Final Expense Insurance

Dying has become costly in the new normal, with medical, funeral, and burial expenses going through the roof. In 2022, the median cost of funeral expenses has crossed over $9,000, adjusted for inflation.

Due to this significant cost spike in the death-care industry, many people with limited income or wealth, including seniors with severe health complications, are being put in a rather unusual financial pickle. They need a viable solution to help prevent their loved ones from spending thousands of dollars or accumulating unnecessary debt following their demise.

Fortunately, in the modern age, we can find different insurance policies in the market, from health insurance to car, boat, life, homeowners, umbrella, and even pet insurance. Most of these policies are designed to help you cover expenses like medical bills and repairs. In contrast, life insurance allows policyholders to leave behind some money for their families after their passing.

However, there is another policy you can opt for to cover all expenses related to your death – Final Expense Insurance. This relatively new insurance policy has become the go-to solution for those looking to leave behind memories for their loved ones, not bills.

Many people don’t realize that Final Expense Insurance is a type of life insurance. Final expense policies have a much smaller death benefit than traditional life insurance policies. Still, they are structured in such a way to pay for funeral costs and other end-of-life expenses. Because the policy’s death benefit is relatively small, these policies are often less expensive than traditional life insurance.

The best time to take this Final Expense Insurance policy is when you turn 65. The insurance companies that sell Medicare Supplement Insurance Policy also sell final expense life insurance. The underwriting is slightly relaxed when you apply as an add-on to your Medicare Supplement Insurance policy.

So, if you haven’t heard of Final Expense Insurance or are unsure if it’s the right choice, you’re at the right place. This post will share everything you need to know about Final Expense Insurance, including its key benefits.

What Is Final Expense Insurance, and How Does it Work?

Families must make several critical financial decisions in the days and weeks following a loved one’s death. One of the most challenging questions for the beneficiaries is what to do with deceased finances and outstanding bills.

Final expense insurance, also known as funeral or burial insurance, is a whole life insurance policy designed to cover expenses related to death and costs associated with the funeral.

Big Ticket Items:

• Funeral
• Casket expenditure or Cremation
• Memorial Service and Reception
• Transportation
• Outstanding Legal costs
• Medical Bills, etc.

Final expense policies have much smaller death benefits ($2000 to $50,000) than traditional life insurance policies. Still, they are structured in such a way to pay for funeral costs and other end-of-life expenses.

Due to the smaller death benefits, these policies are often less expensive than traditional life insurance. Moreover, the insurance companies that sell Medicare Supplement Policy also sell final expense life insurance.

Thus, when you apply as an add-on to your Medicare Supplement Insurance policy, carriers have slightly relaxed underwriting guidelines during your Initial Enrollment Period, and policyholders can qualify for a super preferred rate that is 10% lower than the preferred rate.

You qualify for a low premium under the highest health classification, super preferred rate. It’s hard to match or compete with super preferred rates.

Ideally, you want to apply for a Medigap or Medicare Supplemental Insurance Plan & Final Expense Insurance during your Initial Enrollment period IEP. 

This happens when you turn 65 and receive Medicare Part A and Medicare B. You are now ready to get a Medicare Supplemental Insurance Plan. 

Once you enter your IEP, you will have 7 months to purchase a supplemental insurance plan. This is the BEST time to buy a Medicare Supplement policy. This time period is 3 months before your birth month, your birth month, and then 3 months after your birth month. Total = 7 months. 

Carriers cannot deny your application in this crucial 7-month window, and you can apply for any plan you choose. But, the insurer could exclude a pre-existing health condition and relax the underwriting for roughly 7 months. It’s a practical and intelligent choice to add Final Expense Insurance to your coverage during this 7-month window, qualify for discounts on premiums, and settle peacefully during your retirement years.

If you failed to enroll during your Initial Enrollment period, insurance providers can reject your application, will not cover any pre-existing conditions, and/or charge you higher rates. Your IEP is prime time! If you miss it and later decide to get Medicare Supplement or Final Expense Insurance, you could end up paying higher premiums.

