Final expense insurance is an important coverage option for anyone who wants to ensure that their loved ones are not left with significant expenses in the event of their death. However, there are many misconceptions about final expense insurance that can make it difficult for individuals to understand what it is, who needs it, and how to obtain it. In this article, we will address the top 10 misconceptions about final expense insurance and provide accurate information to help individuals make informed decisions about their coverage options.
Top 10 Misconceptions about Final Expense Insurance
#1. Final expense insurance is only for the elderly
While it is true that the vast majority of individuals who will choose to purchase a final expense insurance policy will be older, it would not be correct to say that these types of policies are for the elderly. In fact, lots of younger adults will purchase small-term or whole-life insurance policies that wouldn’t necessarily fall under the category of “final expense” for the sole purpose of making sure that if they were to die unexpectedly, their loved ones wouldn’t be burdened with any end-of-life expenses.
It should also be noted that many individuals aged 40 and above who aren’t able to qualify for traditional life insurance coverage will also take advantage of some of the guaranteed issue life insurance policies as well.
#2. Final expense insurance is not necessary because I have savings
This is not entirely true. While it’s always good to have savings, final expense insurance can provide an additional layer of protection to ensure that your loved ones are not left with significant expenses in the event of your death. Final expense insurance can help cover end-of-life expenses such as funeral costs, medical bills, and outstanding debts, which can be significant. Additionally, savings may not be enough to cover these expenses, especially if they are unexpected.
Having final expense insurance in place can give you peace of mind knowing that your loved ones will not have to bear the financial burden of your final expenses. Additionally, the death benefit from final expense insurance is typically paid out tax-free. It can be used to cover any end-of-life expenses, providing your loved ones with financial security in a difficult time.
#3. Final expense insurance is only for funerals
This is not entirely true. As we stated above, while it is true that a final expense insurance policy can be used to cover funeral costs, it can also help cover other end-of-life expenses such as medical bills, outstanding debts, and other expenses that may arise.
#4. Final expense insurance is difficult to qualify for
This is not entirely true. Some final expense insurance policies are simplified issued life insurance, which means they do not require a medical exam and are designed to be easy to qualify for. These policies simply require applicants to answer a few medical questions but typically do not require a full medical exam, blood or urine test.
For those who can’t qualify for a simplified issue life insurance policy, guaranteed issue policies are available. These are life insurance policies that won’t require one to answer any health-related questions or take a medical exam. All that is required for approval is that you are a US citizen, that meets the minimum age requirements and that you live in a state where these types of policies are offered.
So, even if an individual has pre-existing conditions, there are final expense insurance policies that may cover them, but it is important to understand that these policies may have different terms and conditions and that all guaranteed issue life insurance policies will have a 2-3 year waiting period before they will cover natural causes of death.
#5. Final expense insurance is only for people who are sick
This is not true; final expense insurance is for anyone who wants to protect their loved ones from the financial burden of their final expenses. It’s a type of life insurance that is designed to provide coverage for end-of-life expenses, such as funeral costs, medical bills, and outstanding debts. It’s not only meant for people who are sick but for anyone who wants to have a plan in place to cover these expenses in the event of their death.
Final expense insurance policies can be tailored to meet the specific needs of an individual, regardless of their health status. Some policies may require a medical exam, while others may not. Some policies may have exclusions, and some may be guaranteed issues. It’s important to review the policy and understand what it covers, what it does not cover, and how it can meet the specific needs of the individual.
It’s important for individuals to consider their own situation and determine if final expense insurance is a good option for them. It is not necessary for everyone, but for anyone who wants to ensure their loved ones are not burdened with significant expenses in the event of their death, it is a good option to consider.
#6. Final expense insurance is not tax-free
This is not true; final expense insurance policies are generally tax-free for the beneficiaries. The death benefit from final expense insurance is typically paid out tax-free and can be used to cover any end-of-life expenses. The beneficiaries of the policy will not have to pay taxes on the money they receive as a result of the death of the insured individual.
It’s important to note that depending on the country or state you live in, there might be some variations in tax laws and regulations that apply to final expense insurance. It’s always a good idea to consult with a financial advisor or insurance agent to determine the tax implications of your specific policy.
In general, the death benefit from final expense insurance is typically paid out tax-free to the beneficiaries and can provide them with financial security in a difficult time.
#7. Final expense insurance is too expensive
This is not entirely true. While the cost of final expense insurance can vary depending on the coverage amount, the length of the policy, and the health status of the individual, it can still be an affordable option for many people.
That said, some policies may be more affordable than others, and it’s important to shop around and compare policies to find the best option for you. Additionally, some policies may have flexible payment options that can make them more affordable.
It’s also important to consider the potential cost savings of having final expense insurance in place. Without a final expense insurance policy in place, your loved ones may be left with significant expenses in the event of your death, such as funeral costs, medical bills, and outstanding debts. These expenses can add up quickly, and final expense insurance can help cover them, providing your loved ones with financial security in a difficult time.
#8. Final expense insurance is only needed if you have a large estate
This is not true; final expense insurance can be beneficial for people of all income levels and estate sizes. The main purpose of final expense insurance is to provide coverage for end-of-life expenses, such as funeral costs, medical bills, and outstanding debts. These expenses can be significant, regardless of the size of one’s estate.
Final expense insurance can provide peace of mind and financial security for both the individual purchasing the policy and their loved ones. It can ensure that end-of-life expenses are covered and loved ones are not left with significant financial burdens. It’s important to consider the potential cost savings of having final expense insurance in place, regardless of the size of one’s estate.
#9. Final expense insurance is only available through funeral homes
This is not true, final expense insurance can be purchased through a variety of different providers, including insurance companies, financial advisors, and independent agents. While funeral homes may offer final expense insurance as an option, it is not the only place to purchase it.
#10. Final expense policies are the same as funeral payment plans:
Final expense insurance and funeral payment plans are not the same.
Final expense insurance is a type of life insurance that is designed to provide coverage for end-of-life expenses such as funeral costs, medical bills, and outstanding debts. It is purchased by an individual and provides a death benefit that the beneficiaries can use to cover these expenses.
On the other hand, a funeral payment plan is a pre-payment plan for funeral services. It allows an individual to pay for funeral services in advance. It does not provide a death benefit, and the money paid into the plan is typically non-refundable.
While both final expense insurance and funeral payment plans can be used to cover end-of-life expenses, they are not the same and have different features and benefits. It’s important to understand the difference between the two and choose the one that best meets your needs.
And there you have it, our top 10 misconceptions people have about final expense insurance policies. Now, hopefully, this has helped clear up any misconceptions you may have had and perhaps sparked an interest in learning more about how a final expense insurance policy might be right for you. If so, give us a call, and let us show you what we can do for you!
