Is Final Expense Life Insurance Worth Purchasing?

Your family will likely have to cover your funeral costs as well as any medical bills after you pass away. Things can quickly get overwhelming if your loved ones are not financially prepared to handle these expenses. Even the most basic funeral services can cost thousands of dollars. Final expense insurance may be the best option for you to ensure that your family can cover the cost of any medical bills or funeral payments.

Final expense, or burial insurance, does not provide your family and loved ones with continued financial support after you pass away like a life insurance policy would, but it still may be a worthwhile investment. Final expense coverage will be proportionate to the cost of your funeral, which will rarely exceed $20,000. On the other hand, typical term and permanent life insurance policies will pay out a value that is proportionate to your ability to earn money now and for the remainder of your life.

Will I need final expense insurance?

Final expense insurance can be incredibly helpful for covering the high cost of funerals, but it may not be necessary for everybody. For people insured with a term or whole life policy, final expense coverage may not be necessary to pay for funeral costs or medical bills after their death. However, in the event that someone outlives their term life insurance policy, final expense insurance may be a necessary supplement to cover the expenses after their death.

If a family has a large number of assets available (noted in the last will and testament) to work with after a loved one passes away, they may consider self-insurance to cover the funeral costs. Essentially, self-insurance is when a family uses their own money instead of using the payout from a life insurance policy. However, families who choose to self-insure should plan to spend at least $10,000 for funeral and medical expenses. If this amount seems unmanageable, final expense coverage may be the best option.

Pros and Cons of Final Expense Insurance

A final expense funeral insurance policy, like all insurance policies, may not be a one-size-fits-all option. For example, this type of insurance may not be appealing to those who are younger and still a long time away from retiring from work and living on a fixed income. There are a variety of advantages and disadvantages that you should consider when you are deciding whether or not to purchase burial insurance. Here are some of the pros and cons of this type of insurance.

Pros

Final Expense Life Insurance is Affordable for Those on a Budget

Since final expense coverage is used primarily to pay for funerals and final medical costs, it usually comes with more affordable premiums than a life insurance policy. If a standard life insurance policy is unaffordable, it may be a better option to purchase final expense insurance instead.

Provides Peace of Mind for your Family

This insurance is great for covering high funeral costs, which come out to about $9,000 for an average casket funeral. Cremations and funeral services can also end up costing about $5,000. Your loved ones will be thankful for the financial assistance in paying for these expenses, especially while they are grieving.

Payouts can be Made Directly to Funeral Homes

If you have a specific plan in mind for your funeral, then final expense insurance may be a good option. You can assign the payout from the burial insurance directly to a funeral home in order to ensure that the entirety of the benefit covers the cost of your funeral. By doing so, you can plan your funeral exactly how you want to and you can be sure that the insurance payout will cover the costs. If there is any money left over after your funeral, the beneficiaries of your policy will receive a payout for the remainder.

Cons

Low Payout Compared to Term or Standard Permanent Life Insurance Policies

While final expense funeral insurance is incredibly beneficial, it is not meant to cover the finances for all aspects of your beneficiary’s life. On average, the payout for this type of insurance ranges between $5,000 and $25,000 that is intended to cover funeral expenses. However, this amount may not be able to cover the cost of a headstone, cemetery plot or any medical bills that you may have had building up.

Payouts are not Required to be Used on Funeral Costs

Although final expense insurance is intended to cover the cost of your last expenses, your beneficiary is not legally mandated to spend all of the payout that way. In fact, your beneficiary can use the benefits however they like, so it is important that you make your beneficiary someone you entrust to handle your funeral wishes.

However, since you can assign your insurance payout to a funeral home to arrange your services when the time comes, you can work around this issue. If you choose to purchase a funeral insurance policy, then you should take the time to plan your arrangements with a reputable funeral service. That way, you can ensure that your final wishes are met and that your funeral arrangements are paid for.

The Last Word on Final Expense Insurance

When the time comes for your funeral, you can use final expense insurance as a way to fund the costs. You can either choose a funeral home to receive the payout from your policy or you can keep a document stating your funeral preferences somewhere with your will. This document can specify whether you would prefer a burial or cremation, open or closed casket and more.

By purchasing a policy, you can ensure that your loved ones will not be stuck with the expenses after you pass away. However, this type of funeral insurance may be unnecessary if you are already adequately covered by a life insurance policy. Additionally, you may find it inessential if your family has the assets available to cover your funeral expenses. If you are having trouble deciding whether or not to purchase final expense insurance, you can consult your financial adviser.