Final Expense Insurance: What, Why, and When?
Final Expense Insurance is a unique name given to an insurance policy that is designated for paying the final expenses of the policyholder. In reality, it is an act of love. It demonstrates the love the policyholder has for his or her surviving loved ones at a time when they are grieving their loss.
What are Final Expenses?
When we die, there are certain expenses, referred to as final expenses, that must be paid by the surviving loved ones of the person who has passed on. Typically, these expenses are for funeral and burial expenses, medical or nursing home expenses, and debts that can legally be passed on to survivors.
The average cost of a moderately priced funeral in the U.S. is currently running about $9,000 to $10,000 according to Parting.com, a service that monitors the funeral industry across the nation. Think about that for a moment, a one-day event to say goodbye to a loved one costs about $10,000. And think about what will happen if your loved one who has just recently passed has not made financial arrangements to have the funeral/burial expenses paid for in advance.
There are other expenses that must also be considered. Many seniors who have passed away may have recently spent time in a nursing home or assisted living facility, and there will typically be an outstanding bill due for their services. If the person who passed had been a party to a financial contract like a vehicle loan or personal loan, they would likely leave the other party on the contract (a spouse, child, or grandchild) completely responsible for the loan balance. This certainly calls for consideration of Burial insurance.
Why Purchase Final Expense Insurance?
Knowing that your surviving loved ones will be responsible for your burial and funeral expenses should be motivation enough to purchase final expense insurance, but in reality, many people fail to do so or put it off until it’s too late. Yes, you are not responsible for the debts of a parent or sibling, but wouldn’t it be best if your passing loved one’s estate wasn’t encumbered by a nursing facility or other creditor?
Many funeral homes will offer a “pre-need” funeral plan that is designed to let you pay monthly for your funeral expenses directly to the funeral home or placed in a trust. A problem that could arise with this method of paying final expenses is that many of these plans are not guaranteed. This means that the funeral home may bill for additional costs or rate increases that were not considered in the total pre-need commitment. You could also set up a savings program that would be designated for final expenses, but then what happens if you die shortly afterward, and there isn’t enough money to pay for final expenses?
With Final Expense Insurance, you can purchase the policy and then die the day after it’s issued and the entire death benefit will be paid to the beneficiary. It is the best and most affordable method to arrange final expense payment in advance.
When Should I Purchase It?
Life insurance rates are based on two primary factors, your age, and your health. The longer you wait to purchase the policy the more expensive it becomes. If you’re like most workers in the U.S., you probably have put your job ahead of your health and will typically experience health issues later in life. Why wait until your health is failing and you may not qualify for coverage?
For example, a typical rate for a 45-year-old non-smoker for $20,000 in coverage would be about $48 per month. The same coverage for a 65-year-old non-smoker would be about $108 per month. In this scenario, waiting until you are 65 years-old would cost you an additional $720 per year. The savings alone should be significant motivation to get your affairs in order sooner rather than later.
Also, we need to take possible health issues into consideration. You are more likely to be healthier at 45 years-old than 65 years-old. Health issues will play a significant role in your cost of insurance and could even prevent you from qualifying for a standard policy. Although most insurers will issue a policy for people with health issues like diabetes, high blood pressure, and cardiac issues, they will typically apply a surcharge (table rate) to your policy which can significantly drive your rates up.
Although there are insurers that offer non-medical policies or simplified issue policies, the rates for these types of policies are significantly higher than a standard policy because the insurer agreed not to get the appropriate underwriting information to establish an adequate rate. Many insurers offer “guaranteed issue” policies where no medical requirements are necessary, but these policies (which are better than nothing) often require the policyholder to stay alive for at least two years before they will pay the full benefit. That is a risky proposition.
You love your family and friends. You know you are going to die sometime, and now you know the expenses involved with passing away. An Insurance policy is the best and most affordable way to eliminate the risk of leaving your final expenses to your surviving loved ones. You can find out how affordable an insurance policy can be by speaking with one of our licensed agents today.
Do you prefer to leave a legacy or debt? It’s your call.