Final Expense Life Insurance: How It Works, Benefits & Whether You Should Buy

Updated: October 21, 2024

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Final expense life insurance is a type of whole life insurance geared towards seniors 50 and older, offering small death benefit amounts to pay for final expenses. Final expense life insurance is also called burial insurance or funeral insurance since many beneficiaries use death benefit proceeds to pay for the insured’s funeral or burial expenses.

Currently, burial and funeral final expenses could cost $10k or more. Final expense whole life insurance can pay for the costs, so your loved ones don’t have to carry the financial burden. Final expense life insurance for seniors locks in your rates and the coverage amount, plus it provides a cash value savings account you can access while you’re still alive.

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Key Takeaways

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Final expense life insurance is a type of whole life insurance geared towards seniors. It has small coverage amounts, builds cash value and offers locked-in rates.

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Final expense insurance rates vary per person due to different factors like age and coverage amount. On average, a 60-year-old can expect to pay between $31 and $75 per month for $10k in coverage or $62 to $98 per month for $25k in coverage.

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Final expense whole life insurance is best for someone who has been denied coverage, doesn’t qualify for term life, has serious health issues or only needs a small coverage amount.

What Is Final Expense Life Insurance?

Final expense life insurance is for seniors needing a small amount of coverage for estate planning and who prefer not to take a medical exam. You can buy coverage directly from final expense life insurance companies or insurance brokers offering life insurance for final expenses. When comparing final expense insurance vs. life insurance, final expense insurance can be expensive.

For instance, life insurance rates for a 60-year-old with a 10-year term policy and $500,000 in coverage are around $141 per month. The same 60-year-old would pay between $62 and $98 per month for $25,000 in senior final expense life insurance. There are two types of final expense life insurance. The type you choose or qualify for will affect the price.

1
Simplified Issue Life Insurance

This type of final expense insurance doesn’t require a medical exam but has health questions on the application. Getting this life insurance for funeral expenses tends to be cheaper than buying guaranteed acceptance because your health factors into the insurance company’s decision. If you’re turned down for simplified issue final expense life insurance or don’t qualify, you have another option available.

2
Guaranteed Acceptance Life Insurance

Guaranteed acceptance insurance is final expense life insurance with no medical questions or exams. You can’t be turned down, regardless of your health status. Since your health risk isn’t a factor, final expense life insurance rates are the most expensive. You’ll get cheaper rates If you’re looking for more affordable rates and can qualify for simplified issue final expense insurance by answering health questions.

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Burial insurance and final expense life insurance are terms used interchangeably to mean the same thing. Final expense insurance coverage is also often called funeral insurance. The policy got these names because it is mainly pays for final expenses, such as funeral or burial costs.

How Does Final Expense Life Insurance Work?

Final expense life insurance works like any other life insurance contract. When you die, your beneficiary receives the death benefit. They can use the money for any reason, including paying for your end-of-life costs and final expenses.

If you have specific needs or wishes for your death benefit, communicate them to your beneficiary, understanding that they can use the money any way they choose. Consider these final expense insurance qualities to help you decide if it’s the right fit.

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    Very few requirements

    It’s easy to apply and qualify for final expense whole life insurance. Final expense life insurance doesn’t require a medical exam. Those who apply for guaranteed issue life insurance don’t have to answer medical questions or take an exam. You just have to meet the age criteria (if applicable), choose your coverage amount and apply.

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    Very expensive

    Compared to other types of life insurance, final expense or funeral insurance can be costly. Without a medical exam to decide the insured’s risk, the insurance company will use high-risk final expense life insurance rates instead.

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    Guaranteed death benefit

    The death benefit amount of final expense or burial insurance is guaranteed to be paid upon death, as long as the policy premiums are paid. The beneficiary can use the death benefit for anything; it is up to them to decide how to use it.

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    Cash value

    Since it’s a whole life policy, final expense insurance builds cash value over time. It grows tax-deferred, and you can access it while still alive. You can borrow against it or use the cash value to pay premiums instead of paying them out-of-pocket. The insurer will deduct any outstanding loan balance from the death benefit upon death.

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    Level premiums

    Premiums are locked in from the day the policy is approved. No matter how old you get, you’ll never pay more for your final expense insurance coverage as long as the policy stays in force. The policy may be paid in full once you reach a certain age (usually 100) depending, on the policy and insurance company,

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    Fast decision

    The application process is fast and easy, and coverage is typically approved within a few days, and you may even get approval the same day. Final expense insurance coverage starts after the company approves the policy and receives the first payment.

