How Much Final Expense Insurance Do I Need?

    What You Need To Know Before Buying Burial Insurance

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    With final expense insurance, you can save your loved ones the surprise expense of a funeral as well as tie off any loose ends – whether they may be medical bills or personal loans. But, how much final expense insurance do you need? In this guide, we’ll help you calculate an approximate figure so your loved ones won’t face financial difficulties in your final moments in life.

    What Is Final Expense Insurance?

    Final expenses are all the costs we incur during the final moments of our lives. This includes, but is not limited to, the funeral, burial or cremation, hospitalization, hospice, and home care. As such, final expense insurance is a type of whole life insurance that offers coverage for these types of expenses when the time comes.

    This type of insurance is characterized by the following features:

    • A fixed death benefit: Much like typical whole life insurance, final expense insurance provides policyholders with a death benefit, or a lump sum that can be accessed by the beneficiaries upon their death. Typically, you can expect a death benefit of $2,000 to $50,000. This sum should be enough to cover any expenses incurred during your death. Unlike in other policies, the death benefit remains fixed throughout the lifetime of the life insurance policy.
    • Fixed premium rates: Premiums are the monthly payments that policyholders must pay to maintain the policy. While premium rates for final expense insurance may be slightly higher compared to term insurance policies, they do remain fixed until the end. That means you won't be hit with surprise price hikes down the line.
    • Lifelong coverage: As final expense insurance is a type of whole life insurance, that means that a policy will last as long as your lifetime. This is good news for anyone who doesn't want to keep renewing their policy and redoing the application process all over again. However, this means that this type of insurance is on the more expensive side.
    • Cash value: The cash value component is akin to an investment account, where policyholders can tuck away their money and grow it over time. This is common among most whole life insurance policies. Having a cash value component is very beneficial – it gives you the opportunity to add to the value of the death benefit as well as the option to borrow against your policy.

    Final Expense Insurance vs Whole Life Insurance

    While final expense insurance and whole life insurance are similar in a lot of ways, there are some key differences that you should know about. For one, final expense insurance provides lower coverage than whole life insurance. This means that you can expect to pay less in premiums and provide your beneficiaries with a lower death benefit. As its name suggests, this type of insurance is purchased primarily to help pay off the expenses involved with passing.

    So how do you choose between final expense and whole life insurance? Since it provides a lower coverage, final expense insurance makes more sense for seniors who don't have any dependents, such as non-working spouses or children who are minors/still in school. Conversely, whole life insurance should be the better choice for people who do have kids and spouses depending on them for their daily needs. Whole life insurance is also better for those who don't have a lot in savings or retirement funds, and who are anticipating leaving behind debts.

    Should you get final expense insurance if you already have whole life insurance? In most cases, you don't need both. Whole life insurance is already pretty comprehensive, with most policies providing enough coverage to keep dependents financially secure for a few years and to help cover the cost of things like hospital bills and funerals.

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    How Much Final Expense Insurance Should I Get?

    When computing for your final expense life insurance coverage, you want to make sure your beneficiaries will have enough to cover all your final expenses, plus a little extra just in case.

    Most people will base their computations on the estimated average costs of medical bills and funeral expenses. So we'll break down how much each of these components will likely cost you in the future.

    Funeral Costs 

    There are typically two ways to go about one's funeral – with a burial or with a cremation. While the former is the more traditional method of laying one to rest, cremation has gained popularity over the years. In fact, the cremation rate in the U.S. stood at 54 percent in 2019, compared to the meager 26 percent in 2000. This is mostly due to the difference in cost, with cremation costing just about a third of a typical burial on average.

    Here's a more detailed breakdown of the two options:

    Basic Funeral Costs With Viewing And Burial

    According to the NFDA, the median cost of a funeral with viewing and burial costs $7,640. If you purchase a vault, you're likely to spend about $1,495 more, or a total of $9,135. Included in the package are the following:

    • Professional service fees ($2,195): This covers the cost of the staff, funeral director, and overhead fees. This can also include coordination fees, consultation with the surviving family, documentation, and sheltering for the deceased.
    • Transfer of the remains to the funeral home ($350): This the fee for removing the remains from the home/hospital/place of death and transporting it to the funeral parlor.
    • Embalming ($750): For funerals with viewing, embalming is most often required to preserve the body until the burial or cremation. Embalming fees will include the preparation, materials, and equipment needed to complete the procedure.
    • Other preparations of the body ($255): This includes things like dressing and cosmetology.
    • Facilities and staff for viewing ($425): Viewing is the time loved ones can gather and pay their respects. Viewings are usually done at funeral homes over several days before the funeral ceremony and burial/cremation.
    • Staff and facilities for the funeral ceremony ($500): The funeral ceremony is usually officiated by a priest or pastor from the family's religion, and may take place at the funeral home, a church, cemetery chapel, or the crematorium.
    • Hearse ($340): This is the vehicle that is used to transport the deceased's body from the funeral home to their burial spot or the crematorium.
    • Service car/van ($150): Sometimes, family members may not have enough vehicles to transport guests to the service. In this case, they may opt to rent service vehicles for the day.
    • Printed materials ($175): This can include prayer cards, register books, photos, and acknowledgment cards for guests.
    • Metal burial casket ($2,500)

    Basic Funeral Costs With Viewing And Cremation

    According to the NFDA, the median cost for a funeral with viewing and cremation is $6,645. A package will include the aforementioned costs, along with a cremation fee (median cost is $350), a cremation casket ($1,200), and an urn ($295). The package is usually cheaper than burial because it excludes the use of a hearse, metal burial casket, and vault.

