What is final expense insurance?
Although it’s marketed as a policy for final expenses, this type of policy is just a permanent life insurance policy with a small death benefit. It’s called final expense insurance because it’s aimed at people who want just enough coverage to pay those expenses.
Final expense policies are usually either simplified or guaranteed issue policies, and most people who apply will be approved. Most policies have no medical exam, and many also have no medical questions. There are limits on the amount of coverage available.
How much does final expense insurance cost?
Final expense insurance premiums vary depending on your age, the company you choose and the death benefit amount. The younger you are when you buy the policy, the less it will cost. However, younger people in good health will likely get a better deal from a traditional life insurance policy with a medical exam rather than a no-medical exam final expense policy.
AIG advertises that its final expense policies start at about $21 monthly for $5,000 in coverage, while Colonial Penn promises coverage from $10 monthly. However, the actual rate you pay may be much higher, and the best way to find out is to compare quotes.
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Pros and cons of final expense insurance
Is final expense insurance worth it? There are a lot of factors to consider before you buy a final expense insurance plan. Speaking with an expert before buying life insurance is always a good idea.
Pros:
- Simplicity. You can quickly buy a final expense insurance policy online or over the phone.
- Guaranteed acceptance. There is no medical exam for most policies.
- Available to older applicants. Most companies will sell policies up to age 80 or 85.
- Level premiums. Premiums don’t increase over time; as long as you pay them, coverage won’t expire.
Cons:
- Limited benefit period. There is usually a two-year period during which benefits under the policy are limited.
- Coverage limits. Final expense policies have smaller death benefits, so they aren’t a good fit for anyone needing a larger death benefit.
- You could overpay. Life insurance that doesn’t require a medical exam is more expensive because it’s a blind risk for the insurance company. If you’re healthy and young, you’ll likely get a better rate through the exam.
- It’s not the best investment. You might do better to put the money into another type of investment and have more than enough for final expenses by the time you die.
If you want to ensure your funeral expenses are covered and don't have a better way of putting money aside, final expense insurance might be the right choice.
