Final Expense Insurance: Essential Statistics
Believe it or not—2016 Insurance Barometer Study shows—53% of life insurance owners in the U.S. find reasons to buy final expense insurance.
Why Final Expense Insurance Matters
Death has never been easy and cheap. It is emotionally troublesome for those who stay behind when you pass on. They lose the love they enjoyed from you. They lose the benefactor, the breadwinner, the best guide they had.
Even if you are not the breadwinner, you count important to them.
This is family ties.
However, on a realistic note, they find the burden of paying for the medical bills, the loans and the funeral costs to be an addition of fire to the fuel when you pass on. For those who have no savings and lose their breadwinners, the time can be of heightened emotional turbulence. If you have a practical approach toward family finance, you can save your heirs from the financial trouble by purchasing a final expense insurance policy.
Final expense insurance is intended to meet the last rites bills that an insured’s death involves.
If your term life insurance is over, you should not ignore funeral expense insurance.
Funeral Can Be More Expensive than You Know
In the U.S., funeral costs are leaping fast upward.
According to National Funeral Directors Association (NFDA) the national median cost of burial in 2014, was $8508. It was inclusive of a vault but exclusive of things like monument or marker, cash advance charges for flowers or obituary.
Ten years earlier in 2004, the same would cost you $6,580. The cost for burial thus rose by 29.3%.
Item-wise speaking, the lowest raise in cost was 14% in the price of metal casket which cost $2,395 in 2014. The same would cost you $2,100 in 2004. Similarly, the cost for non-declinable basic services fee rose by 37%, removal of remains by 59%, embalming by 39.6%, preparation of the body by 42.9%, facilities by 25.3%, hearse by 41.1%, service vehicle by 42.5% and basic memorial printed package by 63.2%.
Cremation Not Cheap
Though many people consider cremation to be a cheaper option for the last rites, it is no less expensive by any means. According to the NFDA analysis, the median cost of an adult’s funeral with cremation in 2014 was $6,078. This cost does not include vault, monument or marker or the miscellaneous costs related to the ceremony.
Clearly, funeral can be highly expensive. If you do not wish your people bore the burden, final expense insurance is worth purchasing.
The Uses of Final Expense Insurance
Final expense insurance can be useful in the following 8 ways:
It Funds Funeral Costs
As we have already mentioned, final expense insurance is intended to create funds for the last rites: burial or cremation of the mortal remains. As an insured, you leave it for your people to arrange the costs that funeral process would require.
Ensures Funeral Your Way
When you have your final expense insurance policy, you have the freedom to choose the way you want your last rites to take place. For example, you can choose where you want your last remains to go to and how. Without a funeral advantage life insurance policy, you may not be able to be the decision-maker. So, if you add value to the traditional Christian burial system or the faith you adhere to, final expense insurance can work for you. That means if you are against cremation, you can ask your insurer to intern your physical remains or vice-versa.
Brings Feel of Peace
Final expense insurance serves as a means for ensuring mental peace. When you have it, you know that you are not leaving a burden on your family members. This brings peace of mind for you. And, it counts for you.
Passes on Financial Wisdom
Having final expense insurance proves that you are a financially wise person. Not all people are savvy in financial planning. As knowledge is also an inheritance, your attitude could contribute to transfer your wisdom to your children.
Provides for Medical Bills
Death usually incurs medical bills. The inheritors of your final expense life insurance policy benefit can choose to send the remnants of the death benefit to pay for small-scale medical bills.
Helps Pay Personal Loans
When you die, the death benefit of your final expense insurance goes to the people you nominate. After paying for the funeral costs, they can use the money left to pay off your personal loans in case you have any.
Leaves Financial Support for Survivors
Many children or spouses feel emotionally broken down when someone dies. The remaining part of the benefit of the final expense insurance can be of use in those moments. The children can find it as a support fund for temporary needs.
Serves as a Gift
You can leave part of the death benefit as a gift to someone you love most. It may be a grandchild or anyone. The money that comes off after the funeral costs can be a tool to fulfill your wish to go to someone as a monetary gift.
Who Need Final Expense Insurance?
Final expense life insurance is not a must for all. Some need it while others do not. It depends on your financial situation whether you should have this type of policy or not. You probably need it when you are in one of the following situations:
You have not been able to save enough money for yourself to fund your funeral expenses.
