How Does Final Expense Insurance Work

The world of insurance can often feel overcomplicated. From auto and home coverage to permanent life insurance and health benefits, it can be difficult to determine the coverage amounts you need.

This is especially true because most insurance options deal with the “what ifs” in life. But final expense insurance is the exception. Read on to have final expense insurance explained by the experts so you can understand the benefits of this unique coverage.

According to Investopedia, final expense insurance is a small whole life insurance policy that includes an additional death benefit. This type of insurance will disburse your proceeds to the beneficiaries upon the passing of the policyholder to cover end-of-life expenses (which we will cover in more detail shortly).

This type of life insurance is often marketed as “burial insurance,” “funeral insurance,” or “end of life insurance”. However, these are all the same.

Some of the major benefits of final expense life insurance are that:

• It offers affordable premiums
• The benefit can be used for anything
• It’s easy to qualify for
• It will last forever

Policyholders get out what they put into your final expense insurance policy. The policy will accumulate cash value over the policyholder’s lifetime and in most cases earns interest. Policyholders can borrow against their cash value, but this can reduce the amount the beneficiaries receive upon their death.

The exact amount of the death benefit varies by policy (and by borrowing), but it’s typically between $2,000 and $35,000 according to Investopedia. The death benefit is not taxable, which means the beneficiaries will not be left with any tax burden.

As the name suggests, final expense life insurance is meant to cover any final expenses a family may be left with after the death of a loved one. It’s most commonly associated with funeral expenses, which continue to grow year after year.

While it may seem simple to budget for funeral expenses, the costs can be steep. The National Funeral Directors Association recently reported that the national median cost of a funeral with a viewing and burial in 2021 was approximately $7,848. And the median cost of a funeral with cremation was slightly less at approximately $6,971.

The death benefit is typically used to cover expenses such as a funeral or memorial service, embalming, and a casket, or cremation. However, it can be used by beneficiaries for any number of things, including paying off the deceased’s credit card debt or medical bills. Since there are no hard and fast rules for what the death benefit can be used for, beneficiaries could even use the benefit to pay property taxes or take a vacation.

The flexibility of final expense insurance can give individuals peace of mind that when they pass, their loved ones won’t have to bear the financial burden of these expenses.

How does final expense insurance work when it comes to qualifications? Another benefit of this type of coverage is that it’s relatively easy to qualify for.

• No medical exam is required by most final expense insurance companies. The application will typically ask you a few questions about your health, though some policies may skip this step as well.
• No (or short) waiting periods. According to Choice Mutual, some final expense companies offer no waiting period plans that fully insure individuals 100% for natural or accidental death.
• Age is the only factor that many companies consider. Final expense life insurance plans are available for children as young at 14 days old in some cases. Many companies set the maximum age as 85.

Like most insurance options, the price of monthly premiums depend on the individual. When it comes to final expense insurance premiums, some factors that will determine costs include:

• Gender
• Age
• Health
• State of residence

Of course, the carrier also plays a big part in price. With more and more final expense insurance companies entering the space, you can find policies that work for most budgets.

In general, this type of coverage is relatively affordable. According to Bankrate, premiums could cost as low as $20 per month. More typically, policyholders can expect monthly premiums to be around $50-$100 a month.

Since premiums do not change over time, it’s easy for policyholders to budget for this recurring expense.

With a rapidly aging population, the need for final expense insurance continues to grow. Many large life insurance companies like Mutual of Omaha and State Farm are entering the space. You can also find some niche businesses that specialize in this coverage.

The best way to purchase final expense insurance coverage is to work with an agent. Final Expense Insurance Agents understand the market inside and out. They have the tools and knowledge to compare different policies to match clients with the best plan for their needs and budget.

As a Final Expense Insurance Agent, you know there are a lot of moving parts when it comes to selling this type of coverage. In addition to understanding how it works on a broad level, you must also know the individual nuances of different carriers and the needs of your clients.

Best Plan Pro is the all-in-one software solution that helps you understand how final expense insurance works for each of your carriers so you can sell the right product. With an efficient, predictable, and effective underwriting calculator at your fingertips, you can sell more efficiently to maintain maximum placement and retention.

Learn more about Best Plan Pro and how it can help you become the best Final Expense Insurance Agent you can be.