Retirement Concerns by Andy

What Is Final Expense Insurance?

• Andrew Barrett

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Final Expense Insurance

Introduction

This document summarizes key aspects of final expense insurance (also called burial insurance, end-of-life insurance, or funeral insurance), drawing upon five different sources. These sources offer a comprehensive look at the product, its benefits, drawbacks, and suitability for various individuals. The goal is to present a clear and informative overview to help make informed decisions about this type of insurance.

Core Concept: What is Final Expense Insurance?

  • Definition: Final expense insurance is a type of whole life insurance policy designed to cover end-of-life expenses. It typically has a smaller death benefit than traditional life insurance and is often targeted at older individuals.
  • "It's a form of life insurance which you pay a monthly premium for...Its eventual payout is specifically designed to cover end of life expenses." - Safewill
  • "Final expense insurance is a small whole life insurance policy that is easy to qualify for." - Investopedia
  • Purpose: It aims to provide funds to beneficiaries to cover funeral costs, medical bills, legal fees, and other expenses associated with death.
  • "The beneficiaries of a final expense life insurance policy can use the policy’s payout to pay for a funeral service, casket or cremation, medical bills, nursing home bills, an obituary, flowers, and more." - Investopedia
  • "A burial insurance plan can provide immediate peace of mind, knowing that you’re covered upon the first premium payment and that the policy will pay for your funeral costs." - Choice Mutual
  • "Your beneficiaries will be able to apply the death benefit from final expense insurance to a variety of costs, such as: funeral and burial costs, medical bills, legal fees, hospice care, everyday bills." - Aflac
  • Flexibility: Despite being designed for end-of-life costs, the death benefit can be used for any purpose.
  • "However, beneficiaries can use the death benefit for any purpose, from paying property taxes to taking a vacation." - Investopedia
  • "Since final expense coverage is a type of life insurance, the final result will merely be a tax-free cash payout. Your beneficiaries can spend the money on anything. There are absolutely no restrictions." - Choice Mutual
  • "Moreover, if they have the needed funds to meet obligations, the benefit can be used in any other way the beneficiary chooses." - Investopedia
  • Differentiation: It is often sold as a smaller policy to make it more affordable, focusing on funeral costs and related expenses.
  • "There is no difference between final expense insurance and life insurance, other than the fact that insurers sell the smaller final expense insurance policies to make it more affordable." - Investopedia
  • "Whilst this policy typically has lower death benefits than traditional life insurance or a funeral insurance policy, this makes what your monthly premium payments a lot more affordable." - Safewill
  • Synonymous Terms: It is important to note that final expense insurance is frequently referred to as “burial insurance,” “end of life insurance,” “funeral insurance,” or “cremation insurance.”
  • "Final expense insurance is also frequently referred to as “burial insurance,” “end of life insurance,” “ funeral insurance,” or “cremation insurance.” These labels (regardless of who uses them) are all synonyms." - Choice Mutual

Key Benefits of Final Expense Insurance

  • Affordability: Premiums are typically lower due to the smaller death bene

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Speaker 1:

All right. So we've got a whole stack of articles here, all about final expense insurance.

Speaker 2:

Yeah.

Speaker 1:

You've been thinking about end of life planning.

Speaker 2:

Right.

Speaker 1:

And trying to make things easier for your family.

Speaker 2:

That's important.

Speaker 1:

Yeah, it really is. I mean, no one really likes to think about it, but it's one of those things that Better to be prepared. Yeah, exactly why not right. So we've got articles here from Safe Will and Bestopedia, choice, mutual, experian and Aflac, and then we've also got some insights from KBI Benefits.

Speaker 2:

Those are some great resources to get us flooded.

Speaker 1:

Yeah, and they cover a lot. So you know we're going to break it all down.

Speaker 2:

Okay.

Speaker 1:

But you already know the basics of life insurance right.

Speaker 2:

Yeah, I'm pretty familiar with the basics.

Speaker 1:

Okay, so let's just jump right into what makes final expense insurance different Sounds good. Sometimes it's called burial insurance or funeral insurance. Right, but it's all the same concept, exactly. Basically it's designed to cover those end-of-life costs, but is it really just for funerals?

Speaker 2:

That's a common misconception actually.

