Final Expense life insurance is a very real and legitimate way for people to create funds to help offset the inevitable expenses associated with dying. Policies are available up to age 85, regardless of your health, and can be tailored to meet your budget.
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What IS final expense life insurance?
Final Expense Life Insurance (also called Burial Insurance or Funeral Insurance) is a type of permanent life insurance. It is generally purchased by seniors who seek to simply have enough money to cover their funeral and other final expenses (debts, medical bills, etc.) so that they don’t leave this burden to their spouse or children. Final Expense Insurance policies are typically available with face amounts ranging from $2,000 to $40,000 (depending on the insurer). These policies don’t require a medical exam and the entire process is fast and painless. In most cases as long as you’re between 50 and 80 years old (sometimes even 85)…you’re good to go within days! Watch our FAQ video below to learn more about Final Expense Life Insurance and how it can help protect your family from your end of life final expenses. If you prefer to read, scroll down and read our FAQs.
Final Expense FAQs
Do I need a Final Expense policy? We all know that LIFE can be expensive. What you may NOT know is that DEATH can be expensive too! As a matter of fact, the average funeral now costs around $10,000! In addition to funeral costs, there are also other final expenses such as outstanding debts, legal, and medical expenses that often wind up being the responsibility of people you care about.
Guaranteed Issue or Simplified Issue. Which is better? There are two categories of Final Expense coverage: Guaranteed issue, and Simplified issue. With Guaranteed Issue you can’t be turned down for health reasons, there are no medical questions and no exam. It’s guaranteed acceptance, pure and simple. However, if you die (of natural causes) during the first two years of the policy, you don’t receive the full death benefit. What you do receive is your money back, PLUS 10% of the money you’ve paid in. If you die in an accident, the full death benefit is paid, even during those first two years.
Simplified Issue policies cost less than guaranteed issue policies, and doesn’t have those same waiting periods before the full coverage is available. Even if you die just one day after coverage starts, your beneficiaries receive the full death benefit of the policy! But, Simplified issue policies DO require you to be in halfway decent health to qualify. You certainly don’t have to be perfect. In fact, you can often get this kind of coverage even though you may have one or more medical conditions. With Simplified Issue, there’s still no exam, but they WILL ask just a few quick medical questions to see if you qualify. Of course, even if you DON’T qualify, you can ALWAYS qualify for, and buy, a Guaranteed issue policy. There’s also one more category of policy, it’s commonly called modified (or graded) death benefit life insurance. This type of policy may have a schedule of percentages of death benefits that grade in overtime. For example, one policy might say that during the first year, if you die, you’d get 30 percent of the death benefit. Year two, 70%, and year three, 100% of the death benefit. Because this is a compromise between the two other types of plans, these typically cost more than level death benefit Simplified issue plans, and since their death benefit schedules can vary, sometimes they cost less, but sometimes more than guaranteed issue plans.
How much do Final Expense policies cost? The more coverage you want, the more it costs. A $10,000 policy would obviously cost about twice as much as a $5,000 policy would. Simplified Issue plans cost less than Guaranteed Issue plans for the same coverage amounts. For both types of plans, rates are guaranteed never to go up, once they’re issued. Rates and availability can also vary by state.
How long does it take to get my policy? Most final expense life insurance companies are prepared to approve and issue policies so that you can be covered within minutes, either in person, or right over the phone. Your application can be taken and “voice signed” right over the phone as well. The physical policy is usually mailed to you within a day or two, but if approved, and your payment goes through, you can sometimes be covered before you hang up the phone.
How are life insurance death benefit proceeds taxed? Or are they taxed at all? Other than in rare circumstances, none of which are likely on a final expense policy, the death benefit proceeds from life insurance policies are received by your beneficiaries 100% income tax-free!
Final Expense policies are typically issued as Whole Life. What does that mean? Final Expense policies are almost always issued as Whole Life. Whole Life is the type of product that has a premium that remains level for life, and has coverage that does not expire (like term insurance can). If you have a level death benefit whole life final expense policy, your coverage remains the same for the rest of your life, and it can’t be canceled other than if you don’t pay your premium each month. Another feature of whole life is that, by law, whole life policies have reserves that create cash surrender values. Since final expense policies are generally small in face amount, the cash values don’t generally amount to all that much, but they are real, and they are available for you to access by way of policy loans if you should ever want to.
I see so many commercials and get so many postcards. Are they all the same? No. They’re definitely NOT all the same. Some companies only offer guaranteed issue plans. The truth is, if your health is even a little below average, you can often do better with Simplified Issue policies. As your advocate, we believe you deserve to know if there is a better option that you can qualify for, giving you more death benefit, no waiting period, and lower premiums.
Am I too old to qualify for coverage? Final expense policies are available all the way up to age 85.
How can I be sure the money will be there when I die? These policies are issued by some of the oldest, largest and strongest financial institutions in the world, life insurance companies like Mutual of Omaha, AIG, and many others. These companies manage billions of dollars in assets, are highly rated by A.M. Best and Company, and they promptly pay claims every day. Some of them have been doing it for well over 100 years.
What methods of payment are available? Insurance companies decide which methods of payment they’ll accept, and that does vary from company to company. All of them will take a standard “ACH” form, which allows them to debit your bank account for the premium each month. Some of them will also take credit cards, at least for your first premium, while others won’t. Finally, some will allow you to pay using a debit card or a social security debit card, while others won’t. We know the rules at each company and can help guide you.
What can the death benefit from the policy be used for? The proceeds of a Final Expense policy can be used for anything at all. It’s totally up to your beneficiaries. Obviously, most people use the proceeds to help with final expenses, like the cost of the funeral, and any outstanding medical, legal, or other bills. But, they can also be used to augment your legacy for your loved ones… leaving behind a little cash for them for any purpose you like.
Won’t the Social Security Lump Sum Death Benefit pay for my final expenses? When someone dies, the Social Security lump-sum death benefit from the government is only $255. That’s hardly enough to pay for a funeral let alone other debts that you might leave behind.
Does ownership of a whole life policy negatively affect my ability to qualify for Medicaid? While whole life policy CASH VALUES are counted in the Medicaid eligibility calculation, the cash values in these policies are relatively small and unlikely to cause any disqualification for Medicaid. If they did, you could easily borrow the funds out of the policy and spend them down in order to qualify. As a practical matter, we don’t see this happen very often at all. If you’re still concerned, one workaround is to have one or more of your children own the policy. If you don’t own it, it WON’T be included in the Medicaid eligibility calculations.
Who should you trust?
In our opinion, you should trust and buy your life insurance from whoever gives you the best advice. If that’s us, we hope you’ll trust a licensed AccuQuote agent to handle your application. It’s how they make their living. If, on the other hand, you get better advice from another agent, then you should buy from them.
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