Family Final Expense Insurance: Securing Your Funeral Payments
When you pass away, you’ll likely leave a very large bill for your loved ones. Funerals are expensive, and other costs like medical bills and outstanding debts can add to your final expense. Fortunately, you can take precautions to make sure that your family will be able to grieve in peace.
Having a final expense insurance policy can help ease the financial stress on your loved ones when you die. In this guide, we’ll cover everything you need to know about final expense insurance and how it can aid your family!
Understanding Final Expense Insurance
Final expense insurance, also called burial insurance, refers to a whole life insurance policy with a smaller death benefit and relaxed application process. Like any other life insurance, you’ll be provided coverage in exchange for regular premium payments.
This coverage comes in the form of a death benefit that will be paid out upon your death to your benefactors, typically your family. In addition to insurance companies, some funeral homes are also licensed to offer final expense life insurance.
Unlike traditional life insurance that generally requires a medical exam on your application, you only need to answer a health questionnaire to qualify for final expense life insurance. Some final expense life insurance policies even offer guaranteed issue options where you skip any health checks in exchange for higher premiums.
However, some final expense insurance policies have stipulations that may limit your protection. Several insurers grant limited death benefits if you pass away within two years of your application’s approval. A number of policies also only provide final expense coverage until age 100.
Due to the smaller death benefit, final expense life insurance usually offers lower rates compared to traditional life insurance. For a $10,000 final expense policy, a 50-year old man can expect to pay $360 annually. However, this rate tends to increase sharply with age. For the same amount of coverage, a 60-year old man will be charged $516 annually.
Can You Get A Final Expense Insurance Policy For Your Whole Family?
Typically, final expense insurance only exists as individual insurance. Unlike family life insurance where you can insure multiple people with one policy, you can only insure yourself with final expense insurance. Moreover, final expense insurance is generally aimed at older people who cannot qualify for traditional life insurance.
How Can Final Expense Insurance Help Your Loved Ones?
Final expense insurance can help your family pay for your funeral and more. Here are some ways that final expense insurance can help your family.
It Will Help Your Family Pay Your Funeral Expenses
Funerals aren’t cheap. Including the funeral home’s services, transporting your remains, managing your ceremony, buying your casket, it all adds up. On average, funerals can cost up to $8,000 or even more depend on what you have planned. A final expense life insurance policy can lighten this financial burden using your death benefit.
It Can Help Cover Your Medical Costs
The average cost of dying in a hospital is more than $32,000. Even if you opt for hospice care at home, you’ll be saddled with $11,000 in care costs. While being covered by government programs like Medicaid or Medicare helps, you’re still responsible for part of your medical bills.
This, of course, will have to be paid for by your family after your death. On top of funeral costs, this is another significant source of financial stress to those you’ve left behind. To help lighten this load, your family can use part of your death benefit to pay these medical bills.
It Can Help Pay Your Probate And Legal Fees
Probate is the process of authenticating your last will and testament. This involves calculating all the assets you left behind and then paying any outstanding bills before distributing the rest to your heirs. How much your family needs to pay for probate and other legal costs will vary by state laws and the value of your estate. Generally, families can expect to pay 4% to 7% of an estate’s total value on probate. A final expense insurance policy can help bear this cost, leaving more of your estate to be distributed to your heirs.
Alternatives To Family Final Expense Insurance
Applying for a final expense insurance policy isn’t the only choice available to pay for your funeral. There are other alternatives you can look into, several of which we’ll cover in this section:
Traditional Life Insurance
Traditional life insurance requires you to take a medical exam as part of your qualification process. If you’re young and in good health, traditional life insurance will be a better option than final expense insurance due to its larger coverage and more favorable rates. For instance, a 30-year old man can expect to pay $229 annually for a 20-year term policy worth $500,000 in coverage.
Traditional life insurance becomes less viable as you age and accumulate more health issues. That same 20-year, $500,000 policy will cost you $842 per year at age 50. While traditional life insurance does offer a guaranteed issue policy that allows you to skip the medical exam, you can expect to pay much higher premiums. If you find the higher premiums prohibitively expensive, then a final expense insurance policy is a better option for you.
Paying for your funeral in advance can be another alternative that you can consider. Typically, you can arrange a prepaid funeral with a funeral home. Paying your funeral costs well in advance also gives you the advantage of being able to pay in installments and not a lump sum.
One of the most common ways to prepay your funeral costs is with a pre-need funeral trust agreement. First, you need to plan your funeral at the funeral home and determine how much it costs. Then, your total cost will be written down into a contract that determines how much you need to put into the trust to fully pay for your funeral. Upon your death, the funds you put into the trust will be directly used to arrange your planned funeral.
Prepaying your funeral means that you’ve already reserved space for your burial, taking away any uncertainties that may arise. Your loved ones will also be saved from the stress of having to plan your funeral since it’s already planned out in advance.
However, there are several drawbacks to prepaying your funeral. Since your arrangement is only made with a specific funeral home, it can be challenging to get a refund if you move or the funeral home goes out of business. Moreover, all of those funds will go to the funeral home, leaving none to pay for your other final expenses.
Unless you’re absolutely sure you want to be buried with the services of a specific funeral home, you should reconsider prepaid funerals. If you need more flexibility in your burial options, you’ll be better off applying for final expense life insurance.
