Starting a Conversation about Final Expense Insurance with Loved OnesJun 22, 2023 | 8 MIN READ
It is an unfortunate fact of life that someday, sooner or later, it ends. Thinking about the end of your life—or the life of someone you love—can inspire existential dread in nearly anyone. Talking about it can be even harder. How do you go about telling your family, significant other, or other loved ones that you’re thinking about buying life insurance to cover your final expenses or that they might need to make plans about what to do to prepare for the worst-case scenario.
Regardless of how well you’ve planned this talk, it’s bound to be at least somewhat awkward. To help you start a conversation about final expense insurance with your loved ones, it might be a good idea to learn a little bit about how it works, why you or your loved ones might need it, and some tips for discussing end-of-life plans and preparations.
How Does Final Expense Insurance Work?
Final expense insurance is a variety of whole life insurance that has a lower death benefit amount than more traditional forms of life insurance.
Why is the benefit smaller than other life insurance policies? Because it isn’t designed to replace the deceased’s income to support the family. Instead, it’s designed to cover end-of-life expenses such as funeral costs, end-of-life medical care, and burial or cremation.
Since the benefit amount is smaller than more traditional whole life insurance policies, the premiums tend to be lower. This can make it more affordable to purchase final expense insurance. Additionally, some insurance companies may be less strict about underwriting requirements for final expense life insurance because it has a lower death benefit amount—which can make the qualification process simpler.
Who Needs Final Expense Insurance?
Everyone should have some form of insurance (or make other arrangements) to help manage their final expenses. As noted by Forbes, “the median cost of an adult funeral with viewing and burial is $7,848” and the “median cost of an adult funeral with viewing and cremation is $6,970.” While not an astronomical amount of money for some families, it is a large bill that many don’t expect that can complicate estate planning.
Whether you’re preparing for retirement or just moving out of your family’s home, it’s important to prepare for funeral costs and other end-of-life expenses. In fact, it may be better to purchase final expense insurance while you’re young and healthy rather than put it off until you know you’ll need it.
Why Buy Final Expense Insurance When You’re Young and Healthy?
It’s easy to assume that final expense insurance is only for the elderly or the terminally ill. However, you shouldn’t wait until the end of your life to start preparing for your final expenses. Final expense life insurance is a whole life insurance plan. This means that, unlike a term life insurance policy, the plan will never expire so long as you complete your insurance payments. In fact, it may be best to buy a whole life insurance plan while you’re young.
Why? Because, when you’re younger, you can more easily qualify for lower premiums on higher-value insurance plans with stricter underwriting processes because you’re young and healthy—and thus, not at as high a risk of needing to collect the death benefit sooner rather than later.
Whole life insurance policies can also build value over time (unlike term life insurance policies). This helps them better keep up with the effects of inflation on common end-of-life expenses.
Remember, the cost of life insurance will most likely increase over time—it’s almost a guarantee. Not only does the risk of you needing to collect on the plan increase as you age, the cost of funerals is increasing.
According to the Bureau of Labor Statistics, the average cost of a burial casket “rose 230.0 percent from December 1986 to September 2017.” Meanwhile, in that same time period, the total cost of all items in a funeral increased by 123.4%. In other words, in just under 31 years, the cost of a funeral alone has more than doubled.
Other end-of-life costs, such as medical care, have also increased. And, it can be hard to predict how much the cost of healthcare will be for a terminal patient. Data from the US Inflation Calculator site shows that, between 2012 and 2022, annual inflation for healthcare varied between as little as 1.8% increases to as much as 4.6% increases year-over-year. Other factors, such as where you get your care (in home or in a care facility), your health insurance plan, and the specific type of care you need towards the end of your life can all cause variances in the cost of care.
By setting aside money when you’re younger, you can help your loved ones be better prepared for your passing. This can help you (or them) avoid dealing with debt management for end-of-life expenses after your (or their) passing.
Long story short, sooner or later, everyone will need to deal with end-of-life expenses eventually. So, getting final expense life insurance is almost always a good idea if you can afford it. It’s better to prepare now rather than later.
