Could your funeral cause your children and other loved ones to go into debt? According to recent research, it very likely can. Today, it is estimated that about 85 percent of a person’s debt problems start with a death in the family.
The cost of a funeral can be expensive. But, the price that your children may have to pay could go far beyond just the cost of the just the funeral service itself. In fact, final expenses can include a long list of debt related items. This is debt that many people are not prepared for – and because of that, your children could end up being responsible for paying bills for many years to come afterward.
What are Final Expenses?
While many people may think that final expenses only encompass the cost of a funeral service and burial arrangements, they can include a much longer list of items. These may include:
- Uninsured medical / hospitalization costs
- Hospice care
- Nursing home and / or home health care
- Unpaid debt obligations such as credit cards, personal loans, etc.
Because many people simply don’t like to think about the future, they will often not prepare for it, either. But unfortunately, this could end up being a costly mistake – and it could put children into a substantial amount of debt that they didn’t anticipate. The good news is that there are ways to eliminating this debt – and it can often be wiped away before it even starts. This can be done through the purchase of a final expense insurance policy.
How Does Final Expense Insurance Work?
In many ways, Final expense insurance works like regular life insurance coverage in that an individual will pay premiums for the policy, and when the insured passes away, the policy will pay out to a named beneficiary (or more than one named beneficiaries).
But, these policies can also be somewhat different from a traditional life insurance policy. First, they are specifically designed for paying the bills that your children and / or other loved ones will face once you are gone.
Also oftentimes referred to as funeral insurance or burial insurance, a final expense insurance policy can help to ensure that your loved ones won’t be saddled with the high cost of these expenses.
Altogether, the cost of a funeral service, burial plot, headstone, flowers, and transportation for the service can run in the range of $10,000. But, when factoring in other ancillary costs, the price could be higher – in some cases, much higher.
Final expense insurance is often purchased by those who are in the age range of 50 to 80 – however, some insurance carriers will offer this coverage to people who are older (and younger).
In many cases, the amount of final expense insurance is between $5,000 and $25,000. But, there are many insurance carriers that will offer much higher death benefits to applicants – sometimes even as much as $500,000.
While there can be several types of final expense insurance, it is common that these policies are whole life. This means that, in addition to the death benefit coverage, the policy will also have a cash value component. The cash that is in this part of the policy is allowed to grow on a tax-deferred basis.
This means that the cash can grow and compound over time without being taxed – unless or until it is withdrawn by the policyholder. The cash is allowed to be either borrowed or withdrawn for any reason – including paying off debts and / or supplementing retirement income.
Final expense life insurance coverage may also be easier to qualify for than traditional, medically underwritten life insurance. This is because, in many cases, there is no medical examination that is required to be approved. Therefore, even if an applicant has certain types of adverse health issues, he or she may still be able to qualify.
Some final expense insurance policies even have few – or no – health related questions on the application. So, provided that the premium is paid, the applicant will qualify for the coverage – and, the coverage cannot be canceled by the insurance company.
Just as with other types of life insurance coverage, the death benefits that are received from a final expense policy will be free of income taxation to your beneficiary. This means that they will be able to use 100% of the proceeds – without the worry of tax – to pay off debt or to use the funds for other pressing needs. This can provide a great deal of peace of mind for your children and loved ones – especially at an already difficult time in their lives.
In some cases, the proceeds of the final expense policy can be paid directly to a funeral home. This can also make the financial end of the planning much easier because the money will be there and available whenever the time may come. If you decide to go this route, you can also name a child or other loved one as a contingent beneficiary on the policy. This means that should there be any funds from the policy left over after your funeral has been paid for, this individual (or individuals) will be able to obtain the rest.
Why Consider a Final Expense Insurance Policy?
While many people don’t like to think about the time that they will be gone, planning for it is essential. There can be a number of large expenses that are affiliated with a person’s funeral and burial, as well as other debts that may be left behind.
Leaving these expenses behind could place your children and others whom you love and care about in a difficult financial position. But, having a final expense insurance plan can provide proceeds – and peace of mind.
