When someone is determining whether they need life insurance coverage it can feel like a daunting task.
Of course, you will need to take into account what the monthly budget is and how much coverage is necessary. Along with this is the TYPE of coverage and how it is structured.
When comparing final expense coverage vs. life insurance there are many differences to take into consideration. Along with the policy structure, it is important to know what the death benefit can be used for upon the passing of the insured.
What Does Final Expense Insurance Cover?
Final Expense is whole life insurance that is easy to get and never expires. The death benefit is paid out upon the insured’s passing and can be used to purchase anything necessary. While this money is often spent on final arrangements it is not restricted to these costs.
The phrase Simplified Issue is used to describe the underwriting process and simplicity of taking out a policy. Some life policies undergo strict guidelines for obtaining coverage, with Final Expense this is not the case. The entire process can be done over the phone from the comfort of home.
Whole Life Insurance lasts for the entire life of the insured guaranteeing that no one will outlive their coverage. There are several other benefits of this type of policy including price lock and a cash value that builds.
The Usual & Unusual Costs
While the death benefit has no restrictions, this coverage is most often taken out in order to cover the final expenses of the insured. The most common along with some more unusual costs that you might not have thought of purchasing are listed below.
Memorial / Celebration of Life
There are several titles that this service can take on, whatever someone may choose to refer to the ceremony as it’s a time to mourn the loss of the deceased while celebrating the life they lived.
The costs of this ceremony can rapidly add up when taking into consideration the additional aspects of a gathering.
- Food and beverage
- Rental items (tables, chairs, linens, etc.)
- Use of facilities/staff for ceremony
- Transportation of remains
- Other preparation of the body
Of course, these expenses are not required but it is good practice to have these costs in mind when planning a service.
This is the process of lying someone into their final resting place.
The average cost in America is $7,643 which includes items like a casket, service fees, transferring, and more. Not included in this average amount is a grave marker or plot of land. This price can vary by about a thousand dollars in either direction depending on where in the United States these services are being performed.
This method is one of the most traditional ways to proceed, however, it is on the decline across the country due in part to the higher cost.
While cremation is commonly viewed as the less expensive option when someone passes away, it still costs $6,280. This national average cost does not include a columbarium or headstone.
In recent years the rate of cremation has outpaced the percentage of the more traditional interment option, as seen in the predictive graph below.
Post Mortem Expenses
This would include an autopsy should the need arise.
There are two primary reasons an autopsy would be elected. The first being if there was any foul play that was suspected to be the cause of death. The second is for family historical reasons and genealogy, basically looking to identify any hereditary conditions to be on the lookout for in the remaining heirs.
The remaining bills are nearly unavoidable in this circumstance. Even for those who are debt-free when they pass there is still a high likelihood of family encountering the following bills.
- Credit Cards
While not all of these payments will need to be taken into account, this is a good place to start when considering what outstanding bills MIGHT need to be considered.
Leaving an Inheritance
This can be done in a multitude of ways. Most commonly the remaining money after costs are covered is left to the family.
If leaving a financial legacy is of high importance taking out a policy to cover this is highly encouraged.
Regardless of the size of the policy, leaving money to a favorite charity or religious organization is an admirable thing to do.
This can be accomplished by naming the organization as a beneficiary or donating any additional funds after the final costs have been covered.
Any outstanding medical bills that were not taken care of prior to death can be covered using this policy payout.
The estate is responsible for paying any outstanding medical bills. If these expenses cannot be paid for by the estate through probate, these costs could fall to the adult children or other family members depending on the state of residence.
If the insured is on Medicare or Medicaid a portion of these outstanding bills could be covered.
End of Life Care
End of life care or senior care could include some of the following costs.
- Hospital Care
- Palliative Care
- Hospice Care
It is common for seniors to receive at least one of these types of services towards the end of life, make sure you are financially ready.
Again, some of these costs will be covered for those on Medicare. For instance, the costs are covered completely if the hospice provider is Medicare-approved.
Specific tax paperwork needs to be filed after someone passes away. If the insured has a trusted accountant that helps file their taxes each year they should be able to help explain this process.
Legal expenses usually slip through the cracks of many end-of-life budgets. Be sure to have the following legal documentation prepared to ease the transition for loved ones.
