) to make payments on the policy. Using a working adult’s account also helps you avoid missed payments, which can cause your plan to lapse.

How to Choose a Funeral Insurance Policy

Choosing a final expense policy requires you to talk to your family, look at your finances, and do your research.

The first step means researching the costs of your funeral.

Think About Your Funeral Costs

You don’t need to know all the finer details of your funeral, but you should have a good idea of the big picture. You should know what events you want to include (funeral, wake, memorial, etc.) and how you prefer to be buried. These are the two most substantial costs that come after death.

However, death – as life – comes with a long list of unexpected costs. In addition to the fees assessed by the funeral home and cemetery, there will also be the costs of:

  • Travel by loved ones to the funeral
  • Accommodation and food for guests
  • Survivors’ loss of income while planning and attending the funeral
  • Paying a probate lawyer
  • Caring for your property in the meantime (including cleaning and removal services)

These costs differ for every family, and geographic location also plays a role. Fortunately, final expense insurance cash benefits are flexible, and your survivors can use them in a way that makes the most sense.

However, even after you come up with a rough total, keep in mind that having extra cash after paying for the essentials can also help reduce your survivors’ stress while making the arrangements.

What is the Average Cost of a Funeral?

Keep in mind that the average cost of a funeral (the basic package) ranges between $7,000 and $10,000, including burial. Cremation costs slightly less at $6,000 to $7,000.

If you want to create a detailed plan, use the Federal Trade Commission’s Consumer Information calculator for a checklist.

2019 AVERAGE FUNERAL COST CHECKLIST
AVERAGE COST
BASIC SERVICES
$2000
TRANSFER OF DECEASED
$250
EMBALMING
$700
CASKET & VAULT
$3,500
MEMORIAL SERVICE
$200
HEARSE
$300
FACILITIES CHARGE
$900
GRAVESIDE SERVICES
$400
HEADSTONE
$1,500
CEMETERY PLOT
$1,000
TOTAL AVERAGE COST FOR A BURIAL IN 2019
$10,750

Evaluate Your Estate

With your estimate in hand, you need to think about whether you can afford to pay in cash.

Will there be enough money in your estate (after debts) to cover the cost of your final expenses? More importantly, will it be accessible to your survivors? When you die, your estate needs to go through one of two types of probate.

Either way, it can take weeks or months for your survivors to get money from the estate. This is a problem because service providers expect payment when they deliver – not when the estate is free.

If your estate may not cover the expenses or it is likely to be tied up, it can leave your loved ones in the lurch.

Policies typically max out at $25,000 to $50,000, which gives you a fixed figure to work with.

Talk to Your Loved Ones About the Cost

Your funeral is a joint venture, and a key part of deciding whether and how much funeral insurance you need is talking to your loved ones.

This applies both to adult children with parents whose health is rapidly declining and to parents who want to discuss their plans with their adult children.

When discussing this subject, it’s important to listen as much as you talk and make sure everyone knows their ideas and thoughts are worthy of respect.

It’s also helpful to discuss the funeral in relation to another event you both attended. Talk about experiences that you had planning or attending, and what you both found moving and appropriate.

Finally, remember to keep talking. You won’t answer all your questions or finalize plans during your first conversation. It will take several discussions to reach a point where you both feel comfortable with the preferences chosen. And re-approaching the subject later gives you both time to think.

If you’re not sure where to start, use the Funeral and Memorial Information Council’s “Have the Talk of a Lifetime” workbook to get started. It provides a helpful guide through the process as well as some prompts to initiate this emotional conversation.

If you have other concerns, talk to your estate lawyer or attorney about formalizing your wishes.

Weigh the Pros and Cons

Burial insurance isn’t right for everyone. The pros and cons differ according to your unique situation.

Some of the pros of final expense insurance include affordability, peace of mind, and the ability to assign it to a funeral home.

Because the coverage is significantly less than a typical life insurance policy, the monthly premium is lower. That means you can ensure peace of mind for your family without paying for a cash benefit that you don’t want or need.

Additionally, you can assign the insurance to a funeral home of your choice, and the funeral home will deal with the insurance company directly. That means your survivors don’t need to worry about sitting on the phone with your policy provider or cutting checks.

The same flexibility can also be a disadvantage. Your policy’s beneficiary can spend the money how they want, which means its essential to find someone who will execute your wishes. However, you can also solve this by assigning the funeral home as the beneficiary.

Get a Quote

Don’t sign the first contract you see. Shop around to find policies that work best for your needs in the short- and long-term.

Quotes are reasonably easy to find and are usually instant. All you need is the type and amount of insurance you are interested in as well as simple details about your health.

You can then use the quote to start further inquiries into policies that seem to make the most sense for you.