Speaker 1:

Oh, okay.

Speaker 2:

While it's often marketed for funeral expenses, the beneficiary can actually use the money for anything Really Medical bills, outstanding debts, even that trip to Vegas you mentioned earlier.

Speaker 1:

Wow.

Speaker 2:

Just kidding, of course, but you get the idea.

Speaker 1:

Yeah, so it's really important to choose the right beneficiary.

Speaker 2:

Absolutely Open communication is key.

Speaker 1:

Yeah, for sure.

Speaker 2:

And that brings up an interesting question who really needs this type of insurance?

Speaker 1:

Right.

Speaker 2:

I mean, if someone has a sizable estate or their family is already financially comfortable, is it still necessary?

Speaker 1:

That's a good question. I was thinking the same thing.

Speaker 2:

Because even if the estate can eventually cover everything, there's still the issue of timing.

Speaker 1:

Right Probate can drag on and families might be stuck waiting for funds, exactly Like when they need them the most.

Speaker 2:

That's one of the major advantages of final expense insurance. Yeah, it's designed for quick payouts, often within a couple of days.

Speaker 1:

Okay, so it can provide immediate relief when it's most needed, exactly so. We've talked about what it is and who might benefit from it. Let's get into the pros and cons of final expense insurance.

Speaker 2:

Sure, let's start with the positives. Final expense insurance is generally more affordable than traditional life insurance.

Speaker 1:

Okay.

Speaker 2:

Especially for older individuals, and the approval process is usually straightforward.

Speaker 1:

I was going to say that sounds pretty good so far.

Speaker 2:

Often just a simple health questionnaire.

Speaker 1:

Okay, so no medical exams for most policies.

Speaker 2:

Right, which is a big relief for a lot of people.

Speaker 1:

Yeah, I would say so.

Speaker 2:

And another plus the premiums are usually fixed, so they won't go up over time.

Speaker 1:

Oh, that's good to know.

Speaker 2:

And the coverage is guaranteed.

Speaker 1:

Okay, so the death benefit is locked in.

Speaker 2:

As long as the premiums are paid.

Speaker 1:

So that predictability can be valuable.

Speaker 2:

Absolutely Knowing those final expenses are taken care of can really alleviate a lot of stress.

Speaker 1:

For both the policyholder and their loved ones.

Speaker 2:

Exactly.

Speaker 1:

I also saw something called living benefits mentioned in a few articles.

Speaker 2:

Oh yeah, those can be a great addition.

Speaker 1:

What exactly are those?

Speaker 2:

So some final expense policies offer riders called living benefits, which allow the policyholder to access a portion of the death benefit.

Speaker 1:

Oh wow.

Speaker 2:

If they're diagnosed with a terminal illness, it can help cover medical expenses or other needs during a difficult time.

Speaker 1:

So it's almost like getting some of the benefit early.

Speaker 2:

In a way, yes.

Speaker 1:

Yeah.

Speaker 2:

But it's essential to understand how these riders work and what the specific terms are.

Speaker 1:

That's important to keep in mind. Definitely Okay. So we've talked about the upside. What about the downsides?

Speaker 2:

Well, one thing to consider is the lower payout.

Speaker 1:

Oh yeah.

Speaker 2:

The death benefit for final expense insurance is typically much smaller than traditional life insurance.

Speaker 1:

So you're saying it might not be enough to cover everything?

Speaker 2:

It depends on your individual needs and circumstances.

Speaker 1:

Right.

Speaker 2:

Another thing to watch out for is waiting periods.

Speaker 1:

Okay.

Speaker 2:

Some policies, particularly those with guaranteed acceptance regardless of health Right, have a waiting period before the full death benefit is paid out, and I think there's also something called a graded benefit policy.

Speaker 1:

Right, you got which is like a partial waiting period.

Speaker 2:

Exactly. Think of it like a staircase where the payout steps up each year.

Speaker 1:

Until it reaches the full amount.

Speaker 2:

Right.

Speaker 1:

So it's like a middle ground between standard and guaranteeing issue policies.

Speaker 2:

Exactly.

Speaker 1:

Okay. One thing that Choice Mutual mentioned was that you know, if you live long enough, you might actually end up paying more in premiums over time than the death benefit itself.

