There are many products on the market claiming to be the best financial vehicle for final expenses. Along with these claims, each product is named something different, and it is easy to get confused.
Fortunately, one product is simple to understand and has permanent benefits, which is a final expense and burial insurance policy.
What Is Burial Insurance?
Burial insurance, final expense, and funeral insurance are identical types of whole life insurance. For a simple and affordable monthly payment, your final expenses will be covered, allowing your family to celebrate your life rather than taking on a financial burden. Burial insurance plans include whole life insurance features like permanent coverage and a locked-in monthly premium.
Three Names, One Product
There are three names used to describe and market insurance to cover funeral expenses.
- Final Expense Insurance
- Burial Insurance
- Funeral Insurance
These three names are used interchangeably by the carriers and have the same meaning.
Final Expense Policy Features
Since final expense life insurance is a type of whole life plan, there are distinct benefits included. However, two features separate this product from traditional whole life coverage.
No Medical Exam: This policy has simplified issue underwriting, which means there are no doctor visits. The application can be completed over the phone from the comfort of your own home. Applicants can complete the process through a 30-minute phone call by answering a series of health questions. There are also plans available that ask no health questions.
Affordable Coverage: The policy death benefit amounts are much lower than traditional plans. The more coverage you have, the higher the monthly cost. Final expense coverage ranges from $2,000 – $40,000, and traditional policies begin at $50,000 and extend into the millions. This makes the cost of burial insurance premiums much more affordable while still having the great permanent advantages of a whole life policy.
Benefits of Whole Life Insurance
Three standard whole life benefits are included in every final expense insurance policy.
Price Lock: The price never changes. For seniors on a fixed income, this is a key feature. Understanding your budget and monthly costs is pivotal, and this benefit by itself makes funeral insurance worth it for so many.
Coverage Lock: The coverage amount will never decrease or expire. When taking out a policy intended to cover funeral costs, it is important that the policy is active when your health declines. This product is permanent with a locked-in death benefit amount and will be there for your family when they need it most.
Builds Cash Value: For every payment made, a portion will go towards the cash value. Over time this amount will grow, giving the policy owner the ability to borrow from it if needed.
What Can the Payout be Used For?
Final expense insurance can cover any needed expenses. There are no mandates or regulations on what the beneficiary must use the distribution for. However, there is a list of common items typically purchased with the lump-sum payment.
- Funeral arrangements
- Leaving an inheritance
- Legal expenses
- Medical bills
- Credit cards
- Remaining balance on a mortgage
- Charity donations
- Post-mortem expenses
- Remaining car loan balances
- Other final expenses
Types of Final Expense Insurance
There are four different plan tiers that seniors can qualify for.
Level: This plan is reserved for the healthiest of seniors. If you can answer “no” to all health questions, you will receive immediate coverage and the lowest premium prices.
Graded: Offering a favorable progressive payout during the two-year waiting period and midpoint premiums, this policy is designed for seniors with past medical concerns.
Modified: This policy has a standard two-year waiting period. With higher pricing, if this is your only option for coverage, you could be better off using a low-cost guaranteed issue policy.
Guaranteed Issue: Designed for seniors with a chronic or terminal illness, this plan has a two-year waiting period. Applicants who want to answer no medical questions may find this product right for them as well. Depending on the provider, a guaranteed issue product can be an affordable option.
Burial Insurance Price Details
The average price for coverage is $50 – $90 per month. This can fluctuate greatly depending on different factors.
Four Price Factors
Health, age, gender, and policy amount will affect the monthly price you pay for funeral insurance coverage.
Health: The health of the applicant carries the most weight when looking at the monthly price. This is due to which plan tier you can qualify for. The more medical uncertainty someone presents, the higher the price will be in order to lessen the insurance provider’s risk.
Age: As mentioned, the price will not change the older you get. However, the longer you wait to lock in coverage, the higher the monthly price will be.
Gender: Women pay less for coverage than men do. This is mainly due to the statistics showing that, on average, females live four years longer than males in the United States.
Policy Amount: The more coverage a person takes out, the higher the monthly premiums will be.
Final Expense Insurance Premiums & Quotes
The chart below shows the price range someone can expect to pay for coverage from the best burial whole life insurance companies.
The healthier the applicant is, the lower the monthly premium. The more complicated the medical history someone has, the higher the premium will be.
Monthly Premium Range
|45||$23 – $34||$32 – $49||$42 – $64|
|50||$24 – $39||$35 – $57||$45 – $80|
|55||$28 – $47||$40 – $69||$52 – $103|
|60||$33 – $54||$48 – $80||$63 – $119|
|65||$41 – $66||$60 – $99||$79 – $146|
|70||$53 – $80||$78 – $120||$103 – $177|
|75||$72 – $116||$107 – $173||$142 – $254|
|80||$98 – $190||$146 – $283||$194 – $411|
|85||$136 – $220||$202 – $328||$269 – $436|
Monthly Premium Range
|45||$27 – $47||$39 – $68||$51 – $89|
|50||$31 – $56||$44 – $83||$58 – $110|
|55||$36 – $61||$52 – $91||$69 – $135|
|60||$44 – $68||$64 – $101||$84 – $149|
|65||$56 – $91||$83 – $135||$110 – $199|
|70||$75 – $106||$110 – $158||$146 – $233|
|75||$100 – $150||$148 – $223||$197 – $328|
|80||$140 – $232||$208 – $346||$276 – $461|
|85||$193 – $312||$288 – $467||$382 – $621|
Is There A Difference Between Life Insurance And Burial Insurance?