Talking about Final Expense Insurance with Your Loved Ones
Now that you know a little bit about what final expense insurance is and why it’s important to get it, how can you start a conversation about your end-of-life preparations?
This can be the most difficult step. Whether you’re thinking about buying health insurance for yourself or want to encourage a loved one to make that decision before it’s too late, it’s going to be awkward. After all, you love them, want the best for them, and likely don’t want to be discussing what to do if you or they die and how to take care of the bills after your (or their) passing.
The first step is doing some research on final expense insurance, seeing what your options are, and checking out if the benefits outweigh the costs.
Some other things to consider include:
Choosing the Right Time to Have the Discussion
When is the right time to discuss final expense life insurance? You might want to start the discussion as soon as you have a good idea of what your end-of-life plans are (i.e., what kind of funeral you want, whether you’d prefer burial or cremation, what kind of medical care you want, etc.).
It’s important to share these plans with your loved ones so they know what your plans are and how you’ve prepared for your eventual passing. Even if you don’t actually discuss final expense insurance or other types of life insurance with them, this helps them know what your wishes are so they can give you the end-of-life celebration that you would want.
Consider Specifying How Your Final Expense Insurance Is to Be Used Your in Your Will
If you have a will, you may want to highlight how your final expense insurance is to be used in it. If there is any overage, specify how that excess money should be applied to your estate.
For example, do you want the excess to go towards paying down other debts to help protect the value of your estate? Would you prefer to roll the excess into a trust for one of your inheritors?
By putting your plans into writing before your passing and discussing it with your inheritors, you can help ensure that your estate is distributed exactly as you wish instead of according to the interpretation of the executor of your estate. This also creates an opportunity to discuss your final expense insurance since you’ll likely need to discuss your will with your inheritors.
Discussing End-of-Life Plans with a Loved One
If you want to get a loved one to consider final expense insurance, you may want to start by asking what preparations they’ve already made. Ask them what kind of end-of-life celebration they want.
Do they want a small, private affair with just a few friends and family or a larger one where more of their acquaintances can attend? Will they want to have a viewing of their body or a closed-casket affair (or a cremation prior to the funeral)?
These considerations will affect the cost of their final expenses—which may affect how much they need extra insurance to cover those costs. The more elaborate their end-of-life plans are, the more important it will be to have that extra buffer of final expense insurance to help pay for those plans without affecting their estate.
To start the conversation, you might want to share your own preparations and plans. Even if they don’t want to talk about their own preparations right away, you can help get them thinking about their future needs by discussing your own plans.
Preparing Your Loved Ones for Life Without You
This goes a bit beyond talking about final expense insurance, as it’s really only meant to help cover end-of-life expenses, but you may want to have a discussion with your loved ones about what they need to do to go on without you.
For example, if you’re a parent, you may want to talk with your children about what may happen if you pass. Let them know (and be sure to inform your lawyer or the executor of your estate in writing) who you want to have raise them in your place if the unexpected happens. It may be helpful to specify secondary and tertiary choices as well—and get approval from the person or persons you want to have raise your children in your stead.
This is an important consideration to make since, as noted by the Administration for Children & Families, there were 407,000 children in the foster care system at the end of 2020, and 117,000 waiting to be adopted. Making arrangements and discussing them with your loved ones and preferred foster parents is crucial for helping to protect your children, smooth the transition into foster care, and prepare them for life without you.
When discussing these plans, you can bring up what kind of insurance you have and how it will be used. While you might not be able to have this discussion with a child who’s too young, any teenage children you have should definitely be made aware of the arrangements you’ve made for them in case of your death.
At the very least, if you have a discussion with them, it gives them a chance to ask you questions so you can answer them directly instead of having to try to anticipate every concern in a written letter to be delivered after your passing.
We know that having this discussion with your loved ones can be extremely difficult. However, we also know how important it is to be as prepared as possible for the unexpected.
Do you need help with preparing for end-of-life costs? Speak to an ELCO agent today to discuss final expense insurance and other life insurance options.