Final expense insurance

Life insurance provides your loved ones with an income replacement if you are no longer around to provide for them. When you’re a senior or retired and you don’t have dependents anymore, you might not need traditional life insurance coverage. However, there is still one big cost you need to plan for: your funeral.

A funeral can cost anywhere from $8,000-$10,000, not including other end-of-life expenses such as medical bills. These can end up falling on the shoulders of loved ones and cause a financial strain.

That’s where final expense (or burial) insurance comes in. If you’re looking for life insurance coverage that can cover the cost of your death and funeral arrangements, final expense insurance may be right for you. Due to its high cost, it’s best suited for people who are ineligible for traditional coverage.

What is final expense life insurance?

Final expense insurance is a type of permanent life insurance originally intended to cover funeral expenses. The death benefit is usually used to pay for final medical bills and other end-of-life expenses, like burial or cremation, items like caskets and urns, and more.

Like other permanent life insurance, burial insurance never expires and remains active as long as you pay your premiums. But, unlike most traditional permanent life insurance policies, which require a medical exam to determine the cost of your policy, you’ll only need to answer a few questions to qualify for final expense insurance.

Types of final expense insurance

There are two types of final expense insurance: guaranteed issue life insurance and simplified issue life insurance, which vary slightly in maximum benefit amounts, pricing, and the amount of medical information required to apply.

Guaranteed issue life insurance

Guaranteed issue policies offer near-certain application approval. In rare cases, insurance companies may ask “knockout questions” about terminal illnesses that disqualify you for coverage, but many providers offer coverage regardless of your health status. Because of this, guaranteed issue is more expensive than simplified issue and offers lower maximum coverage amounts, typically $5,000-25,000.

→ Learn more about guaranteed issue life insurance

Simplified issue life insurance

Simplified issue life insurance is good for people who may not qualify for a traditional life insurance policy but are only considered moderate risk. You’ll have to answer a detailed medical questionnaire, but there’s no medical exam involved. You’ll still pay more than you would for term life coverage, and you can get a simplified issue insurance policy with coverage up to $50,000.

→ Learn more about simplified issue life insurance

How to ensure your death benefit is being used as planned

Final expense insurance is meant to be used as burial insurance for funeral expenses, but the beneficiary isn’t technically (or legally) required to use it that way. There are no limitations on how the death benefit can be used and they can spend it however they wish. But there are a few steps you can take to make sure it’s used as you planned:

• Name someone you trust as your beneficiary: Naming someone you trust as your policy’s beneficiary is the best way to ensure the death benefit is used to fulfill your funeral plan. It should be someone who will likely be financially impacted by your death and would use the death benefit accordingly.

• Name the funeral home as your beneficiary: Some funeral homes will also accept an assignment of the insurance policy death benefit payout. This means that the proceeds will go directly to the funeral home to cover the cost of the funeral.

• Spell out your final wishes: You can write out your wishes or lay them out to a financial advisor. This will determine how you’d like your final rites to be conducted and how the money from your policy should be allocated.

Who needs burial insurance?

Because of its high cost, final expense insurance is best for candidates who are typically ineligible for traditional life insurance coverage. This includes:

• Individuals who are above a certain age

• Individuals who have a serious health condition

• Individuals who earn a low (or no) income and have no assets

Health conditions that make final expense insurance a more suitable coverage option include illnesses such as cancer, HIV, or Parkinson's disease.

For most others, traditional life insurance options are more cost-effective.

How much does final expense insurance cost?

Because final expense policies are reserved for older or less-healthy shoppers, the cost of final expense insurance is exponentially higher than a comparable term life insurance policy. When you’re getting burial insurance, you might end up paying about the same as you would for a term life policy, but for far less coverage.

Below are sample costs for a guaranteed issue, simplified issue, and term life policies for a 60-year-old man to illustrate the cost differences.

Methodology: Quotes are based on rates for a 60-year-old male in Ohio who qualifies for a $25,000 guaranteed issue policy, $25,000 simplified issue policy, and a 10-year, $250,000 term life insurance policy in a Preferred health class. Actual rates vary based on each customer’s specific circumstance. Rate illustration valid as of 1/11/2021

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Pros & cons of burial insurance

Final expense life insurance isn’t meant for everyone — but there are advantages for some people. Depending on your circumstances, final expense insurance could be right for you.

Who sells final expense insurance?

Many major life insurance companies sell some form of final expense insurance. AIG, Lincoln, Minnesota Life, Mutual of Omaha, and Transamerica are just some of the companies that have final expense insurance available.

Connecting with a Policygenius advisor for free is the best way to determine what final expense policies are available to you based on your profile.

How to buy final expense life insurance

Getting a final expense insurance policy is fairly quick and easy. You can get coverage almost immediately if you sign your policy papers right away. On the call, you should expect to provide your Social Security Number, driver’s license number, and payment information.

Whether or not you’re looking for expediency, you should always shop around for the best insurer before you commit. Each life insurance company is different, and the coverage type and premiums will vary.

→ Learn more about how to buy life insurance

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What alternatives are there to final expense insurance?

There are several other ways to pay for funeral expenses besides final expense insurance that may be preferable, depending on your health and finances. These include:

Term life insurance

If you’re relatively young with no health issues, it makes more sense for you to purchase a term life insurance policy. This type of policy is significantly cheaper than other types of life insurance. For term life insurance policies, you pay premiums for a set amount of time (usually 10-30 years) and the policy pays out if you die during that time. Because traditional life insurance is more affordable for the same (and more) coverage than burial insurance, your benefit amount can include enough funds to pay for your family’s cost of living and pay off any debts alongside funeral expenses.

→ Learn more about term life insurance

Pre-need insurance

Pre-need insurance, also called pre-need funeral insurance or pre-need burial insurance, is a type of permanent life insurance offered by funeral homes and funeral directors. Pre-need insurance essentially allows you to plan, price out, and pay for your funeral before you pass away, and even work with a funeral director to design your funeral and memorial service.

→ Learn more about pre-need insurance

Pre-need funeral trust

A pre-need funeral trust serves the same purpose as a pre-need funeral insurance policy — allocating money to be used specifically for funeral expenses — but rather than the funeral home waiting for the insurance policy to pay out, you contribute to a trust that accrues interest over time. This can be a cost-effective way to fund your funeral, but the interest is typically taxable and irrevocable, so it is impossible to modify.

Self-funded burial

Final expense insurance is often targeted at the elderly, who might not otherwise be able to afford their burial. If you’re financially prepared for retirement, you may have the money you need already. Of course, this approach is a long game — you’ll need to save and invest while you’re younger so that the funds can grow enough to be used for end-of-life expenses.

Is final expense insurance worth it?

Whether burial insurance is worth it depends on your age, health, and eligibility. A term policy should always be your first option when it comes to life insurance. It’s the most cost-effective way to cover burial costs and any other expenses you provide for your loved ones.

However, if you absolutely need financial protection and your age or health would disqualify you from getting traditional coverage, a final expense life insurance plan may be worth looking into. Always speak to a licensed expert who can help you compare policies before committing to a coverage option.