This type of coverage is typically not difficult to qualify for – and in many instances, the premium is very affordable. Plus, once you are obtained a final expense plan, the premium cannot be raised, nor can the coverage be canceled (as long as the premium payments are being made).
The way that your financial plan is set up right now, who will pay your final expenses once you are gone?
Who is a Good Candidate for Final Expense Insurance?
Even if you already have life insurance in place, final expense insurance could provide you and your loved ones with an added benefit. That’s because other life insurance that is already in force may be earmarked for other needs. So, once those funds have been used up, who will pay the cost of a funeral and other related costs – costs that could exceed $10,000?
For those who are age 50 and older, final expense coverage should often be considered. And, if you have an adverse health condition, this type of insurance may be able to offer you the coverage that you need, without the worry of your application being declined.
One way to determine whether this coverage could be beneficial for you is to estimate the amount of all expenses that could fall on the shoulders of your children or other loved ones when you are gone. If your current life insurance is not sufficient, then a final expense policy should be considered.
What to Look for in a Quality Final Expense Insurance Policy
When shopping for a final expense policy, there are several items that are important to look for. First, you should estimate roughly how much your final expenses may be. This can be done by making calls to several funeral homes in your area (or in the area where you plan your final interment). Doing so can give you an idea of what the current cost of a funeral is – as well as any of the other expenses that you may not have been aware of.
Once you have done so, you should also consider any other debts that you may have that would go unpaid upon your passing. For example, do you carry any balances on your credit cards? Do you have an auto loan that may have a high balance left?
In addition, you should also consider potential costs that may not be covered by your health insurance, such as policy deductibles and / or copayments that would be due for final care. These, too, would need to be paid by your children or loved ones. After you have added up all of these potential costs, it is important to make sure that you find an insurance company that offers this amount of death benefit.
There are also some other parameters to consider when shopping for a final expense policy. These can include the way in which the death benefit is paid out. For instance, some final expense insurance policies will pay out 100 percent of the stated proceeds – regardless of when the insured passes away.
Others, however, may only pay out a certain percentage of the stated benefits if the insured dies within just the first year or two of owning the policy. In some cases, for example, the beneficiary may only receive 50 percent of the death benefit – and in still others, the beneficiary may only receive back the amount of premiums that were paid into the policy. So be sure to inquire as to how – and when – these proceeds will be paid out.
It is also essential to know how you can qualify for the coverage. This is because, in some cases, you may need to answer a number of health related questions, while in other cases you may not be. This can be important for those who may have an adverse health condition and may, in turn, not be able to qualify if medical underwriting is required.
Yet another key criteria is how much you will be charged in premium. Just like with any other products and services that you may purchase, final expense policies can be priced very differently – sometimes substantially – from one insurance company to another. This can be the case, even for the very same type and amount of coverage.
With that in mind, be sure that you shop and compare several different final expense policies before making your coverage decision. While this may take some time if you go from one insurer to another, it can be done much more quickly, easily, and conveniently if you work with an independent insurance brokerage or agency that has access to multiple life insurers.
Looking at different life insurance carriers can also mean checking the companies’ financial strength ratings. Here, you will want to make sure that the company you purchase through is strong and stable from a financial standpoint so that it can be there when the time comes for paying out a claim.
Where to Get the Best Quotes on Final Expense Insurance Coverage
If you are looking for the best quotes on final expense insurance coverage, shopping and comparing several different insurers can be a good route to go. That way, you can compare policies, benefits, and premium quotes – ideally all in one place – and from there, you can make your ultimate decision based on what will be best for you.
When you are ready to move forward, we can help. We work with many of the top life insurers in the country today and can provide you with all of the details that you need on final expense coverage so that your children will not have to go into debt. If you are ready to proceed, just simply fill out the form on this page.
If you have any additional questions about final expense coverage, please feel free to contact us directly via phone, toll-free, by calling 888-389-8676. We understand that considering final expense coverage can be somewhat daunting. But the good news is that these policies can ensure that you won’t be leaving your children in debt. So, contact us today – we’re here to help.