Life insurance in general is an important part of a good, solid overall financial plan. Certainly, by having the right type of life insurance, a decedent’s loved ones will be able to pay off debts, and continue their current lifestyle without future hardships and financial struggles.
As one gets older, the need for life insurance coverage does not go away. It does, however, change. One type of life insurance coverage that is often marketed to those who are older is final expense coverage.
Final expense life insurance is a type of coverage that provides funds for the cost of a funeral, burial, and other related expenses that are considered to be one’s “final expenses.” This coverage is sometimes referred to as “burial insurance” or “funeral insurance.” The face amount of this coverage is not typically high, with proceeds usually ranging between $5,000 and $50,000 per policy.
How Does Final Expense Life Insurance Work?
Similar to with other types of life insurance, the owner of a final expense life insurance policy is able to name a person, or persons, as their policy beneficiary to receive the death benefit proceeds. Typically, the beneficiary will be a spouse, family member, or close friend that the individual trusts to carry out the payment of his or her final expense payments.
Also like other life insurance options, final expense coverage can be either term or permanent. Term policies will provide coverage for a set amount of time, such as 10 years or 15 years. Therefore, should the insured person pass away when the insurance policy is in force, the named beneficiary will receive the proceeds for the purpose of paying the insured’s final expense costs.
A permanent final expense life insurance policy will not have an expiration on it. Therefore, as long as the premiums are paid, a permanent policy will remain in force. In addition to the life insurance coverage that is provided with a permanent plan, this type of policy will also include a cash value component where cash can accumulate on a tax deferred basis over time.
Typically, final expense life insurance is offered at a lower amount of premium than most other types of life insurance coverage. Policy holders are usually allowed to make easy monthly payments – which can be convenient for retirees who are typically living on a fixed income.
When purchasing a final expense life insurance policy, it is important for an applicant to determine the type of coverage that they need – term versus permanent – as well as the amount of coverage that will be appropriate for their specific needs. In addition, it is also wise to ensure that the insurance company that is offering the coverage is financially stable and has a good claims paying reputation.
Qualifying for Final Expense Life Insurance
Qualifying for final expense life insurance is typically easier than qualifying for more traditional forms of coverage. There are actually two ways in which these types of plans can be underwritten. These include either simplified issue or guaranteed issue.
With a guaranteed issue policy, the applicant is not asked any medical questions at all on the application for coverage. Therefore, anybody who applies will be approved for this particular type coverage.
Although the premiums on these plans are typically higher than they are on most other types of life insurance plans, those who possess adverse health conditions can still obtain life insurance coverage – so this can provide a great deal of peace of mind to those who would otherwise not qualify for life insurance benefits.
A simplified issue final expense life insurance policy application will ask some questions regarding the individual’s health and medical status. However, the person will not be required to take a medical exam in order to apply for coverage.
Why Consider Purchasing a Final Expense Life Insurance Policy?
When purchasing life insurance, it is important to choose the right type and the right amount of coverage for your specific needs. Therefore, be sure to add up all of the potential final expenses that may be required.
Given the high cost of a funeral today, along with the many other related costs, the additional debt could leave loved ones with a great deal of undue stress. A final expense life insurance policy can help to ease this.
Although all types of life insurance can be important – depending upon one’s needs – final expense coverage can fill the specific need of ensuring that loved ones are not burdened with having to come up with a substantial amount of money at an already emotional time.