Planning for the future can be intimidating. Consider the average funeral cost is roughly $8,000 along with the high costs of medical care (medical debt is the No. 1 cause of U.S. bankruptcies) – it can leave our loved ones in a stretched financial position if you don't have a plan in place. Life insurance and final expense policies can be one of the many financial vehicles to help you prepare for when the unthinkable happens.
Bluff Country Insurance has made this guide to help you compare final expense to traditional life insurance, to help you understand your options.
What is final expense insurance?
Final expense insurance is used to cover medical bills, funeral costs, and other end-of-life expenses that your loved ones may need to cover after your passing. Coverage is typically lower because you are taking out just enough to cover funeral and final expenses – not replacing lost income.
Final expense is a type of whole life insurance, which means it will remain active for the rest of your life and does not expire after a certain age if premiums are paid. After you pass, a lump sum is paid to the beneficiary.
Do I need a final expense policy?
Final expense insurance may be a good fit for you if:
· You’re a senior who doesn’t qualify for term life insurance
· You have been declined life insurance due to health reasons
· You have a terminal illness
· You are caring for aging parents and have limited resources to pay for funeral costs
Always calculate how much coverage your family really needs, compare pricing, and other options. You may not necessarily need it. Especially if you have enough money set aside to cover these expenses with existing savings, investments, or other insurance policies.
What are the differences between final expense and life insurance?
Final expense policies feature simplified underwriting and lower coverage levels ($2,000 to $40,000) compared to other traditional life insurance options. However, this might not be enough for some. Because benefit amounts are minimal and intended for final expenses – it does not replace lost income or help cover your loved one’s expenses in the years to come.
Term life Insurance is usually the most affordable alternative, with benefit amounts at $100,000 plus. This type of insurance is designed to replace the lost income associated with your passing. It can be used for end-of-life expenses, mortgage, education, childcare, and cost of living expenses for your spouse or children. This type of insurance is available in 10,15-,20- or 30-year terms.
Permanent life insurance policies are also available and remain in effect for the remainder of your life. It is similar to term life with premiums calculated based on age, gender, medical history, and lifestyle - among many other factors. Permanent life insurance includes a cash value component. Always get quotes on available options to make sure you can meet your needs at the best price.
Who should consider life insurance?
Life insurance can help your family maintain their standard of living and lifestyle in the event of your death. Benefits are paid to your beneficiary if you pass away during the term or duration of the policy. Life insurance may be right for you if:
· Have dependents, spouse, or children relying on your income
· Have debts to pay off: mortgage, car, or credit card
· Require coverage for a set period of time (for example: until your children are grown or graduated college)
Do I want to help pay for my grandchildren’s education? Will my partner struggle financially if I were to pass and had to rely on one income? How would I pay for childcare if my stay-at-home spouse were to pass? These are all excellent questions to start with when considering if life insurance is right for you.
Whether you choose final expense or life insurance - it depends on your personal needs and goals. Final expense insurance covers final expenses, while life insurance offers a financial safety net for your family. Contact us If you need assistance exploring your options or would like more information.
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