Speaker 2:

It's a possibility and it's something to consider when making your decision. It's a little bit scary to think about, honestly, I understand, but that's why it's so important to weigh the pros and cons carefully.

Speaker 1:

Yeah.

Speaker 2:

And of course there's always the potential for misleading marketing in this industry.

Speaker 1:

Oh yeah.

Speaker 2:

Some companies might make exaggerated claims or promise incredibly low prices that turn out to be inaccurate.

Speaker 1:

So it's buyer beware.

Speaker 2:

Always, always, read the fine print and do your research.

Speaker 1:

Speaking of misleading marketing, let's talk about the different types of final expense insurance.

Speaker 2:

Oh, okay.

Speaker 1:

Because it can get a little confusing.

Speaker 2:

You're right. The most common type is standard final expense insurance. You answer health questions, but there's usually no medical exam.

Speaker 1:

Okay, and then there's guaranteed issue.

Speaker 2:

Right, where you're accepted regardless of your health.

Speaker 1:

Yeah.

Speaker 2:

But there's often a waiting period for the full benefits.

Speaker 1:

And then, of course, we talked about the graded benefit policy. So how does someone navigate all of this and make sure they're getting the right policy for their situation?

Speaker 2:

Well, it can feel overwhelming, but with a little guidance it doesn't have to be.

Speaker 1:

Okay.

Speaker 2:

Comparing policies from different companies is essential.

Speaker 1:

So don't just settle for the first one you come across.

Speaker 2:

Exactly. Look closely at the coverage amounts, waiting periods, premiums and any additional features, like those living benefits we discussed.

Speaker 1:

So don't just jump at the lowest price.

Speaker 2:

Right. Make sure you understand what you're paying for and whether it truly meets your needs.

Speaker 1:

And be wary of any advertising that seems too good to be true.

Speaker 2:

Exactly. Chances are it probably is. A few of the articles, especially the one from Experian, recommend working with an independent insurance broker.

Speaker 1:

That sounds like a good idea.

Speaker 2:

Yeah, they can help you compare options from multiple companies and find the best fit for your specific needs and budget.

Speaker 1:

So they can offer unbiased advice and help you understand the fine print of each policy Exactly. Speaking of fine print, let's talk about some of those sneaky marketing tactics you mentioned earlier.

Speaker 2:

Oh yeah, those are important to be aware of.

Speaker 1:

What are some things people should watch out for?

Speaker 2:

well, first and foremost, be wary of ads that promise free final expense insurance free final expense insurance yeah, there's no such thing as a free lunch, especially when it comes to insurance well, it makes sense you'll always be paying something one way or another okay, what else? I see a lot of ads with lines like coverage starting at just pennies a day.

Speaker 1:

Oh yeah.

Speaker 2:

But something tells me it's not that simple.

Speaker 1:

Probably not.

Speaker 2:

You're right to be skeptical. These claims can be misleading. They often highlight the lowest possible premium.

Speaker 1:

Right.

Speaker 2:

For a very limited amount of coverage, which might not be enough to cover your actual needs.

Speaker 1:

So they're technically telling the truth, but not the whole truth.

Speaker 2:

Exactly and watch out for claims about new state regulated life insurance programs or government burial insurance.

Speaker 1:

Oh yeah, I've seen those.

Speaker 2:

While there might be legitimate state programs, it's crucial to remember that the only government provided coverage of this kind is the VA life program, and that's specifically for disabled veterans.

Speaker 1:

Got it. So anything else claiming to be government backed is probably not what it seems.

Speaker 2:

Right.

Speaker 1:

I also remember reading about the Colonial Pen $9.95 plan.

Speaker 2:

Oh yes, their ads can be a bit deceptive.

Speaker 1:

What's the story there?

Speaker 2:

Their ads imply that seniors can get thousands of dollars in coverage for that low price.

Speaker 1:

Right.

Speaker 2:

But in reality it's often for a much smaller amount and the actual cost can vary significantly based on age and health so it's another case of making it sound too good to be true exactly so what's the main takeaway from all of this marketing talk? Don't believe everything you see in an ad. Do your research, compare quotes from reputable companies and don't be afraid to ask questions an informed consumer is a protective consumer.

