Final expense life insurance isn’t an ideal form of life insurance for most people. It’s pricier than other types and provides less coverage — but it’s easier to qualify for and is valuable for people looking to skip the underwriting process, like elderly and less-healthy applicants. What exactly do final expenses entail? The five main categories are medical expenses, funeral and burial expenses, cremation expenses, after-death expenses, and other bills.
Final expense life insurance is typically a type of simplified whole life insurance. It’s similar to other types of permanent life insurance like whole life, universal life, and variable life insurance in that it has a cash value. While whatever money is left to your loved ones is intended for final expenses, it’s important to note they don’t have to use the funds that way. Your family can use the money on whatever they wish. It’s important to have a conversation about the expectations for the life insurance death benefit.
Life insurance is often used for expenses after the policyholder dies, like paying for a mortgage or leaving money behind to heirs. But costs can add up before death, and if you’ve racked up medical bills, you don’t want to leave your loved ones saddled with that debt.
That’s where final expense insurance can come in handy. Say you need a relatively small coverage amount — typically under $50,000 — simply in the event of covering hospital bills. You can combine this with a term life insurance policy to make sure the full death benefit of that policy goes toward your initial intent, while the final expense policy covers medical-related bills.
Funeral & burial services
According to a 2015 National Funeral Directors Association (NFDA) Pricing Survey, the median cost of a funeral, burial services, and vault was over $8,500.
Why so expensive? Funeral comparison home website Parting estimates the following costs for basic end-of-life services:
Funeral director fees: $1,500
Funeral home usage fees: $500
Grave site: $1,000
Grave liner: $1,000
The FTC recommends you take even more into account when thinking of funeral expenses:
Visitation and viewing
Forwarding/receiving body to/from another funeral home
And that’s just a partial list. It doesn’t include things like flowers or an obituary, or other costs we’ll discuss later.
It’s uncomfortable to think about, but if you don’t decide what you want your funeral to be, and how much it’ll cost, you’re putting that burden on your loved ones. They’ll have enough to deal with at the time — the last thing you want is to force them to figure out how they’re going to pay for everything, too.
Some funeral homes accept an assignment of the benefit, which means that they’ll receive money directly to cover funeral costs and your beneficiaries will get anything that’s left over. This involves a little coordination beforehand, but can take another thing off your family’s plate at the time of the funeral.
An alternative to burial is cremation. It’s estimated cremation accounts for half of all funeral services, according to the NFDA. And while it’s a cheaper option, it’s still pricey; the same NFDA Pricing Survey pegs the median cremation cost at $6,078.
That’s because there’s a lot that goes into cremation, too. Besides service fees, there’s also transportation of remains, preparation and viewing expenses, the cost of the actual cremation, an urn, monument or marker costs, and more.
Even if you choose cremation — because it’s more affordable or because it’s just your preferred method of funeral — it can still set your loved ones back a lot. No matter what type of funeral you choose, life insurance provides financial peace of mind.
A funeral isn’t just about death — it’s about celebrating life. There’s a lot that happens after you’re buried or cremated. Maybe all of your loved ones will gather somewhere and you don’t want anyone to have to foot the bill for a venue, food, or drinks.
Or maybe you’ve asked your family to bring your ashes and spread them around somewhere you loved, like a childhood home or favorite nature spot. A final expense life insurance policy ensures they can get where they need to go and honor your last wishes.
Finally, there are the types of expenses your loved ones would normally spend a life insurance death benefit on. Everyday living expenses, mortgage, credit card debt, college — those are things your family will have to deal with for years to come if you’re the primary breadwinner. A good life insurance policy helps cover those costs. Of course, since final expense insurance is good for older applicants, you may not have those types of other expenses. You might have already paid off your house and put your kids through college and saved for retirement.
But that’s what can make final expense insurance so useful: The low benefit amount still allows you to cover the expenses your loved ones will almost certainly run up against. While there are other types of life insurance that are more affordable for more coverage, there may be health barriers keeping you from qualifying for them. Final expense insurance policies can be a great way to make sure those final costs are covered.