Most people hate the thought of being a burden to family and friends later in life. Yet, an individual’s final expenses are often the responsibility of those left behind. In planning for final expenses many people chose to purchase final expense life insurance..
The need to make final arrangements is a common concern among individuals as they enter their golden years This concern is often compounded when people learn that Social Security’s lump-sum death benefit is only $255.
Intended to help consumers in planning for final expenses and wishes, final expense life insurance can often provide needed security and peace of mind. Of the various types of life insurance on the market, final expense is frequently the right fit for burial coverage.
The following article, Final Expense Life Insurance: Keys to Understanding Burial Coverage, provides an overview of burial life insurance and considerations when comparing coverage options.
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Introduction to Final Expense Life Insurance
Final expense life insurance, or burial coverage as it is commonly known, is life insurance coverage purchased for the purpose of paying a person’s final expenses and other obligations. These plans are typically whole life policies with a death benefit of between $5,000 and $25,000.
Based on the type of coverage and policy amounts final expense plans often have simplified underwriting standards, requiring minimal health questions and no medical examination. Many life insurance companies in the marketplace offer final expense coverage, and there are typically a number of policy options depending on an applicant’s coverage needs and health considerations.
Types of Final Expense Life Insurance
There are several different types of final expense life insurance plans available to consumers depending upon an applicant’s health considerations. For individuals who are healthy or have moderate health conditions level benefit policies provide immediate coverage for the full death benefit at the best rates.
For those with more severe health conditions, graded benefit, modified benefit, and guaranteed issue plans offer coverage with a waiting period before the full death benefit can be paid to designated beneficiaries.
Often insurance companies offer the different types of final expense life insurance policies, placing an applicant in the best policy for which their individual health conditions qualify. It is important to work with an experienced independent agent to help in selecting the best insurance company and policy for your individual circumstances.
Level benefit final expense plans provide immediate coverage for the full death benefit amount. A level benefit plan is the only final expense policy option that provides coverage for 100% of the death benefit from the day the policy is issued.
This type of final expense policy is ideal for those who are in good health, or have minor to moderate health conditions.
Level Benefit Highlights
Premium rates for level benefit plans are typically lower than graded benefit, modified benefits, and guaranteed issue policies.
Graded benefit final expense plans initially provide a graded or partial death benefit for a certain period, after which the full death benefit amount would be paid.
As an example, a graded benefit policy may pay 30% of the death benefit for a death occurring in year one, 70% for a death occurring in year two, and 100% for years three and beyond. It is typical for insurers to pay the full death benefit in the event of an accidental death with a graded benefit policy.
Graded Benefit Highlights
This type of final expense policy can be a good fit for those having moderate health conditions not qualifying for level benefit coverage. Premium rates for graded benefit plans are typically higher than level benefit policies, but lower than modified benefit, and guaranteed issue policies.
Modified benefit final expense plans traditionally provide a return of premiums plus a percentage if death occurs during a certain waiting period, after which the full death benefit would be paid.
As an example, a modified benefit policy may return premiums paid plus 10% for a death occurring in year one, return premiums plus 20% for a death occurring in year two, and pay the full death benefit for years three and beyond.
Modified Benefit Highlights
This type of final expense policy can be a good fit for those having moderate to severe health conditions not qualifying for graded benefit coverage. Premium rates for modified benefit plans are typically higher than level and graded benefit policies, but lower than guaranteed issue policies.
Guaranteed issue final expense plans work like modified benefit policies, only they are guaranteed issue. Essentially, an applicant cannot be denied coverage based on health considerations.
This type of final expense policy can be ideal for those having severe health conditions which make them uninsurable with other types of life insurance coverage. Based on the approval guarantee, guaranteed issue policies typically have the highest premium rates of all final expense policy types.
Guaranteed Issue Highlights
Best Candidates for Final Expense Coverage
Final expense life insurance is best suited for individuals between 50 and 80 years of age, who have a need for life insurance coverage to pay burial and/or other final expenses.
Though more mature applicants traditionally have an interest in this type of coverage many companies also offer final expense plans to individuals much younger.
As funeral costs continue to rise, these expenses often create anxiety and financial challenges for many aging Americans. This type of coverage can provide financial security and peace of mind related to an individual’s final expenses and wishes.
Sample Final Expense Life Insurance Rates
The following illustrations provide sample premium rates for level benefit, graded benefit, and guaranteed issue final expense life insurance policies on a 65-year-old female non-smoker. These sample rates are intended for illustration purposes only, please contact us if you are interested in quotes based on your individual situation.
Level Benefit Final Expense
Note: The rates illustrated above are for a $10,000 level benefit final expense life insurance policy on a 65-year-old female non-smoker.
Graded Benefit Final Expense
Note: The rates illustrated above are for a $10,000 graded benefit final expense life insurance policy on a 65-year-old female non-smoker.
Guaranteed Issue Final Expense
Note: The rates illustrated above are for a $10,000 guaranteed issue final expense life insurance policy on a 65-year-old female non-smoker.
Best Final Expense Life Insurance Companies
Many companies in the market place offer final expense life insurance policy options. The following companies are recommended in our experience based on company ratings, underwriting standards, premium rates, customer service, and other relevant factors.
Case Study - Final Expense Life insurance
Final Expense Life Insurance
Betty is a 65-year-old retired widow who lives on a fixed income from Social Security and a small pension. After her husband's passing a year ago she began considering arrangements for her own final expenses and wishes. Since she does not want her three grown children to have to cover the costs associated with her funeral service and burial, Betty has decided to purchase a final expense life insurance policy. Working with an experienced independent agent, Betty chooses a $10,000 final expense policy from a leading insurance company. In this case, final expense life insurance has given Betty financial security and peace of mind in knowing that when the time comes her arrangements are covered.
Applying for Final Expense Coverage
Applying for final expense life insurance can be much simpler than applying for many other types of life insurance coverage.
Since these products routinely offer extremely simplified underwriting, an application and potential phone interview are often all that is required.
In evaluating your application, the insurance company will review the information provided as well as medical information bureau and prescription database information. It is important to ensure that complete and accurate information is provided on your application since conflicting and/or missing information can result in declined coverage. Given the simplified nature of final expense life insurance underwriting approval decision times typically ranges from minutes to a few days.
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James Shiver, DBA is the founder of ChoiceLifeQuote.com and a multi-state licensed independent life insurance agent serving the individual family and small-business markets. Dr. Shiver also serves as a university business professor, as well as being an Accredited Financial Counselor®.