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Though the application process can differ with final expense insurance vs. life insurance, once coverage is approved, it works the same. You pay the premiums at regular intervals, usually monthly or yearly. When you die, your beneficiary notifies the insurance company. Once approved, your beneficiary will receive a tax-free lump sum death benefit within 30 days of filing the death claim.

How Much Does a Final Expense Life Insurance Policy Cost?

For a final expense life insurance policy, the average 60-year-old can expect to pay an average of $31 to $75 monthly for $10k in coverage. The average cost of $25k in coverage would be $62 to $98 per month. Final expense life insurance for seniors over 80 would cost around $98 to $240 for $10k in coverage. The same 80-year-old would pay between $198 to $400 monthly for $25k in coverage.

How much final expense coverage do I actually need?

Average Monthly Life Insurance Premium by Age per Coverage Level
Age
$10k Coverage
$25k Coverage

60

$31–$75

$62–$98

70

$69–$115

$103–$221

80

$98–$240

$198–$400

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Not all final expense life insurance companies are the same. We analyzed dozens of companies to help you choose. Before you get final expense life insurance quotes, check out our picks for the best final expense life insurance companies.

Pros and Cons of Final Expense Insurance

Understanding the advantages and potential drawbacks of a final expense life insurance policy is important in determining whether this type of coverage aligns with your financial planning goals.

Below are some of the pros and cons of final expense insurance to help you make a well-informed decision.

Pros:

  • Guaranteed Acceptance: Most final expense life insurance policies do not require a medical exam, making them accessible to many, especially older adults with health issues.
  • Manageable Premium Costs: Compared to premiums for other life insurance types, final expense life insurance rates are relatively low, making it a viable option for those on a fixed income.
  • Quick Payouts: Beneficiaries typically receive the death benefit swiftly, ensuring that funeral and other related expenses can be promptly covered.
  • Cash Value Benefits: Final expense whole life insurance plans include a cash value component that grows over time and can be borrowed against if needed.

Cons:

  • Coverage Limits: Final expense life insurance policies usually offer lower coverage amounts, which may not suffice if you have extensive debts or want to leave a financial legacy beyond covering final expenses.
  • Inflexibility: Once issued, final expense life insurance plans often offer little flexibility in terms of adjusting coverage amounts or policy terms, limiting adaptability to changing financial circumstances.
  • Potential for Overpayment: If premiums are paid over many years, there's a risk that the total final expense insurance cost may surpass the policy's value, particularly for younger applicants or those in good health.

Should You Purchase Final Expense Life Insurance?

Whether you should purchase a final expense life insurance policy is a personal choice. This policy benefits seniors who only need a small amount of coverage and don’t want to burden loved ones with funeral or cremation costs.

You should consider your age, health and financial needs to decide if life insurance for final expenses is right for you. A final expense insurance plan may be the right choice for several reasons, like paying for your final expenses, debts, spousal income or leaving a legacy for your family or a favorite charity.

1
Pay for end-of-life expenses

You can use final expense insurance to pay for end-of-life expenses, including medical bills, in-home care, burial, cremation and funeral costs. Seniors can consider the death benefit when helping to plan their funeral services, knowing their loved ones won’t be burdened with the expenses when they die.

2
Pay off debts

If you expect to have other debts when you die, your beneficiary can use the final expense proceeds to pay for it. Debts can include your mortgage, student loans, credit cards or a car loan.

3
Leave an inheritance

Leaving an inheritance or legacy to younger generations is another reason seniors choose final expense insurance. You can direct your wishes in your will and select a beneficiary you know will honor them.

4
Supplement spouse’s income

Another way to use final expense death proceeds is to supplement your spouse’s income. If you’re worried about your spouse being able to finance their lifestyle after you’re gone, you can buy final expense insurance to help.

5
Leaving something for charity

If you don’t want to leave an inheritance and can fund your final expenses, you can name a charity as your beneficiary. This action will leave a legacy to a cherished foundation of your choosing, so they can use the funds and remember you after you’re gone.

6
Not qualifying for a term life policy

Final expense life insurance may be your next best option if you can’t qualify for term life because of your age or health. With no medical exam requirement, it can often be easier to qualify for than other types of permanent life insurance.