Your children are not financially capable to fund your funeral costs.
The term life insurance you had is over and you have fallen out of insurance protection.
You own no whole life insurance that would bring death benefit when you die off.
When you may not be eligible for life insurance for some reasons, critical illness or some other cause, final expense life insurance is the only option you can avail of.
Is Social Security’s Death Benefit an Alternative?
You might wonder why you would require to buy final expense insurance when there is Social Security’s death benefit when someone dies. It is worth for you to know that state-funded social security cannot be an alternative for funeral insurance. Here are the reasons:
The Social Security death benefit allocated for funeral is literally scanty in view of funeral costs. When you typically need as much as $10,000 for funeral, your Social Security pays you only $255. This amount does not suffice even to fund the so-called minimum cost of cremation which is $600.
Receiving the Social Security death benefit is often uncertain. You may or may not be eligible to receive it. So, you cannot depend on it. Also, funding for funeral costs on Social Security is a state-specific program. Depending on which state you reside in, you may or may not avail of the opportunity.
Even if your state has the program, you cannot be sure you can make use of it. Because, if you are not enrolled on the Social Security Program, you are not going to get anything.
Needs Eligible Survivor
Social Security death benefit may be blocked if you do not have an eligible survivor. The either of the two survivors that can receive it is the spouse and the child who stayed with you during your last days. Thus, if you do not have either of the recognizable survivors, the benefit is unlikely to convert.
What Are Your Choices?
When you will want to purchase final expense insurance, you will typically have two options before you to choose from. They are: pre-need insurance and funeral insurance. Although both are designed to aid your final expenses, there are distinctive lines that separate them.
Pre-need Funeral Program
Pre-need funeral insurance is often an arrangement between a funeral home and you to facilitate the final expenses. It can also be bought from regular life insurance companies.
How It Works
When you purchase it from a funeral home of your choice, you pay the costs to the home-people. You can pay up the money in full at a time or in installments. In return, the home remains responsible to provide you funeral services. That is to say, they typically remain in charge of funeral home, merchandise, church and burial services. The home-people virtually consider this insurance as a contract.
On the other hand…
If you buy your pre-need funeral life insurance from a regular life insurance company, they send the death benefit to your chosen funeral home to execute the funeral.
You should note that a pre-need final expense life insurance policy comes in two packages: guaranteed and non-guaranteed. When you buy a non-guaranteed policy, your cost may rise over time for inflation. On the other hand, if you buy a guaranteed policy, the cost of the product will remain the same no matter what happens to economy. As a matter of course, a guaranteed policy will cost you more than a non-guaranteed one.
Advantages of Pre-need Funeral Insurance
An advantage with the pre-need insurance is the people of the insured do not have to worry over the issue of the funeral.
When you buy a guaranteed policy, inflation does not affect the cost of the funeral.
The burial or cremation comes hassle-free. When informed, the funeral home people take necessary steps immediately to do their job.
Disadvantages of Pre-need Funeral Insurance
Set against inflation, a non-guaranteed policy may make you pay up more in the end.
The funeral home being the authority to your last rites leaves no scope for your people to make decisions.
They do not refund any left-over money to the heirs.
When you buy pre-need funeral life insurance from a regular insurance company, the death benefit goes to the funeral home instead of the heirs.
This policy can be costlier than a regular final expense insurance policy.
Funeral Life Insurance
You can get a regular final expense life insurance from many of the well-known life insurance companies. Usually this policy is sold to people between 45 to 85. However, the age restriction may vary company-specifically. The policy typically comes in the form of whole insurance. No matter what your age is, so long as you pay your premiums, your policy stays effective till your last day. Funeral expense insurance is also available in term insurance category.
Advantages of Funeral Life Insurance
Provides Final Costs
A big pro of final expense insurance is that the death benefit goes to your heirs. Besides meeting the final expense costs, they can use the rest of the money any way they find necessary.
Has Cash Value
As the regular funeral life insurance falls in the whole life insurance category, it provides you cash value benefit. This means that after taking the company’s fees, charges and the insurance amount off, part of the premiums is sent to grow profit to be added to the benefit. This is known as cash value and you are eligible to borrow against it.
(But remember, hoping against this can prove to be hopeless.)