Speaker 1:

Okay, so we've heard a lot of ground here. In part one we have. We talked about what final expense insurance is, who it's for, the pros and cons and even some sneaky marketing tactics to watch out for.

Speaker 2:

It's a lot to digest.

Speaker 1:

But we're not done yet. We've still got more to delve into.

Speaker 2:

When we come back for part two, we'll dive deeper into the different policy options and what factors you should consider when choosing the right one for your needs.

Speaker 1:

Stay tuned okay, so welcome back. We laid a pretty solid foundation in part one yeah, I think we covered a lot yeah, so now let's actually dig into those different policy options for final expense insurance. All right, it's kind of like choosing a cell phone plan oh, yeah, how so many choices right. And what works for one person might not be the best for another.

Speaker 2:

Exactly. It's like with those phone plans. It's crucial to understand what each option entails before you make a decision. Okay, so, as we talked about before, the most common type is standard final expense insurance.

Speaker 1:

Right.

Speaker 2:

This usually involves answering some health questions, okay, but you can often skip the medical exam.

Speaker 1:

Oh, thank goodness.

Speaker 2:

Yeah, nobody enjoys those.

Speaker 1:

Right.

Speaker 2:

So, but what if someone isn't in perfect health?

Speaker 1:

That's what I was wondering.

Speaker 2:

Are they automatically out of luck?

Speaker 1:

Right.

Speaker 2:

Not at all. That's where guaranteed issue policies come in Okay, as the name suggests.

Speaker 1:

Yeah.

Speaker 2:

Your guaranteed acceptance, regardless of your health history acceptance regardless of your health history. So no health questions, no health questions.

Speaker 1:

No exams, no exams, no exams. It sounds too good to be true. Well, there is a trade-off.

Speaker 2:

Okay, guaranteed issue policies typically have a waiting period?

Speaker 1:

Okay, usually two to three years before the full death benefit is paid out.

Speaker 2:

So if the policyholder passes away during that waiting period, yeah. What happens?

Speaker 1:

The beneficiaries would receive a refund of the premiums paid Okay, plus some interest, but not the full death benefit.

Speaker 2:

Got it, so it's like a safety net.

Speaker 1:

Exactly.

Speaker 2:

But with a bit of a delay Right, which brings us back to those graded benefit policies. Yes, it's almost like a hybrid approach. You could say that with graded benefit policies there's a partial waiting period and the death benefit increases gradually each year.

Speaker 1:

OK.

Speaker 2:

The policy is in force.

Speaker 1:

So you're slowly building up to that full benefit amount. Exactly OK. But even within these types of policies, I imagine the specifics can vary.

Speaker 2:

Oh, absolutely. That's why it's so important to shop around and compare quotes from multiple companies.

Speaker 1:

Don't just settle for the first one, you see, Exactly.

Speaker 2:

Each company has its own underwriting guidelines, pricing structures and even customer service practices.

Speaker 1:

It's like any major purchase, you know a little research. Absolutely, it's a long way, a long way. So what are some key things that people should pay attention to? When they're comparing these policies.

Speaker 2:

The most obvious are the premium costs and the death benefit amount. Okay, but don't stop there. Okay, look closely at the waiting periods, any exclusions or limitations in the coverage, and whether there are any optional riders that might be beneficial.

Speaker 1:

Like those living benefits we talked about. I remember Choice Mutual mentioned that some companies have better financial ratings.

Speaker 2:

Oh yeah.

Speaker 1:

Than others.

Speaker 2:

That's a great point.

Speaker 1:

What does that even mean and why should people care?

Speaker 2:

So financial strength ratings are basically an assessment of an insurance company's ability to pay out claims.

Speaker 1:

Okay.

Speaker 2:

They're assigned by independent agencies like AMBEST and Standard Poor's.

Speaker 1:

Okay.

Speaker 2:

And they're based on factors like the company's reserves, investments and overall financial stability.

Speaker 1:

So it's a way to gauge how reliable a company is.

Speaker 2:

Exactly. You want to make sure they'll actually be there when your loved ones need them.

Speaker 1:

Right.

Speaker 2:

Choosing a company with a strong financial rating gives you peace of mind that your beneficiaries will receive the death benefit as promised.