- Assigned Power of Attorney
As you can see when you get down into it, there are many expenses that can rapidly start to increase the amount of money needed once someone has passed. This is why it is a good idea to start thinking about coverage sooner rather than later.
Final Expense Insurance works in a very straightforward way and provides many benefits.
- Take out a policy
- Make monthly premium payments
- Beneficiary receives money upon death of the insured
Take these simple steps to get your final wishes covered.
Is there anything NOT covered?
One of the best things about this product is that the money can cover anything, this allows for unrivaled flexibility.
Perhaps the insured changes their mind down the road on the final wishes for their remains, this will not be an issue. They simply need to communicate this new decision to the appointed beneficiary. There is no need to call the company or take any further action.
If for any reason the insured wants or needs to change the beneficiary this is also possible, although it is advised to select a reliable person when taking out the policy initially.
Finding a Trustworthy Beneficiary
Selecting a dependable and honest beneficiary is absolutely essential. Since the death benefit can be spent on anything without restrictions imposed by the insurance provider, having someone who is trustworthy is imperative.
As the policyholder, you will want to make sure that you expressly communicate your final wishes to your appointed beneficiary.
Most companies allow multiple beneficiaries to be listed in the policy.
Listing more than one beneficiary is a way to keep some accountability throughout the process. Most companies will allow you to split this in whatever percentage you would like. For example, you could list a 50/50 even split or an 80/20 division.
Another beneficiary option that is highly encouraged is the listing of a contingent recipient. Meaning that should something happen to the primary listed beneficiary in which they are unable to receive the money and carry out the wishes, the person listed as contingent will be granted the death benefit money.
How quickly does the beneficiary get the money?
Other coverage options take around 30 days before the beneficiary will receive the death benefit. With Final Expense Insurance, the money is given to the recipient within a week (or less) of the filed claim.
This money comes in a lump-sum amount that is tax-free. This is important because the amount intended for the beneficiary is what will end up in their pocket, there will not be any tax implications later on that they will have to deal with.
How do you select the best policy?
When looking into coverage there is no shortage of agents and companies to purchase through. It is important to read reviews and understand the options.
Within this coverage type, there are four tiers that someone will fall into. Some plans have a waiting period involved and some do not.
Many plans that you see on TV are considered Guaranteed Issue which means there is at least a 2-year waiting period before the full benefits can be received. For example, this is the staple product that is advertised by Colonial Penn.
Working with an independent agency that specializes in this coverage will undoubtedly be the quickest and most cost-effective way to get immediate coverage at the lowest rate.
Willamette Life is this exact type of agency, give us a call at 844-576-0019 to get a free, no-obligation price estimate today. Unlike other agencies that represent only one company, Willamette Life offers policies from many including Mutual of Omaha and AIG.
Other Coverage Options
The price lock, coverage lock, and flexibility that is appealing with final expense insurance coverage are NOT always available with other types of policies.
These policies list the mortuary as the beneficiary. With this coverage, individuals preplan the service and needed expenses (casket, plot, urn, etc.) then pay for it in installment or in a lump-sum.
However, this type of coverage locks you into your decisions.
What if you move? What if you change your mind on your final resting place? There is a lot less freedom when considering this type of plan.
With that being said, there are still a lot of people that Pre Need would be perfect for. It all comes back to what you are looking for.
This coverage expires after a certain time period so it is not recommended as the primary plan to take care of your final expenses. It is also known to fluctuate in price.
For example, AARP promotes its Term plan as final expense coverage, however, it terminates upon the insured turning 80 and increases the premiums every five years.
a. What does Final expense Insurance cover is a very common question that is asked. The answer to this is that the money can be used to cover anything needed.
b. This is a type of Whole Life coverage that comes in smaller policy amounts to make it more affordable for seniors on a budget.
c. Getting a policy with flexible spending is helpful to accommodate any needed costs or unexpected bills.
Stacie is the trainer of sales and customer service at Willamette Life. She enjoys educating both the staff and the public about Final Expense Life Insurance. By taking the questions frequently asked by clients she has been able to assist in developing a series of blogs that will hopefully be able to help more people than just those we are able to speak with.
We would be happy to answer your specific questions if there is anything we haven’t covered yet.