Final expense insurance is a term used to describe funds that are set aside to cover our final expenses, or our funeral expenses, which are the last expenses that we will ever incur. Final expense insurance is life insurance which is designated to cover these expenses.
The best final expense insurance plans are life insurance programs that are designed to cover these expenses. These types of policies are usually marketed to individuals who are age 65 and older, and to many who have health difficulties that make it difficult for them to obtain regularly underwritten life insurance.
Final expense life insurance is usually written in limited denominations of death benefits from $3,000 to $25,000. This is to limit the exposure of the death benefit per policy which is an actuarial advantage.
Most of the policies are of a guaranteed issue variety, but with some stipulations such as a waiting period for the death benefit to occur if a person is suffering from some form of serious illness. People who are residing in hospitals or nursing homes are typically not eligible for coverage.
If a person has had cancer or a heart attack within the past two years, they will usually be able to gain coverage with a “waiting period” type of policy. This form of coverage will not pay the full death benefit until after a probationary period of say, 2 to 3 years have expired, and then the regular death benefit will apply.
Another format of a death benefit arrangement is the “modified death benefit” type of policy. With this kind of policy arrangement, the death benefit might be zero for the first year, 33% for the second year, 66% for the third year, and 100% for the fourth year and beyond.
These kinds of arrangements allow the insurance company to mitigate their risks to compensate for the high mortality rates of people who are in their older ages.
Since most of these policies are written for insurance applicants who are age 65 or older, the incidence of claims is going to be much higher for people of this age group, so these underwriting techniques enable more people to own policies, whereas they normally would be priced out of the market.
When we are older is the time in our lives when life’s physical limitations begin to catch up with us. The best final expense insurance plans allow us to at least qualify for something, even though it may not be the top-of-the-line coverage like we could have purchased when we were much younger, but something that will provide for our burial expenses nonetheless.
The best final expense insurance plans usually consist of permanent life insurance, the kind that does not run out or stop its coverage, unlike term insurance which ceases to exist at the end of its term of 10, 15 or 20 years. With permanent life insurance, the price of the coverage is guaranteed never to increase, and the coverage will always be there up to the time of death when the policy pays off to the beneficiary.
Funerals today run in cost on an average of $7,000 to $10,000. This cost does not only include the burial and service, but also, there is travel, the funeral meal, housing and lodging of relatives and final medical costs.
Buying final expense life insurance to cover your costs of your funeral and accompanying expenses is a definite act of love, as you are saying that you do not wish for your relatives, your spouse, or your children to have to pay for your funeral costs.
Plus, it is a fact that you are paying for your final costs with discounted dollars, for what you pay for the policy will seldom equal the death benefit which is paid to your beneficiary upon your death.
Permanent life insurance policies also create a cash value or a loan value. This money builds cash over a period of years which is available to the policy owner in the form of loan. If a policy owner takes a loan, the amount of a loan will decrease the insurance face amount by the amount of the loan.
Final expense life insurance is the way to go if you are over age 65, you have no other life insurance, and you want it to be there when it is needed.