Savings Accounts And Totten Trusts
Another option to pay for your funeral is to create a dedicated savings account for your funeral funds. You can set aside part of your income regularly until you have enough to pay for your funeral. To avoid probate, you can make a joint savings account with your chosen beneficiary. This allows them to have direct access to the money you’ve set aside in the account after your death.
A similar option to a savings account is a payable-on-death account, also known as a Totten Trust. In these accounts, you name a beneficiary who can only access the funds inside only after your death. Once they present your death certificate to the bank, they’ll have access to everything you’ve put in the account during your life. However, in life, you can still withdraw money from it like a regular savings account.
The big downside of this option is the lack of security. If you pass away before you manage to save up enough money, then your family will still be saddled with a portion of your funeral bills.
Memorial societies are non-profit volunteer organizations that provide reasonably-priced funeral arrangements. Run by the Funeral Consumers Alliance (FCA), there are chapters spread out across the United States. For a small lifetime membership fee, a memorial society can provide you with much lower funeral rates due to FCA negotiations. Volunteers from these societies also carry out the work typically done by the funeral home to further drive down costs.
With the help of memorial societies, you can lower your funeral costs by hundreds or even thousands of dollars compared to regular funeral home rates. Even if you’re already insured, joining a memorial society can still be beneficial. The money you save on your funeral means your death benefit can be used on other costs or even be reduced altogether.
If you qualify for it, government assistance can help pay for your funeral. Many states offer programs to help those who can’t otherwise afford a funeral.
In the case of federal government assistance, Social Security pays out a death benefit depending on your employment history. Typically, Social Security pays out a one-time $255 allowance upon your death and if eligible, monthly benefits for your household. These monthly benefits are tied closely to your lifetime earnings and survivor eligibility.
If you’re a veteran, you’re eligible for funeral reimbursements for both services- and non-service-related death. In addition to the death benefits, you’re also eligible to be buried in a national cemetery at no cost. Moreover, your veteran status also qualifies you for optional military funeral honors at no extra cost.
Government assistance may help cover some of your funeral costs, but it’s unlikely that it can cover your whole funeral bill. Social Security benefits are very limited and not everyone can qualify for veteran benefits. Qualifying for government assistance will help lighten your funeral costs, but you can’t entirely depend on it.
How To Get The Best Protection From Final Expense Insurance
Plan Out Your Funeral In Detail
Talk to a funeral home and plan out your burial arrangement in full detail. This way, you’ll get a rough estimate of how much you need to pay for your funeral. Even if funeral costs rise in the future, you’ll know how much of a cushion you need on your policy.
Another benefit of this is the amount of choice and customization you have over your own funeral. Since you’ll be a major part of the planning process, your loved ones won’t have to guess what sort of ceremony you would’ve wanted. Keeping a document of your funeral and final wishes for your family will help clear up any confusion that may arise during your funeral arrangement.
Calculate Your Final Expense Estimates
Aside from funeral costs, your insurance policy will pay for your other final expenses. While calculating your medical bills may be tough if you don’t have any major health issues, you can calculate other things such as debt. Estimate how much debt you can pay in life and have a rough idea of how much will be left when you die. Having an estimate of this will allow you to further adjust your death benefit so you don’t overpay or underpay your insurance.
Stay In Good Health
Even if final expense life insurance doesn’t require a medical exam, health still matters! Favorable answers on your health questionnaire can grant you lower rates. Insurers especially regard smokers as high risk and they are typically charged much higher on premiums, so consider quitting if you smoke.
Consider Being Insured Earlier
Age matters in final expense life insurance, even for seniors. The older you are when applying for a policy, the higher your rate will be. If you find qualifying for a traditional life insurance policy challenging or prohibitively expensive, it’s best to immediately consider applying for a final expense insurance policy.
Take The Medical Questionnaire Option
If you have some health issues, a guaranteed issue policy may look appealing. However, it’s still recommended that you take the medical questionnaire anyway to see how much you’ll be charged on premiums. Afterward, you can compare and see which one is more affordable – with or without the guaranteed issue option.
Be Honest In Your Application
Everything you write down in your insurance application’s medical questionnaire will be checked. Any difference or inconsistency between your medical records and your questionnaire answers will raise a red flag for the insurer. If they discover these discrepancies, your death benefit claim may be denied entirely.
Find The Right Insurer
Finding the best final expense policy isn’t just about finding affordable rates! You need to analyze whether the insurance company has a proven track record of reliability. While shopping around for a final expense insurance policy, it’s a good idea to get quotes from several insurers so you can compare them all.
If you want to confirm an insurance company’s reliability, look up insurance rater sites like A.M. Best. Generally, any insurers with an A or A+ rating are considered trustworthy.
Work With An Insurance Agent
Researching and comparing policies by yourself can be challenging. With the help of an insurance agent, you can take advantage of their expertise to help you choose the right policy for you. It’s recommended that you choose an independent agent since they generally offer more options from different insurers. Insurance agents can also help simplify your purchase process and can possibly apply discounts.
Know Your Policy’s Details
Different final expense insurance policies may have differing conditions. It’s essential to know how long it takes for your death benefit to pay out, any age limitations it may have, and the existence of any waiting period between your application being approved and the insurance coverage coming into effect.
If age and health issues prevent you from getting favorable rates on traditional life insurance, a final expense insurance policy may be the best option for you. Its simplified acceptance criteria can help you make sure that your funeral will go just as you planned.
If you’re still trying to determine whether final expense insurance is right for you, contact Wesley Insurance, LLC today! Our team of professionals will gladly advise you on the best options to pay for your funeral.