Final expense vs. guaranteed issue life insurance

Final expense policies are small life insurance policies in which the death benefit is often used for funeral expenses. Guaranteed issue life insurance is a type of final expense policy that doesn't require a medical exam or a thorough medical questionnaire.

The other type of final expense policy, simplified issue, also allows you to skip the medical exam but does require a medical questionnaire. However, final expense is costly and comes with some restrictions. If you have enough assets for your beneficiaries to pay final expenses out of your estate, you likely do not need these policies. Here’s how to decide which type of life insurance fits your needs.

How does final expense insurance work?

Final expense life insurance, also known as burial insurance, is a type of permanent life insurance that offers small coverage amounts — typically up to $25,000 or $40,000 — to people who may not otherwise qualify for traditional term or whole life insurance.

There are two types of final expense life insurance. Both offer lifelong coverage and no cash value

• Guaranteed issue life insurance doesn't require medical questions or a medical exam for approval. Most companies offer guaranteed approval for guaranteed issue plans.

• Simplified issue life insurance requires you to answer questions about your health, but doesn't require a medical exam. You could be denied if you have a critical illness or reside in an assisted living facility.

Some guaranteed issue policies come with graded death benefits, meaning your policy won’t pay out the full death benefit if you die within the first two years of coverage. Instead, your beneficiaries receive a payment equal to 110% of the premiums you’ve paid into the policy.

Simplified issue vs. guaranteed issue life insurance: Quick comparison

	Simplified issue insurance	Guaranteed issue insurance
Term length	Life	Life
Coverage amounts	$2,000 to $40,000	$2,000 to $25,000
Sample premiums	$97.94/month	$186.07/month
Age requirements	45 to 85 years	50 to 80 years
Underwriting requirements	Application and medical questionnaire	Application for coverage
Cash value	No	No
Best for	Individuals in moderate health who need limited coverage or don’t qualify for traditional policies	Individuals with serious health concerns who may not qualify for simplified issue or traditional life insurance

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Final expense insurance vs. term life insurance

If you still have dependents or debts, like a mortgage, you probably need more than final expense insurance to cover your financial obligations. The death benefit from final expense insurance is enough to cover the cost of a funeral, but not enough to support your loved ones long-term. 

Term policies require a more thorough medical review during the underwriting process, which makes final expense a better choice if you have a critical illness or are in poor health. But if you’re able to qualify, a term policy will offer more coverage for your money. In the table below, the term life rate is higher, but pays for a $250,000 policy compared to a $25,000 simplified issue policy.

Final expense vs. term life insurance: Quick comparison

	Final expense insurance	Term life insurance
Term length	Life	10 to 30 years
Coverage amounts	$2,000 to $40,000	$250,000+
Sample premiums	$97.94/month	$76.28/month
Age requirements	45 to 85 years	18 to 80 years
Underwriting requirements	Medical questionnaire and demographic information (simplified issue) or demographic information only (guaranteed issue)	Medical exam (with exceptions), prescription check, medical records check, and phone interview
Cash value	No	No
Best for	Seniors, people with complex health issues, and those with low coverage needs	Adults who need financial protection beyond funeral expenses

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If you're a senior or have health concerns, it’s worth getting quotes for term life insurance before you write off the option. You may be able to qualify for cost-effective term life policies if you’re matched with the right provider. A licensed expert can help you choose the best plan to protect your loved ones.