Unlike other more “traditional” types of life insurance policies, which are typically designed to meet specific needs, final expense policies or burial life insurance policies can be confusing for some people. Therefore, in this article, we will discuss how final expense insurance policies work and highlight a few key points that you should be aware of when shopping for a policy that best suits your family’s needs.
In this article, we will address the following questions:
- How do final expense policies work?
- How can you apply for a final expense insurance policy?
- What should you be aware of when shopping for a final expense insurance policy?
- How can you find the best final expense insurance policy for myself?
So, let’s dive right in and get started!
How do final expense policies work?
Final expense insurance policies are a type of whole life insurance policy that are designed to cover the costs associated with a person’s funeral and other end-of-life expenses. These policies typically have lower coverage amounts than other types of life insurance policies, usually ranging from $5,000 to $25,000.
When you purchase a final expense policy, you’ll typically pay a monthly premium for the duration of your life. As long as you continue to make your premium payments, the policy will remain in effect, and your beneficiaries will receive the death benefit upon your passing.
One of the benefits of final expense policies is that they typically have simplified underwriting requirements, meaning that you may be able to qualify for coverage without a medical exam. This can be particularly helpful for individuals who may have difficulty obtaining other types of life insurance coverage due to health issues or other factors.
It’s important to note that final expense policies are not intended to be used as a source of income replacement for your loved ones, as the coverage amounts are typically not high enough to cover ongoing expenses like mortgage payments or college tuition. Rather, these policies are designed to help your family cover the immediate expenses associated with your passing, such as funeral costs, outstanding medical bills, and other end-of-life expenses.
How does one apply for a final expense insurance policy?
One of the advantages of final expense insurance policies is that most of them do not require applicants to undergo a medical exam, making it possible to purchase a policy online without having to meet with an insurance agent in person.
This convenience means that you can complete the application process quickly and easily, often in just a few minutes, and receive approval in as little as 24 hours.
However, it’s important to be cautious and avoid rushing into a decision. The speed and ease of the application process can sometimes lead people to purchase a policy without fully understanding the terms and conditions. Therefore, it’s important to take the time to research different policies, compare options, and ask questions before making a decision.
In the next section, we’ll discuss some key factors to consider when shopping for a final expense insurance policy to help you make an informed choice.
What should you be aware of when shopping for a final expense insurance policy?
When shopping for a final expense life insurance policy, you will likely be offered one of two different types of policies, neither of which requires you to undergo a medical exam. However, one type will require you to “medically qualify” for coverage and may order several reports during underwriting, which could affect your ability to qualify for coverage. These reports may include a prescription medication database check, a DMV and/or criminal background check, a credit report, and a Medical Information Bureau report that provides a record of any previous life insurance applications.
This type of policy is called a Simplified Issue Final Expense insurance policy, and not everyone will be able to qualify for it. The good news is that if you do qualify, these policies often cost less than Guaranteed Issue Life Insurance Policies that do not require medical qualification for coverage.
The potential downside of these policies is that there are many different types of Simplified Issue Final Expense Insurance Policies, making it difficult to determine which policy is the best fit for you. In the next section, we’ll discuss some key factors to consider when evaluating different policy options to help you make an informed choice.
This is why…
We always recommend that clients ask four basic questions about the life insurance policy they are considering to be aware of “how” their life insurance policy works. Second, they are HAPPY with how it works.
These 4 basic questions are:
- How long will the policy that I’m being offered last? Will it last my WHOLE LIFE or is it a TERM INSURANCE policy?
- How much insurance am I being offered, and can this amount change over the life of the policy?
- How much do I need to pay for my coverage, and will this price ever change over the life of the policy?
- Will my policy cover me for ALL causes of death (Natural and Accidental) immediately upon approval?
It’s important to understand the answers to these questions because not all Simplified Issue life insurance policies have a level payment or will last for your entire life. Knowing this information upfront will help you ask the right questions and make informed decisions about your policy.
Another important consideration is whether your policy provides immediate coverage for all causes of death. If it doesn’t, you may be purchasing a Guaranteed Issue Life Insurance Policy, which includes a significant clause known as a Graded Death Benefit. This clause may make you reconsider purchasing this type of final expense insurance policy.
In the next section, we’ll discuss some key factors to consider when evaluating different policy options to help you make an informed choice.
Guaranteed Issue Life Insurance Defined
Guaranteed issue final expense insurance policies are the second most common “types” of life insurance policies available without taking a medical exam. In fact, unlike a simplified issue life insurance policy, which will require an applicant to answer “health-related” questions and may order a series of reports before approving deciding an applicant’s application, a guaranteed issue life insurance policy will only concern itself about three things.