Physical Exam not Obligatory
You can buy the policy with or without your requiring to undergo physical examinations. So, if you have health issues or critical illness, you can easily get yourself signed up on this policy.
Premiums for funeral life insurance are level. That is to say, the cost does not increase in tune with your age or inflation.
If the policy is active, the death benefit is guaranteed.
Beneficiaries Decide Use of Money
Unlike what happens with pre-need funeral insurance, the beneficiaries decide the use of the money they receive.
May Earn Dividend
The policy offers dividend. It is the share of the profit that the company earns on your premiums. However, dividend share is a promise and not a guarantee.
Disadvantages of Funeral Life Insurance
Despite the pros referred to, funeral life insurance is not all too good. These are the cons that this policy bears:
Insurers sell this policy only to people of certain age band. Mostly, as we have already mentioned, the age band ranges between 45 to 85.
The coverage of this policy is pretty scanty in size. Starting from $3,000, it typically peeks at $25,000. However, the highest benefit may greatly vary from one company to another. For example, State Farm’s highest offer is $10,000 while Colonial Penn approves $50,000.
The death benefit often comes in graded amounts. That is to say, the earlier the insured dies, the smaller an amount of benefit the beneficiaries receive. So, this insurance is always an ‘insurer’s policy’. When you pay for a long time, the death benefit often outweighs the sum total of premiums paid.
Hopeless Cash Value
The cash value that insurers often speak of does not bear guarantee. Even if it does, it might take years to get even $100 dollars. When you borrow against it, you have to pay interest. Unless you return the borrowed money, your death benefit will get sliced off against the borrowed amount (plus interest). You may even end up losing everything if there is not enough money to meet the fees and charges that the insurer takes off regularly.
Time-Consuming Claims Process
Life insurance companies have their process in sanctioning the death benefit. The beneficiaries have to make a claim in order to get the coverage on the insured. This is time-consuming. For example, Lincoln Heritage that specializes funeral expense insurance, takes 24 hours to address the death benefit claims. Without hard cash on hand, it then becomes difficult to do the doable. Besides, if the insured has only the spouse, making a claim can be hard for him or her as he or she will be presumably emotionally broken down.
The Names Final Expense Insurance Goes By
Funeral life insurance comes up by different names. They are:
1. Funeral Advantage Program
2. Funeral Advantage Life Insurance
3. Funeral Life Insurance
4. Burial Life Insurance
5. Guaranteed Acceptance Life Insurance
6. Guaranteed Issue Life Insurance
7. Guaranteed Issue Whole Life Insurance, etc.
What to See While Buying Funeral Life Insurance
Although the core concept of final expense insurance does not vary much, policies vary from one company to another. If you fail to take an apple-to-apple look at several of them, you may end up boarding the wrong boat. So, checking the policy details and understanding the benefit mechanism are of much importance.
We have the tips for you:
Check Waiting Period
For example, like most of their competitors Mutual of Omaha has a waiting period of 2 years for the benefit to convert. If the insured passes away from any natural cause within the first two years of the purchase of the policy, they return all the premiums with an addition of 20% money. Gerber’s life’s addition to the refund is 10%. Most insurers pay off the full benefit within two years only when the insured dies by accident. But there are exceptions to this. For example, Transamerica’s coverage begins immediately.
Check Free Look Period
Whatever life insurance policy you purchase, it is always advisable that you check the ‘Free Look’ period. This is the time the insurer allows you to review the policy and decide whether you would like to continue it or not. It is better to have as many as 30 days which many companies offer. Some companies may offer less than a month’s time. For example, Sentinel Security’s Free Look period is 20 days.
Check the Type of the Policy
Final expense life insurance policy can be both in the term and whole insurance categories. Term policy works for a specific period of time; while whole policy works for your entire life-span. It is important that you make sure you are buying the right kind you need. Most companies sell the whole version of funeral life insurance. But some companies like Progressive and Transamerica sell both types.
In unison with others, Life Insurance Mentors team will ask you to shop around and get quotes online. As funeral life insurance is sold to people past 40 and often without any medical investigation, life insurance companies bear larger risks of mortality. As a result, they want to make their pricing compensatory and charge high costs. But if you shop around, there are possibilities that you will get a comparatively low-cost offer from some of the companies. For example, when we asked for quotes from Fexquotes for Finn Ross, a 50-year old non-smoker Alaskan male, the lowest monthly quote came from Mutual of Omaha. Their quote was $68.08 while the highest probable cost came from Amerigo which was 117.87, nearly 100% more than Omaha’s.
