Final Expense

Final expense insurance is similar to life insurance, in that a policy may be issued on a term or whole life basis at smaller face amounts, usually from $2000 to $25,000.  Some final expense policies are term insurance policies, which typically covers an individual for a set period of time.   At that time, if no claim has been filed and the policyholder is still alive, the policy will expire.  Other final expense policies are whole life policies and provide coverage until death, regardless of age.  Some final expense polices are guaranteed issue and premium. This means that the insurance companies issue the policies without a medical exam and have rates that will not increase.

Permanent Life Insurance

  • Final-expense policies are nearly always permanent life insurance policies. Most final-expense products are little more than ordinary whole life or universal life policies with low face values.

Guaranteed Policy Issue

  • Many life insurance products marketed as final-expense policies require little to no underwriting. Since the face amounts are typically small, insurance carriers often forgo intense and exhaustive analysis of these policies. To account for the increased liability of issuing coverage to nearly anyone who applies, premiums are usually higher to offset the added risk of potentially insuring an unhealthy or otherwise uninsurable person.

Graded Benefits

  • Just as insurance companies increase premiums to offset the cost of possibly covering an extremely unhealthy person, some carriers choose to sell “graded” benefit products as final-expense policies. Graded benefit life insurance contracts stipulate that if your death occurs within the first few years after purchasing coverage, your heirs will receive a reduced payout. Your death benefit will increase to the full requested amount only after your policy has remained in force for a specified number of years, typically between two and four.

Purposes for Final Expense Coverage

  • Final-expense policies are primarily designed to pay benefits to cover the cost of funeral and associated expenses.  However, since final expense insurance is a traditional life insurance policy, the named beneficiary could use the proceeds for purposes other than a funeral such as paying off any other debts or even for personal uses.  As a result, make sure that the beneficiary can be trusted to use the policy payout in a prudent manner.

Securing final expense coverage is relatively easy. You can apply for a simplified issue plan, which requires that you complete a basic medical questionnaire and meet specific qualifications, or for a guaranteed issue plan, which requires no questionnaire or medical exam and guarantees acceptance of your application. If you have a serious health condition, you may be required to purchase a policy with a graded death benefit, which provides coverage after the first few years of your participation.

Before purchasing a final expense policy, compare quotes from several trusted, reliable companies.   Also, there may be more cost effective options to meet your final expense needs.