Which are:
- Are you a United States Citizen?
- Do you meet the minimum age requirements?
And do you live in a state where these “types” of life insurance policies are offered? If so, you will be approved for coverage. If not, you won’t, regardless of how healthy (or unhealthy) you may be.
“But be warned!”
Because in addition to costing a bit more than most simplified issue life insurance policies (in most cases), all guaranteed issue life insurance policies will contain a GRADED DEATH BENEFIT, which is a clause written into the policy which will create a waiting period (typically 2 to 3 years) before the insurance policy will begin to cover an insured for NATURAL causes of death such as a heart attack, stroke, cancer or diabetes. (Accidental causes of death such as those suffered from a slip and fall or motor vehicle accident would be covered immediately).
“This is why it’s so important to take your time when shopping for a final expense insurance policy and be sure you COMPLETELY understand what you are purchasing before you decide to apply for coverage”.
What can I do to find the “best” final expense insurance policy for myself?
Here are some tips to help you find the best final expense insurance policy for yourself:
- Assess your needs: Before you start shopping for a policy, take some time to assess your needs. Consider factors like your age, health, and financial situation to determine how much coverage you need.
- Compare policies: Shop around and compare policies from different insurers. Look at factors like the coverage amount, premiums, and any riders or additional benefits offered.
- Check the company’s financial stability: It’s important to choose an insurer that is financially stable and has a good reputation. Look for ratings from independent rating agencies like A.M. Best, Moody’s, or Standard & Poor’s.
- Read the fine print: Make sure you understand the terms and conditions of the policy you’re considering. Pay attention to factors like the length of the policy, the premiums, and any exclusions or limitations.
- Ask questions: Don’t be afraid to ask questions if you’re unsure about something. A reputable insurer should be willing to answer your questions and provide you with the information you need to make an informed decision.
- Seek professional advice: Consider consulting with a financial advisor or insurance agent who specializes in final expense insurance. They can provide you with personalized advice and help you find the best policy to meet your needs.
By following these tips, you can find the best final expense insurance policy for your needs and ensure that your loved ones are protected in the event of your passing.
Frequently Asked Questions
What is final expense insurance?
Final expense insurance is a type of life insurance policy designed to cover the costs associated with end-of-life expenses, such as funeral expenses, medical bills, and other debts or expenses that may arise after a person’s death.
How much does final expense insurance cost?
The cost of final expense insurance will vary based on several factors depending on the type of final expense an individuals applies for. Contributing factors may include the applicant’s age, health, and coverage amount. However, final expense policies are generally less expensive than traditional life insurance policies.
What is the difference between final expense insurance and traditional life insurance?
Final expense insurance is designed specifically to cover end-of-life expenses, while traditional life insurance can provide a broader range of coverage, including income replacement and other expenses. Final expense policies are also typically easier to qualify for than traditional life insurance policies.
Do I need a medical exam to qualify for final expense insurance?
Most final expense insurance policies do not require a medical exam, but some may require applicants to answer a few medical questions to determine eligibility.
Can I choose my own funeral home with final expense insurance?
In most cases, final expense policies will make the death benefit payment directly to your beneficiaries who will control how this money is spent, which will allow the policyholder or their family to choose the funeral home that best meets their needs.
Can I change my final expense policy after I purchase it?
Some final expense policies may allow for changes to coverage or beneficiaries, but it’s important to read the policy carefully and speak with an insurance agent or representative to understand the specific terms and conditions of the policy.
Can I have more than one final expense policy?
Yes, it is possible to have multiple final expense policies to ensure adequate coverage for end-of-life expenses. However, it’s important to carefully consider the cost and coverage of each policy before making a decision.
Can I choose who the beneficiary of my final expense policy will be?
Yes, you can choose the beneficiary of your final expense policy. The beneficiary can be anyone you choose, including a family member, friend, or charity.
Can I cancel my final expense policy if I change my mind?
Yes, you can cancel your final expense policy if you change your mind. However, you should be aware of any cancellation fees or penalties that may apply.
Will my beneficiaries have to pay taxes on the death benefit from my final expense policy?
No, beneficiaries typically do not have to pay taxes on the death benefit from a final expense policy. However, it’s always a good idea to consult with a tax professional to understand your specific tax situation.
Can I purchase a final expense policy if I have pre-existing health conditions?
Yes, you can still purchase a final expense policy if you have pre-existing health conditions. However, the cost of the policy may be higher, and you may be limited in the amount of coverage you can purchase.
