To lighten the burden on their loved ones, many people choose some type of life insurance that covers their final expenses, such as funeral and burial or cremation costs and other expenses that can arise at the end of one’s life.
Final expense insurance can be a simple way to provide this peace of mind. Depending on your age and state of health, you may qualify for different types of final expense policies.
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Before diving into the details of final expense insurance, let’s take a few steps back and discuss final expenses. Final expenses are any costs that are owed leading up to or following a loved one’s death. These are also commonly referred to as end-of-life expenses.
There are a wide variety of costs that are associated with final expenses. Frequently, final expenses include funeral arrangements, which encompasses burial or cremation fees, memorial service costs, and any other expenses associated with funeral planning.
Additionally, final expenses can also include medical costs. If a loved one was receiving medical care before they passed, the family may be left with unexpected bills to pay associated with their care. While providing loved ones with the care they need to ensure they’re as comfortable as possible, it’s often a hefty burden to take care of these expenses.
It’s not always easy to predict what final expenses will come up. Fortunately, the right life insurance policy can be a huge lifesaver when it comes to being prepared for unexpected costs and fees.
Final expense insurance is a type of whole life insurance intended to cover the costs associated with end of life. Unlike preneed insurance, which exists to cover funeral and burial or cremation costs with benefits paid directly to the funeral home, final expense insurance pays a death benefit to whomever the policyholder designates.
This benefit can then be used to cover not just funeral expenses but also a wake or other memorial service or celebration, debt that may accumulate during a final illness or injury, or even hotel costs for friends and family members who come to the funeral from out of town.
Eligibility for final expense insurance can vary depending on the insurance provider and the specific policy, but generally, the eligibility criteria are more lenient compared to other types of life insurance policies. This type of policy is typically available for individuals who are 50 or older, but some providers may offer them to younger individuals and their families.
Many people choose final expense insurance policies because they’re more affordable in comparison to other life insurance policies. These policies tend to provide lower coverage amounts, making premium payments lower as well. And, policyholders have the option to pay premiums upfront in a lump-sum payment, or in regular installments. This makes this type of whole life insurance flexible depending on your financial needs or concerns.
Though final expense insurance is designed to help cover end-of-life expenses, there are plenty of other ways to help pay off these costs.
Preferred insurance policies are those with the lowest available premiums. If you are in good health and live a healthy lifestyle, then you may qualify for preferred premium rates. Because insurance companies must create a balance between the risk they take by issuing an insurance policy and the premiums they charge, the people they determine to be the lowest risk are eligible for the lowest premiums.
At the opposite end of the spectrum from preferred insurance is a guaranteed issue policy. As the name suggests, individuals who fall within the policy’s age range are guaranteed to qualify, regardless of health status. That means there are no medical questions to answer and gaining approval for coverage is much simpler in comparison to other kinds of insurance policies. It also means, however, that premiums will be higher than on a preferred or standard rate policy.
As a result, these policies are most appealing to people who would not otherwise qualify for insurance due to health issues. If you want to make sure your final expenses are covered but aren’t able to qualify for a policy that requires health questions, then guaranteed issue insurance provides a suitable alternative.
Grading or modifying benefits is one way that insurance companies can offer policies to people who have health issues that disqualify them from level benefit policies. A level benefit is one that is fully effective immediately upon purchase of the policy, providing the full payout even if the insured passes away soon after.
Graded or modified benefits, on the other hand, don’t pay out until a certain waiting period has passed. These policies often simply return the premium to the beneficiary in the event the policyholder dies before this time.
Government assistance programs, such as Medicaid and Social Security benefits, can also help cover final expenses. Supplemental Security Income (SSI) is another government assistance program that can assist with end-of-life expenses.
In fact, individuals can set aside $1,500 from this program to be used toward a burial fund. It’s important to keep in mind, however, that there are eligibility requirements for these sorts of programs and they may vary depending on circumstances and location.
Annuities are excellent for providing a continuous income during retirement years, and that money can be used for all kinds of needs, including final expenses. While this money is intended to be used before the policyholder passes, that’s not always the case, unfortunately.
In the instance of the policyholder passing away before receiving the entire value of their annuity, the remaining value will be given to the beneficiary. Frequently, it’s recommended that the beneficiary uses these funds to contribute to the costs of end-of-life expenses.
Final expense insurance isn’t for everyone, but it’s still important to have a plan for the future in case the unexpected happens. Fortunately, there are plenty of options available when it comes to long-term financial planning.
If you have another whole or term life policy in place or if your family has other financial resources that would allow them to comfortably cover any costs associated with your passing, then you may not need final expense insurance.
However, given the rising costs of funeral planning and other end-of-life expenses, it’s best to have some kind of financial safety net in place. If you’re likely to outlive your term policy, however, it’s wise to reconsider your needs as that time approaches.
If you wish to leave enough for your family to make it through a financial transition after the loss of your income, then consider purchasing a whole life policy that pays a higher death benefit than a final expense policy. Other types of whole life insurance may also be available even if you experience health issues.
No matter what you need out of a life insurance policy, ELCO Mutual is here to help. Our independent insurance agents can match you with a policy that provides you with the peace of mind needed to live comfortably. Get in touch with us today to connect with an agent and better understand your options for paying final expenses.