Types of Final Expense Insurance:

The most common types of policies you can opt for according to your needs or circumstances:

Level or Simplified Final Expense Insurance Policy

This is the most common type of Final Expense Insurance policy in the market and is typically offered to applicants in excellent health. However, the provider (carrier) will check your medical history or report for any surgeries, prescriptions, or health conditions. However, the biggest advantage of this policy is that it’s the only type that offers immediate benefits and full coverage from day one.

When you purchase a level final expense insurance policy, the full face value of the policy is paid out to your beneficiary immediately, regardless of the type of death. This means that your beneficiary receives the full amount of the policy, whether you die from natural causes, an accident, or even suicide. This can be a great way to ensure that your loved ones are taken care of financially after you’re gone.

When looking for a final expense plan, you will find that Level Benefit or Simplified Issue is the most complete, practical, and best-case option. With Level Benefit or Simplified, you or your loved ones will be on a level premium no matter how long they live.

This can provide immense peace of mind in knowing they will be taken care of no matter what happens. With Level Benefit or Simplified Issue, the coverage is the most comprehensive, but it is also much more robust because death is inevitable.

This makes it an excellent option for those on a tight budget; premiums don’t go up, and final expense policy coverage stays the same as long as monthly premiums are paid on time.

Graded Final Expense Insurance Policy

Next, we have the Graded Final Expense Insurance Policy, which generally carries a higher premium and includes a 2-year wait period for full death benefits to be paid. However, some carriers might have long wait periods for full death benefits.

Here are the most common scenarios:

• When you purchase a modified or graded final expense insurance policy, the full face value of the policy is directly paid out to your beneficiary if the cause of death is due to an accident.
• Suppose it’s a non-accidental death during policy years 1 and 2. In that case, they will only receive a small percentage of the benefits in the first year (20-30%), or some carriers will pay out 110 to 120% of the premiums paid to date to make the beneficiaries whole. Ultimately, payouts depend on the carrier’s financial strength and plan coverage details.
• If death occurs in year three or later, the beneficiaries receive 100% of the death payments.

Modified Final Expense Insurance Policy

Modified policies are offered to clients according to their health conditions. They have a 2-year waiting period for benefits transfer. Plus, if the policyholder dies before this period, the coverage will only offer a return on premiums plus a percentage.

Here are the most common scenarios:

• If an individual passes away from an illness, age, or suicide in year one, the carrier will return the paid premiums plus 10% or a predetermined percentage of interest.
• If the death occurs in year two, the carrier might pay 10-20% on top of paid premiums.
• If death occurs in year three or later, the beneficiaries will receive 100% of the benefits.

Guaranteed Issue Final Expense Insurance Policy:

Finally, we have the GI policy, which typically offers the same benefits as modified policies but is generally more expensive due to the lack of health underwriting.

It has a 2-year wait period, meaning it will only pay a return on premiums plus a percentage if death occurs earlier.

Here are the most common scenarios:

• If an individual passes away from an illness, age-related death, or suicide in year one or two, the insurance carrier will return the paid premiums plus 10-20%.
• If death occurs in year three or later, the beneficiaries will receive 100% of the benefits.

Note: The scenarios above are examples to explain how these policies work. Every client is unique, and their initial health conditions and situations will vary, and outcomes of policy approvals will depend on the carrier’s underwriting guidelines as well. The only thing guaranteed is that the healthier and younger you are, the lower rates you’ll pay. 

Conclusion

We hope you enjoyed our brief overview on the basics of Final Expense Life Insurance. To recap, a Final Expense Insurance policy is one of the smartest ways to mitigate life’s uncertainities and avoid finiancial risk. Every client is unique and there needs and aspirations are different. There are many things to know about Life Insurance and Final Expense Life Insurance policies, and we hope that this introductory article was able to help you understand some of the basics. Whether you are new to Final Expense Insurance or have previously purchased a Final Expense Life Insurance policy and not happy with the waiting periods,premiums or service. Please contact us and If you have any additional questions, we would love to help you!

We hope you can have peace of mind and feel confident in your coverage! 

You can contact us to learn more about Final Expense Insurance policies, get a free quote, and compare your options. Please call us at 603-696-4394 or 1-833-META-T65 for a free comparison of Final Expense Insurance Policy options.