Final expense insurance
Final expense insurance explained
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- Final expense insurance is a small whole life policy meant to cover funeral costs and other end-of-life bills.
- Policies that ask health questions usually pay the full benefit from day one. Policies with no health questions often have a waiting period.
- Your beneficiary can use the money for anything, not only the funeral.
Final expense insurance, sometimes called burial insurance, is whole life insurance with a smaller death benefit. It is designed to keep your family from paying for your funeral, medical bills or small debts out of pocket. Because the coverage amounts are smaller, approval is usually simpler than for a large life insurance policy.
How it works
- Coverage amount: typically a few thousand dollars up to the low tens of thousands, depending on the insurer.
- Premiums: usually fixed for life, so the price does not rise as you age.
- Duration: permanent, as long as premiums are paid.
- Payout: a lump sum to the beneficiary you name, who decides how to use it.
Simplified issue vs. guaranteed issue
| Simplified issue | Guaranteed issue | |
|---|---|---|
| Health questions | A short list, usually no medical exam | None |
| Approval | Based on your answers | Accepted within the eligible age range |
| Full benefit | Often from day one | Often after a waiting period, commonly two years |
| Price | Lower for the same coverage | Higher for the same coverage |
During a waiting period, a guaranteed issue policy commonly pays back the premiums paid plus some interest if death is from natural causes, while accidental death is often covered in full. Terms vary, so ask exactly what is paid in the first two years.
Final expense vs. other options
Prepaid funeral plans are bought from a funeral home and lock in specific services. Final expense insurance pays cash to a person, so your family can choose the provider. Savings work too, if you have enough set aside and your family can reach it quickly. Term life is cheaper for the same coverage, but it may end before it is needed.
Want to compare final expense options?
See final expense optionsQuestions to ask
- Is the full benefit paid from day one? If not, what is paid during the waiting period?
- Is the premium guaranteed never to increase?
- Does the policy build cash value, and can I borrow against it?
- What happens if I miss a payment? Is there a grace period?
- How does my beneficiary file a claim, and how fast is it usually paid?
The bottom line
Final expense insurance is a straightforward way to make sure end-of-life costs do not fall on your family. Answer health questions honestly if you can qualify for simplified issue, because it usually means a lower price and no waiting period. Tell your beneficiary the policy exists and where to find it.