Best Final Expense Insurance Companies

CompaniesIssue AgesDeath Benefit TypeCoverage AmountsPolicy Features
AETNA
Ages: 65-89Level, Modified & Graded$3,000 – $35,000Will issue coverage up to age 89
AMERICAN AMICABLE
American Amicable Final Expense
Ages: 50-85Level, Graded & Modified$2,500 – $35,000Large selection of additional policy riders
AMERICO
Americo Final Expense
Ages: 50-85Level & Graded$2,000 – $30,000Lenient underwriting for many high-risk medical conditions
AIG
AIG Final Expense
Ages: 50-85Guaranteed Acceptance$5,000 – $25,000Offers a free chronic illness rider
BALTIMORE LIFE
Baltimore Life Final Expense
Ages: 50-80Level & Graded$2,500 – $25,000Excellent graded benefit plan
FORESTERS FINANCIAL
Foresters Financial Final Expense
Ages: 50-85Level, Modified & Graded$2,000 – $35,000Membership benefits and quick approval
GERBER
Gerber Final Expense
Ages: 50-80Guaranteed Acceptance$5,000 – $25,000Often #1 when it comes to price for guaranteed approval coverage
LIBERTY BANKERS LIFE
Liberty Bankers Final Expense
Ages: 18-80Level & Modified$3,000 – $30,00010% death benefit bonus after policy year 5
MUTUAL OF OMAHA
Mutual of Omaha Final Expense
Ages: 45-85Level, Modified & Graded$2,000 – $40,000Lowest rates for both level and graded plans
PROSPERITY
Prosperity Life Final Expense
Ages: 50-80Level, Modified & Graded$1,500 – $35,00015 minute approval time
ROYAL NEIGHBORS
Royal Neighbors Final Expense
Ages: 50-85Level & Graded$5,000 – $25,000Member benefits and favorable underwriting for diabetics
SENTINEL SECURITY
Sentinel Security Final Expense
Ages: 0-85Level, Modified & Graded$1,000 – $35,000Limited payment options of 10 year, 20 year or pay to age 65
TRANSAMERICA
Transamerica Final Expense
Ages: 45-85Level & Graded$1,000 – $50,000Available in all 50 states
UNITED HOME LIFE
United Home Life Final Expense
Ages: 20-80Level, Graded & Guaranteed Approval$5,000 – $50,000Several free policy riders

What is a Good Final Expense Policy? Features to Look For

The best final expense insurance policy is one that meets your needs. However, some features help better policies standout.

First, look for level premiums. A level premium means you pay the same price for the length of the term. Stay clear of any policy that has a premium that increases over time as this can become very costly at older ages. 

Level benefit policies are much better than modified benefit policies, which come with restriction periods. As previously mentioned, the restriction period denies your full benefit if you pass away 24 to 36 months after buying the policy. However, this typically applies to death due to natural causes (disease or old age). You can still likely receive the full benefit for accidental death.

Stay clear of final expense term insurance. Term insurance is temporary life insurance. Final expense insurance is meant to provide permanent protection that will never expire.  

Lastly, look for policies that don’t require a medical exam. Final expense insurance is simplified underwriting. This means that there is no medical exam required to apply and qualification is based around answers to the health questions on the application.

Why Choose Burial Insurance in Conjunction with Life Insurance?

Burial and life insurance both offer a lump sum cash benefit to your survivors upon death. You may already have a life insurance policy. So why might you also consider burial insurance?

The two policies work together to ensure your loved ones are taken care of.

Most of us buy life insurance to replace lost income, provide something to live on (before retirement funds are available), and ensure any debts are taken care of. When you pay for funeral expenses from the cash benefit, you can reduce the money left for your survivors by as much as tens of thousands of dollars.

By the time they pay for the cost of the funeral and any additional (and likely) fees, they could lose a year’s worth of income from the life insurance policy.

Is Final Expense Insurance the Right Choice for You?

No one wants to think about their funeral, but given both the cost of final expenses and the impact on your survivors, a little bit of planning is essential.

Final expense insurance offers your survivors a cash benefit to pay for funeral and burial costs. It isn’t part of your estate, and once it pays out, your survivors are free to be flexible with the cash. All in all, it makes planning and paying for a funeral so much easier.

Would final expense insurance help you and your family? Click here to learn about the ten best insurance providers and get an instant quote.

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Jeffrey Manola

Jeffrey Manola

Jeffrey Manola is the owner and an experienced life insurance agent at Top Quote Life Insurance. His goal is to provide online consumers with the absolute top quotes for all term life insurance, permanent life insurance, and no medical exam life insurance. Not only does he strive to provide you with the best premium for your life insurance coverage, but he also wants you to be well informed about life insurance coverage options and its importance. Never hesitate to reach out to Jeffrey if you need help. Top Quote Life Insurance is more than just an online quoting agency. We want to help you save money, protect your future, and earn your trust (888) 777-7574.

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