While life insurance is designed to replace income, burial insurance is protection against leaving your funeral expenses behind as a financial burden on your loved ones. Burial Insurance can be obtained for an affordable monthly payment with permanent benefits, while life insurance will come in larger coverage amounts and differ in policy structure.
There are other financial products that seniors can use to prepare their family for funeral costs, but each comes with features to be aware of and potential drawbacks.
Traditional Whole Life
This plan is a pillar in the life insurance industry and includes whole life benefits. This coverage would be best if you were looking for one or more of the following advantages.
Whole Life Benefits: These plans offer benefits including permanent coverage, a price that never changes, and a cash value that builds over time.
Larger Policy Amounts: The policy amounts typically start around $50,000 and rise well into the millions. This makes the monthly premium much more expensive than a more affordable funeral insurance policy.
Used as a Tax Benefit: A financial advisor may counsel someone to use this product to shelter wealth or for tax purposes.
Term Life Insurance
Many individuals will have this product marketed to them through the mail or on television. There is cause for concern when using this product to cover your funeral costs.
Coverage Terminates: Depending on the length of your policy, the insurance coverage will eventually expire. For example, if you take out a 10-year term policy at the age of 70, your plan will automatically cancel when you turn 80 years old. This is problematic and can leave your family in a vulnerable financial position if you outlive your plan.
Lower Premiums: Since the policy will terminate, the monthly premiums are lower than a whole life product. It is important to note that some term plans from funeral insurance companies, like AARP’s Level Benefit Term Life policy, actually raise the monthly price the older someone gets.
No Cash Value: There will be no cash value earned, which means you are essentially renting coverage every month. Essentially this makes your monthly payment an exchange for temporary coverage.
When deciding to use prepaid funerals or pre-need insurance, there are a few significant things to note.
Only Covers Funeral Expenses: This product is designed to cover the final expenses of the deceased, including a casket, urn, etc.
The Beneficiary is the Funeral Home: The lump-sum payout is distributed directly to the funeral home, limiting the flexibility that loved ones have in using the money.
Working with One Business: Preplanning for your final arrangements is a good idea in theory, but there are things to consider. Suppose the funeral home goes out of business, or you decide to be buried in a different geographical area. Using this policy type locks you into your decisions and location in an ever-evolving world.
Savings or Investment Account
When thinking about putting money away to cover your funeral costs, there is merit, but this comes with risk and unknown.
Passing Away Unexpectedly: No one knows when their health will decline, this may cause your saving efforts to come up short and leave family members in a compromised financial position.
Investment Volatility: The market can be a great place to grow your money. However, looking at past statistics, investment accounts can be unpredictable and not perform the way you may hope.
Inflation: The value of the dollar changes consistently. It is impossible to say if your saving efforts will outpace the inflation rate.
Commonly Asked Questions About Burial Insurance Policies
What Does Final Expense Insurance Mean?
Final expense coverage is a type of whole life insurance that comes in lesser policy amounts than a traditional plan. The name final expense refers to what the money is intended to be used for upon the insured’s death. This coverage is also known as burial insurance and funeral insurance but can be used on any expenses necessary.
How Do I Find the Best Plan?
The best plan for you can be entirely different than the best option for your spouse because each carrier has different underwriting standards. The way to find the best plan is to work with an agent with access to many life insurance companies. This will raise the likelihood of finding a great plan specific to your budget and health.
Can I Purchase a Policy for a Loved One?
You are allowed to buy a funeral insurance policy for parents or grandparents, but there are a few guidelines to follow. Your loved one will need to be involved in the process. This includes agreeing to coverage, signing their name, and being in a healthy enough mental state to understand what they are consenting to. You cannot take out a policy on someone without their permission.
a. What is burial insurance? First, it is important to understand that this type of product has different names but is the same type of coverage. Funeral insurance and final expense insurance are used interchangeably to market the product and describe its intent.
b. Final expense insurance is a type of whole life insurance specifically designed for seniors to offer permanent coverage at an affordable price point.
c. The money from a final expense insurance policy can pay for anything the beneficiary deems necessary with no stipulations.
I’m the owner and founder of Willamette Life Insurance. Willamette Life specializes in Final Expense Insurance. We compare prices with different insurance carriers while finding the perfect match for your health and budget. This company was started to help educate the public on why Final Expense Insurance could be a great option for them and their family. We strive to be friendly, informative, and always have the client’s best interest as our top priority. Everything in this article is my own professional opinion and experiences I have had during my time in helping clients.