Talking about end-of-life expenses isn’t fun, but planning ahead with final expense insurance can save your loved ones a lot of stress. Let’s break down what final expense insurance often covers, the pros, the cons, and key questions to ask before spending your hard earned money.
What Does Final Expense Insurance Typically Cover?
Final expense insurance is designed to cover costs related to your passing. Here’s what it usually includes:
- Funeral Costs: Covers funeral services, burial or cremation, and associated expenses.
- Medical Bills: Pays off any outstanding medical bills.
- Outstanding Debts: Settles any remaining debts.
- Miscellaneous Expenses: Can cover probate fees, travel expenses for family members, and other final costs.
Positives of Final Expense Insurance
- Affordable Premiums: Generally, premiums are lower than other whole life policies, making it a good fit for seniors on a budget.
- Guaranteed Acceptance: Many policies don’t require a medical exam, so even those with health issues can get covered.
- Fixed Premiums: Your premiums stay the same, even as you age.
- Cash Value: Builds cash value over time, which you can borrow against if needed.
- Peace of Mind: Ensures your loved ones won’t be financially burdened by your final expenses.
Negatives of Final Expense Insurance
- Limited Coverage: Death benefits usually range from $5,000 to $25,000, which might not cover all expenses.
- Higher Cost per Dollar of Coverage: On a per-dollar basis, these policies can be more expensive than other types.
- No Significant Investment Component: These policies don’t offer much in terms of investment growth.
- Policy Lapse Risk: If you miss payments, the policy can lapse, meaning you lose coverage and any premiums paid.
Important Questions to Ask Before Buying Final Expense Insurance
- What are the Premiums and Payment Options? Understand how much you’ll pay, how often, and what happens if you miss a payment.
- What’s Covered by the Policy? Confirm exactly what expenses the policy will cover and if there are any exclusions.
- Is there a Waiting Period? Some policies have a waiting period before full benefits are available. Know what this means for your coverage.
- Can Premiums Increase? Ensure the premiums are fixed and won’t increase over time.
- What’s the Cash Value? Understand how the cash value works, how it grows, and the terms for borrowing against it.
- Are There Any Riders Available? Check if you can add riders, like accidental death or accelerated death benefit, to enhance your coverage.
The Takeaway
Final expense insurance can be a practical solution for covering end-of-life costs, providing peace of mind that your loved ones won’t be financially burdened. However, it’s essential to weigh the benefits against the downsides. While the premiums are generally affordable and acceptance is guaranteed, the coverage amount is limited and the cost per dollar of coverage is often higher compared to other types of life insurance. Before deciding, ask detailed questions to ensure the policy meets your needs and offers the best value for your situation.