How Death Benefit in Final Expense Insurance Works
There are 3 ways the death benefit of final expense life insurance works. They are as follows:
Level Benefit: This is an immediate effect policy. The death benefit comes to your beneficiaries in full whenever you die once you have signed up the policy and paid the premium.
However, you need to know that this policy comes to you through underwriting. That means, you will need to medically prove that you are eligible to purchase the policy. If you have had records of delicate surgeries or are on drugs for certain health conditions, you are unlikely to qualify for the level benefit final expense insurance policy.
This is the least expensive policy of all final expense insurance types.
Graded Death Benefit
Graded death benefit usually has you waiting for a certain period of time before you get the full death benefit. The typical waiting period for most companies is the initial two years while it may vary with some carriers. For example, Equitable has a waiting period of the first four years.
This policy does not pay the full benefit if you die from any of the natural causes like old age, suicide or illness. Your death from one of these causes within the time will usually bring a percentage of the death benefit to the beneficiaries. That is to say, your final expense insurance policy’s full benefit converts in the third year.
But if you die from an involuntary unnatural cause, the full death benefit will go to your heirs. Auto or plane accidents, death due to falling down from somewhere, death from drowning in water, death from professional mistakes or hazards, death from falling or flying or fire objects or fire burn are situations generate full benefit within the waiting period.
Also, you do not require to undergo a paramedic test for this policy. This is a company-specific issue. Mostly, the insurer will ask you several questions related to your health before they approve your application. You can buy this policy online. If you have minor health conditions like left-behind history of a heart attack, Parkinson’s disease, chronic liver diseases, systematic lupus or COPD, insulin-controlled diabetes, you will be provided a graded policy instead of a level policy.
This cost of this policy will be higher than that of a level policy.
The death benefit of a modified final expense insurance has a waiting period like the graded policy. But the difference lies in the way the death benefit for a natural death comes from this. If the insured dies of a natural cause, the waiting period comes off in pre-defined percentage form. Death in the third year will bring 100% of the benefit, death in the second year will bring less than that and death in the first year will bring less.
Also, this type of final expense insurance is good for people who are ineligible for insurance of for critical illnesses. People with serious health conditions like Lou Gehrig’s disease, HIV, AIDS or Alzheimer’s find this policy useful.
The waiting period is too long when you have any of the critical illnesses.
Guaranteed Issue Policy
A guaranteed issue final expense policy also has a waiting period. Natural death of the policyholder within the period returns the beneficiaries only the premiums with an addition of 10% to 20%. But involuntary death generates the full coverage.
This policy does not investigate into the policy seeker’s health.
It is the costliest of all funeral life insurance policies and are marketed vigorously on the internet.
Which Are the Best Final Expenses Insurance Companies
Having your funeral expenses life insurance from a reputed company is of utmost importance. Not all companies sell final expense life insurance. These are the best final expense life insurance companies our fellow bloggers suggest:
AARP’s burial life insurance comes to their members via New York Life Insurance Company. Their whole insurance sells $5,000 to $25,000 to people aged between 50 to 80. They carry an A+ Better Business Bureau rating. Its service is available in all the 50 states of the USA.
Aetna has two types of whole life insurance for final expenses. They have level, graded and modified death benefit policies that they sell to people between 45 and 85. Their coverage starts at $3,000 and peeks at $35,000. They offer cash value growth. Better Business Bureau awards an A+ to this company.
American International Group’s (AIG) graded death benefit life insurance for final expense offers 2-year graded death benefit. That is to say, the death benefit does not convert for natural death within two years. Acceptance of guaranteed for 50 to 85-year-olds. They also carry an A+ rating from Better Business Bureau.
American Amicable’s funeral insurance comes two ways: with immediate effect and 2-year graded benefit. While the immediate effect policy’s coverage starts at $2,500 and ends at $35,000 the graded benefit policy’s maximum range is $20,000. Eligibility age for purchase of their products is 50 to 85.