Speaker 1:

You don't want the company to go belly up.

Speaker 2:

Right, exactly.

Speaker 1:

When it's time to pay up.

Speaker 2:

That's the last thing you want.

Speaker 1:

Okay, so that's definitely something I'll be keeping in mind.

Speaker 2:

Good.

Speaker 1:

We've talked a lot about the financial and logistical points of this.

Speaker 2:

Yeah.

Speaker 1:

But there's also an emotional side to all of this.

Speaker 2:

It's not just about the numbers.

Speaker 1:

Right, one of the most significant benefits of final expense insurance is the peace of mind it provides.

Speaker 2:

Okay, both of the policy holder and their loved ones. Okay, it's about taking care of those you leave behind, even after you're gone.

Speaker 1:

That sense of responsibility, exactly that you've taken steps to ease the burden Right On your family.

Speaker 2:

Mm-hmm.

Speaker 1:

During a difficult time. It's powerful, yeah, but that peace of mind is only really effective if everyone's on the same page.

Speaker 2:

That's so true, yeah. Having those open and honest conversations with your loved ones about your end-of-life wishes, including your insurance plans, is crucial.

Speaker 1:

Yeah.

Speaker 2:

It can prevent confusion, conflict and a lot of heartache down the road.

Speaker 1:

It's about making sure your wishes are understood Exactly and respected. Yes, but sometimes those wishes can be expensive. They can be. I remember KBI benefits broke down the potential costs of end-of-life arrangements. Yes, and it was a lot more than I expected.

Speaker 2:

It could be a real eye-opener.

Speaker 1:

Yeah, we're talking funeral home fees, embalming caskets or cremation costs, transportation, memorial services, obituaries, flowers.

Speaker 2:

It all adds up.

Speaker 1:

It all adds up quickly, so that's where having this final expense insurance in place can make a difference.

Speaker 2:

Absolutely.

Speaker 1:

It's not just about providing for your loved ones. It's about protecting them from that financial burden.

Speaker 2:

Right During a time of grief.

Speaker 1:

Exactly. It allows them to focus on celebrating your life, honoring your memory yeah, not worrying about how to pay for everything it takes care of those practicalities right so they can focus on what truly matters so it sounds like creating a legacy

Speaker 2:

yeah of care and consideration I like that not just a financial safety net that's a beautiful way to put it this has been really insightful has.

Speaker 1:

We've explored those policy options and really delved into the emotional and financial implications.

Speaker 2:

For sure.

Speaker 1:

But there's still more to consider right.

Speaker 2:

Indeed, in part three we'll shift our focus to you, the listener. We'll discuss the key factors to consider when deciding if final expense insurance is right for you, and we'll leave you with some final thoughts to ponder as you continue on this important journey of planning for the future.

Speaker 1:

Stay tuned okay, so we're back for the final part of our deep dive into final expense insurance it's been quite a journey it really has. We've covered a lot of ground, but now it's time to bring it all home and figure out how this applies to you, the listener.

Speaker 2:

Exactly.

Speaker 1:

Is final expense insurance the right choice for you?

Speaker 2:

That's the big question.

Speaker 1:

Yeah.

Speaker 2:

And there's no one-size-fits-all answer, unfortunately Right, but we can definitely walk through some key factors to help you make an informed decision.

Speaker 1:

Okay, so what are some of the most important things to consider?

Speaker 2:

Well, we've talked about age and health playing a role.

Speaker 1:

Right, could you elaborate on that a little bit Sure.

Speaker 2:

So if you're younger and in good health, traditional life insurance might actually be a more cost-effective option in the long run. Those policies typically offer larger death benefits at lower premiums, especially if you have a longer life expectancy.

Speaker 1:

But, on the other hand, if someone is older or has health conditions that make traditional life insurance difficult or expensive to get.

Speaker 2:

Exactly.

Speaker 1:

Then those guaranteed issue final expense policies.

Speaker 2:

Those can be a lifesaver.

Speaker 1:

Yeah.

Speaker 2:

They provide that peace of mind, knowing that your final expenses are covered, regardless of your health history.

Speaker 1:

Okay, so age and health are definitely important factors.

Speaker 2:

Yeah.

Speaker 1:

What about your financial situation?