    Additional Funeral Expenses

    Depending on your or your family's wishes, you may have to include the following costs in your estimate:

    • Burial plot - $200 to $2,000
    • Grave markers or headstones - $500 to $1,000
    • Travel cost for attending the service - cost varies depending on how many people are coming and their chosen mode of transportation
    • Catering - again, the cost depends on the number of guests at your funeral

    Medical Bills

    The cost of your final medical bills will depend on whether you pass away at home, in hospice, or in a hospital. You'll also have to factor in things like possible emergency room fees, medication, doctors' professional fees, confinement costs, and the like.

    According to NPR, the average cost for one's final month of care at home is about $4,760. If you're in hospice, it gets even more expensive, with the average cost at $17,845. And if you spend your final month in a hospital, you're likely to rack up a bill of $32,379.

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    What Else Can Affect The Cost Of An Insurance Policy?

    Aside from everything mentioned above, it's important to note four key factors that can affect the cost of your final expense life insurance policy.

    Age

    It's good to consider life insurance at an early age. The older we get, the more expensive premiums become. As a matter of fact, it is believed that premiums can rise by 8 percent each year we age.

    If you're relatively young and make enough to meet the monthly premium rate, it's best to purchase whole life insurance while it's still cheap. Another option would be to go for the less expensive but also less secure term insurance, which doesn't provide lifetime coverage but can last for up to 40 years max.

    Gender

    Women have a slight advantage over men when it comes to finding affordable insurance. Since men have shorter average lifespans than women, they can expect to pay larger premiums than their counterparts.

    Lifestyle

    Are you a smoker? Heavy drinker? Occasional drug user? Do you enjoy extreme sports such as surfing, scuba diving, or paragliding? Or perhaps you're somewhat a reckless driver with a less-than-perfect record? All of these are considered high-risk behaviors and can affect your chances of getting lower premium rates. 

    Health

    Although a medical exam isn't usually a requirement to be eligible for funeral expenses coverage, insurance companies will still likely ask you questions about your medical background. This is to get a better picture of your overall health and to help them assess whether you're considered a high-risk client. Things like pre-existing conditions, family history, and accident and injury history can all affect your policy rates.

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    How To Shop For Final Expense Life Insurance

    Now that you have a cost in mind, you can start shopping around for insurance. Here's how you can find the best plan for you:

    1. Estimate Your Final Expenses

    Here's where you apply everything we just went over in this guide. Take a look at the median costs for funerals, decide whether you want a burial or a cremation, and factor in any specific ceremonies or markers you want. Don't forget to include the potential cost of your medical bills, plus anything else you might leave behind, like debts and mortgage balances.

    2. Examine Your Savings Or Life Insurance Policy

    If you have a sizable savings account, an IRA/401(k), or even an existing life insurance policy, you may not need such a big final expense insurance package. In some cases, you might not even need one at all. Go over your financial situation, talk to your immediate family (as well as any remaining dependents), and assess whether an end-of-life insurance policy is right for you.

    3. Determine Which Type Of Final Expense Insurance You Should Get

    So you've decided that, yes, you want a final expense policy. But which type of policy should you get?

    Typically, you have two options: a guaranteed issue policy and a simplified issue policy. The former is, as its name suggests, pretty much guaranteed. This means that you won't even have to undergo a medical exam, nor answer medical-related questions. However, this also means that you're likely to pay more in terms of coverage. Another downside to this type of final expense insurance is the low maximum coverage. In most cases, you will only be allowed a death benefit of up to $25,000.

    On the other hand, simplified issue insurance gets you higher coverage (up to $50,000) in exchange for a more stringent application process. While it's still unlikely for a company to require a medical exam for this type of final expense life insurance, more often than not, you'll have to answer some medical-related questions, such as questions regarding pre-existing conditions like diabetes or hypertension and tobacco use.

    4. Have All The Necessary Documents Ready

    The paperwork requirements for final expense insurance are simple enough. Most insurance providers will ask for proof of identity and age, proof of income, and proof of residency.

    Your proof of identity and age can include your passport, driver's license, birth certificate, or even a green card if you have one. Your proof of income, on the other hand, could be a photocopy of a payslip, income tax returns, or a bank statement. Finally, your proof of residence can be a mortgage contract or, in some cases, a utility bill with your name and address on it.

    5. Partner With An Independent Agent

    There's nothing wrong with approaching an insurance company to ask about their final expense policies. However, if you want an honest, unbiased, and professional opinion on where to find the best deals, consider hiring an independent agent. Since they don't work under one specific company, they can take a look at your profile and find policies from different companies that really align with your needs and preferences.

    What should you look for in a good agent or broker? Find someone who listens to you rather than talks over you. Find someone who isn't adamant about what you should or shouldn't do and someone who can answer any of your questions with ease.

    6. Fill Out The Application And Attend The Interview

    Since you don't usually need to undergo a medical exam to qualify for final expense insurance, the application process is relatively simple.

    You'll be asked to fill out an application form, then given a set of personal and medical-related questions to answer. You'll be asked about your height and weight, age, occupation, lifestyle, and income. You could also be asked about your family's medical history, any pre-existing medical conditions you have like asthma or heart disease, and any medication you're on.

    After you fill out your end-of-life insurance application, you'll be evaluated and then scheduled for a follow-up interview where the insurance provider can go over any additional requirements and company rules.

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    Conclusion

    Between the cost of hospitalization and funeral arrangements, your loved ones could be left with huge bills once you’ve passed on. Final expense insurance can stand as your final parting gift to those you held near and dear – an act of taking the load off your loved ones' shoulders and taking care of your own funeral and medical bills.

    If you want to know more about protecting yourself and your family financially, Wesley Insurance, LLC has a dedicated team ready to consult about all-things-insurance.

    Written By Cameron McDowell
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