The letter grade rating for American Amicable Life Insurance Company from Better Business Bureau is A+.
Assurity has three different types of funeral life insurance for the buyers. Their Simplified Whole Life Insurance bears level, graded and modified death benefit protection. Unlike many companies, level benefit protection can be purchased by people from 0 days to 80 years of age. The death benefit converts from the day 1 and the premiums do not change. Coverage starts at $5,000 and ends at $50,000.
The policy with graded death benefit is available to burial life insurance seekers who are 40 to 80 years old. Buyers can choose amounts between $5,000 to $25,000. Premiums of the policy do not change over time. As it is characteristic of graded death benefit, it does not apply for the first two years if the insured from any other cause than an accident.
Their third product offers modified benefit to funeral insurance seekers. The coverage amounts between $5,000 to $35,000 to people between 40 and 80 years. As a matter of course, the death benefit comes in reduced amounts in the first two years. As it happens with any modified benefit insurance, the premium starts at a lower price and grows after a definite period of time.
Assurity’s Better Business Bureau ratings is A+.
Baltimore Life’s final expense products known as Silver Guard Series offers both level and graded death benefits. The level death benefit by default goes into effect the very first day. A unique feature of this product is up to an amount of $1000 is draft-sent on issuance of the policy to its holder’s account as part of the death benefit that will be due. This is to aid the beneficiaries till the claims settlement takes place.
Their graded death benefit is more user-friendly than many of their competitors’. For natural death of the policyholder in the first policy year, they pay 25% of the face value while it amounts to 50% in the second and 100% in the third year. Like others, they also pay 100% death benefit to their customers when they die by accidents from the very first day. Their products are for people between 50 and 80.
Based on 13 criteria, Better Business Bureau confers A+ rating on this insurer.
Colonial Penn’s Guaranteed Acceptance, that means, no health questions asked final expense insurance is designed for people 50 and 85. The coverage ranges between $3,444 and $25,000 and death benefit remains graded for natural death for the first two years. Premiums paid with a 7% compounded annual interest is returned to the beneficiary. On the other hand, an underwritten, or eligibility check whole life insurance with up to $50,000 coverage is available to buyers between 40 and 75.
Colonial Penn’s Better Business Bureau rating is falls short of some of their contenders. It is an A- which means they have a score between 90 and 93.99 in the 100-point rating scale.
Foresters Financial has three types of burial insurance for their customers and they cover level, graded and modified death benefits. The coverage intended for the 50 to 80 year-olds offers $2,000 to $35,000. Their rating is B-, which means they have 80 to 83.99 points in the Better Business Bureau’s 100 point scale.
Gerber Life sells their guaranteed acceptance burial insurance for people between 50 and 80. The coverage ranges between $2,000 to $25,000. They offer cash value, an interest on part of your premiums. Their Better Business Bureau rating is A+.
Funeral expenses life insurance is the specialty of this company. They sell coverage of up to $20,000 to people between 40 and 85. This company also has an A+ rating from Better Business Bureau. They do not sell their products in New York.
They also enjoy a positive rating of A+ from Better Business Bureau.
MetLife’s burial plan life insurance sells to people between 40 to 70-year-olds. The coverage starts at $25,00 and ends at $50,000.
MetLife’s Better Business Bureau rating is poor than their contenders. They have a C- which means they have 70 to 73.99 on a 100-points scale.
Mutual of Omaha
Mutual of Omaha has two types of funeral expenses life insurance polices: level and graded. The death benefit ranges between $2,000 to $40,000 and customers between 45 and 85 are eligible to buy them. Better Business Bureau awards them A+.
TransAmerica, so to say, are quite liberal with respect to age band rule. They get insured anyone between 0 days to 80 years. They have different payment options to make it easy for the insured to meet the costs. For example, you can pay the full costs in the 10-pay system, meaning in 10 years, instead of throughout the life. Their death benefit ranges between $1,000 to $50,000 depending on the buyer’s age.
TransAmerica’s Better Business Bureau rating is rather poor in comparison with most others. It is a C, which means they have 74 to 76.99 in the 100-point rating scale.
Who You Should Buy From
All the companies mentioned above are the most trusted companies in the country. While attaching value to brand names matters a lot, the bet does depend more on the way the policy works in your favor than on anything else.