Speaker 2:

Right your overall financial picture is crucial.

Speaker 1:

How does that play into the decision?

Speaker 2:

Well, do you have existing assets?

Speaker 1:

Okay.

Speaker 2:

That could cover your final expenses.

Speaker 1:

Things like savings, investments, property exactly yeah if so, you might not need a separate final expense policy but even if you have those assets, there's still that issue of timing right right estate settlements can take time yeah your loved ones might need immediate access to funds to cover those initial expenses.

Speaker 2:

Final expense insurance fills that gap by providing a quick payout Right that can help your family navigate those challenging early days.

Speaker 1:

So it's about taking care of those immediate needs.

Speaker 2:

Exactly.

Speaker 1:

While the rest of the estate is being settled.

Speaker 2:

Right.

Speaker 1:

Something that really struck me in a few of the articles, especially the one from SafeWheel, was the importance of personal preference. Oh, absolutely you know it's not just about the numbers.

Speaker 2:

It's not just about cold hard numbers, Right? Some people simply find immense comfort in knowing that their final expenses are taken care of.

Speaker 1:

Right.

Speaker 2:

No matter what their financial situation might be. It's a personal decision.

Speaker 1:

Yeah.

Speaker 2:

And there's no right or wrong answer.

Speaker 1:

So it's about that peace of mind, exactly, and alleviating the burden not just for your loved ones, but for yourself as well.

Speaker 2:

Absolutely.

Speaker 1:

Speaking of loved ones, we talked about choosing a beneficiary Right. Any final thoughts on that?

Speaker 2:

It's so crucial Think carefully about who you trust To handle those funds responsibly and in accordance with your wishes.

Speaker 1:

Right.

Speaker 2:

Open communication is key. Make sure they understand your intentions and have clear instructions.

Speaker 1:

Communication is everything.

Speaker 2:

Yeah, it really is.

Speaker 1:

Okay, so I want to circle back to something we touched on earlier.

Speaker 2:

Okay.

Speaker 1:

End-of-life planning that goes beyond just the financial side of things.

Speaker 2:

Right, that's an incredibly important point and often overlooked. What were your thoughts on that? Well, we focused on covering the costs, but there's so much more to consider when planning for the end of life.

Speaker 1:

Right.

Speaker 2:

It's about your legacy, your values, how you want to be remembered.

Speaker 1:

It's about living a full life and making choices that align with your beliefs. Exactly Even as you face your own mortality.

Speaker 2:

Right.

Speaker 1:

So what are some practical steps that people can take beyond just purchasing insurance?

Speaker 2:

Well, have you considered creating a living will or advanced directives?

Speaker 1:

I haven't really, but I know I should.

Speaker 2:

These documents allow you to outline your medical preferences and ensure your wishes are honored, even if you're unable to communicate them yourself. So it's about taking control of your own narrative exact even in those final chapters it can be daunting to think about, but it's a gift you give yourself and your loved ones yeah, it's about clarity it is peace of mind and ensuring that your voice is heard even when you're no longer able to speak.

Speaker 1:

Wow, that's powerful yeah so, as we wrap up our deep dive into final expense insurance Right, what's the one key takeaway?

Speaker 2:

Well, I hope listeners have gained a deeper understanding of what final expense insurance is, how it works and the various factors to consider when deciding if it's right for them. It's not just about death. It's about life and how we choose to approach those final chapters.

Speaker 1:

It's about taking ownership of our own stories, making choices that align with our values.

Speaker 2:

Yes.

Speaker 1:

And ensuring that we leave behind not just memories Right, but a legacy of care and consideration for those we love.

Speaker 2:

Beautifully said.

Speaker 1:

Final expense insurance can be a valuable tool in that process, but it's just one piece of the puzzle.

Speaker 2:

Right. Think about the bigger picture. Have those difficult conversations, yeah, and make informed choices that bring you and your loved ones peace of mind.

Speaker 1:

Well, this has been an incredible journey yes thank you so much for joining us for this deep dive into final expense insurance my pleasure we hope you found it informative, empowering and maybe even a little bit thought-provoking. I hope so, and we encourage you to continue exploring these topics, asking questions and making choices that bring you peace and clarity.

Speaker 2:

Absolutely. Until next time Take care.