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Although final expense life insurance policies are specifically designed as end-of-life expense insurance, the beneficiary can use the death benefit for any purpose once it is paid out. The insurance payout of an end-of-life insurance policy is not legally restricted to only cover funeral or burial costs; beneficiaries can use the funds to settle debts, cover living expenses or any other financial needs. This flexibility is a standard feature of most life insurance policies, including a final expense life insurance plan.

How to Get a Final Expense Life Insurance Plan

Finding the right final expense life insurance policy involves understanding your needs, financial situation and options.

  1. Assess Your Needs: Determine how much coverage you need based on your anticipated final expenses and any debts you wish to cover. Consider how these costs might impact your family financially.
  2. Get Burial Insurance Quotes: Contact multiple final expense life insurance companies, check for final expense insurance quotes online or get direct consultations. Comparing quotes can help you find the best rates and terms for your situation.
  3. Choose a Policy: Select a policy that meets your needs and fits within your budget. Look for a plan with affordable premiums and sufficient coverage for funeral expenses and other final expenses.
  4. Complete the Application: Fill out the application, which may include health questions but typically does not require a medical exam. Be honest and thorough to ensure your coverage is not jeopardized by inaccurate information.
  5. Review and Pay the Premium: Once approved, review your policy details to ensure everything is correct. Start by making your first premium payment to activate your coverage.
  6. Inform Your Beneficiaries: Provide your chosen beneficiaries with the details they will need to claim the benefit upon your passing.

By following these steps, you can secure a final expense life insurance plan that ensures your end-of-life expenses will not be a burden to your loved ones. This will allow you to rest easier knowing these matters are taken care of.

Alternatives to Final Expense Life Insurance Policy

Exploring alternatives to a final expense life insurance policy can provide additional flexibility and potential cost savings depending on your financial goals and health status. Here are several options that might be suitable for different needs:

  • Term Life Insurance: This type of policy offers coverage for a specified term, such as 10, 20 or 30 years, typically at a lower cost than permanent policies. It is ideal for those who need coverage to protect against financial obligations that will diminish over time, such as a mortgage or educational expenses for children.

  • Whole Life Insurance: Unlike final expense insurance, traditional whole life insurance offers higher coverage amounts and includes a savings component that accumulates cash value. This option is well-suited for individuals looking for lifelong coverage and an investment component, though it comes with higher premiums.

  • Savings Account: Setting aside funds in a dedicated savings account specifically for end-of-life expenses is another practical alternative. This approach requires disciplined saving but offers flexibility in how the funds are used and can be a cost-effective method if started early.

  • Pre-need Insurance: This insurance is directly linked to the provision of funeral services. Coverage is specifically used to cover the cost of the funeral service as detailed in a contract with a funeral service provider. It’s ideal for individuals who wish to plan and pay for their funeral in advance, ensuring all details are handled according to their wishes.

  • Annuities: Annuities can be structured to set aside money for later life expenses, including funerals. This financial product can be especially beneficial for those with a longer life expectancy, as it provides a steady income stream in retirement.

Each of these alternatives offers different benefits and drawbacks, and the best choice will depend on your financial situation, health and coverage needs.

Final Expense vs. Term Life Insurance: Which Is Better for You?

Term life insurance is one of the most popular types of life insurance. Deciding between final expense vs. term life insurance depends on your needs and circumstances. If your primary concern is covering funeral expenses only and you require a policy with more accessible qualification standards, a final expense insurance coverage may be better. Consider term life insurance if you need more extensive coverage for a set duration.

Frequently Asked Questions About Final Expense Life Insurance

Still have questions about final expense life insurance? Here are the answers to some of the most common questions about life insurance for final expenses.

What is final expense insurance?
What are final expenses?
What does final expense insurance cover?
Is a medical exam required to qualify for final expense life insurance?
How much does final expense insurance cost per month?
Is final expense life insurance the same as burial insurance?
Should I get final expense life insurance?

About Mandy Sleight

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Mandy Sleight is a licensed property, casualty, life and health insurance agent with 20 years of experience in the industry. She has worked for major insurance companies like State Farm and Nationwide, and most recently as the Operations Coordinator for a startup employee benefits company.

Sleight holds a business administration and management degree from the University of Baltimore and a master's in business administration from Southern New Hampshire University. She uses her vast knowledge of insurance and personal finance to create easy-to-understand and engaging content to help readers make smarter choices with their budgets and finances.

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