14 Things You Need to Know About Life Insurance for Burial and Final Expenses
Are you now being told:
- You can no longer qualify or the rates are too expensive.
- Or, the policy won’t pay if you die in the first 2 years.
Quick Article Guide
Here’s what we'll cover in this post:
- 1. What Is a Final Expense Life Insurance Policy Used For?
- 2. How Much Life Insurance Can You Buy for Final Expenses?
- 3. What to Look for in a Final Expense Policy
- 4. How Are Rates and Eligibility Determined?
- 5. Types of Policies Available and Age Limit
- 6. Options for Less Than $100,000 of Coverage
- 7. Options for $100,000 of Coverage or More
- 8. Term Life Insurance Can Work, Too
- 9. What If You Have Health Issues?
- 10. Mind the Fine Print
- 11. What About AARP?
- 12. Self-Insured vs. Buying Insurance
- 13. Determining the Amount of Coverage You Need for Final Expenses
- 14. We’re Here to Help
1. What Is a Final Expense Life Insurance Policy Used For?
Life insurance is commonly purchased to cover the cost of a funeral or to pay any remaining final expenses at a fraction of their actual cost. Most of the clients we work with want to make sure they have some level of coverage when they pass away to make sure they do not leave any debt or bills behind for their loved ones.
These bills are commonly referred to as “final expenses” and can consist of medical bills, outstanding auto loans, mortgage debt, credit card bills, or burial expenses.
2. How Much Life Insurance Can You Buy for Final Expenses?
To cover final expenses, there are numerous types of policies available. Final expense policies are usually less than $100,000 of coverage (typically $10,000-$50,000) and do not require a medical exam.
3. What to Look for in a Final Expense Policy
When shopping for a final expense policy, you want to pay attention to the fine print and the price. The price is important because a final expense policy should be the last policy you ever have to buy. You want to make sure that the price fits your budget so you never have to worry about missing a payment and losing the policy.
Final expense policies are not one size fits all, so be sure to work with an agent who can offer you quotes from multiple companies rather than just one or two. With all the options available, how will you know which policy is the best one you can qualify for if you don’t shop the market?
4. How Are Rates and Eligibility Determined?
Life insurance rates are determined by age, health, and lifestyle. Unless you have a dangerous job, participate in hazardous sports, or travel to dangerous places, your rates are determined by your age and your health. These two factors will typically determine the type of coverage you can qualify for.
5. Types of Policies Available and Age Limit
Up until age 80, there are many options for final expense life insurance, especially if you are in good health. We offer whole life insurance, guaranteed universal life insurance, and term life insurance. These policies pay out immediately and do not have a 2-year waiting period like some other policies.
Most insurance companies will not insure anyone over the age of 85. This is due to the fact that the average lifetime expectancy of an American male is 77, and the life expectancy for a female is 82. Because of this, the insurance companies do not want to take on this risk for anyone over 85, regardless of their health.
As we get older, the rates for insurance climb not only with age, but also in most cases with declining health. In addition, the amount of options available to us for life insurance decreases. Being self-insured is often a better option for someone over the age of 85 due to the cost of premiums.
6. Options for Less Than $100,000 of Coverage
Whole life insurance is an excellent choice if you are under the age of 80, need less than $100,000 of coverage, and are in good health. These policies do not require a medical exam and allow you to lock in a level rate for the rest of your lifetime so that the policy does not increase in price.
7. Options for $100,000 of Coverage or More
If you need more than $100,000 of coverage and don’t mind taking a medical exam, we also offer guaranteed universal life policies that are very similar to whole life insurance. These policies are less expensive than whole life, are offered at $50,000 of coverage or more, and they allow you to guarantee your policy and the rates until the age of 90, 95, 100, or even 121.
8. Term Life Insurance Can Work, Too
Term life may be another option depending on your needs. These polices offer a level guaranteed rate for 10 years or longer, and start at $50,000 of coverage.
We usually recommend term life insurance for someone who has an outstanding mortgage, because these policies are the most affordable option available for larger amounts of coverage, and they can be easily converted to a smaller universal life policy for burial expenses.
9. What If You Have Health Issues?
When someone has health concerns and they are shopping for a final expense policy, it can be more challenging to find an affordable option. The good news is that with 63 companies to chose from, we can almost always find a policy for you.
We offer companies that guarantee to accept you for coverage and offer you a policy regardless of your health. These polices are known as guaranteed issue or graded benefit policies, and are available to those who are not confined to a nursing home, incarcerated, or in an assisted living facility.
Guaranteed issue policies are usually the only option available to someone over the age of 80. If you’re not sure what you can qualify for, feel free to call us at any time for a custom quote.
A guaranteed issue policy will accept almost everyone who applies, but to protect the insurance company from risk, these polices do not offer a full payout if the insured person dies within the first 2 years of the policy. Instead, the premiums paid plus interest are reimbursed to the insured’s family.
With a graded benefit policy, the beneficiary is paid a percentage of the policy benefit if the insured passes away during the first 2 years of the policy. A graded benefit or guaranteed benefit policy is designed for anyone with a serious health issue who would otherwise not qualify for life insurance.
These policies can be a bit more expensive, but they are guaranteed to accept the applicant and the rates do not increase over time. You may also want to consider self-insurance.
10. Mind the Fine Print
We always advise our clients to be wary of a policy that seems too good to be true. The phone calls we receive most often are from those who purchased a policy with “just 3 questions” to answer.
Every time a client asks me about these policies, I cringe. I often hear horror stories about how an insurer found reasons not to pay a claim due to undisclosed medical conditions. These policies are frequently offered through the mail or through an organization and ask questions like:
In the past 2 years, have you had treatment or medication for or been diagnosed by a doctor as having heart trouble, stroke, cancer, lung disease or disorder, diabetes, liver or kidney disease, AIDS, AIDS Related Complex, or immune system disorder?
These types of questions are phrased by very skilled lawyers. If an insurance company offers you coverage with only 3 questions, there are 3 questions you need to ask in response:
In the past 2 years, for any condition, have you been admitted to or confined in a hospital, sanitarium, nursing home, extended care or special treatment facility?
In the past 3 months, have you consulted a doctor or had treatment, medication or diagnostic tests of any type? (Note: You are not required to report negative AIDS or HIV tests).
"Will my price increase?"
“Will my policy expire?”
"What exclusions will prevent this policy from paying?"
11. What About AARP?
Oftentimes, the people who purchase policies from companies like AARP are never informed of the fine print. AARP is not an insurance company. They are selling another company’s insurance, and they do not do this for free.
With these policies, the rates go up every 5 years, causing most clients to lose their coverage after 5 or 10 years due to affordability. In addition, the policy expires at the age of 80, and coverage ends.
At the age of 80, it is very difficult and expensive to buy insurance. We do have options for someone 80 or older, but if you can qualify for a policy that will protect you past the age of 80 when you are younger, you should buy it.
With any type of whole life, graded benefit, or guaranteed issue policy, the younger you buy insurance and the longer you lock in the rates, the more you will save. Don’t take my word for it, though, here is a link to Consumer Affairs complaints about AARP policies.
The whole life, guaranteed issue, and graded benefit polices we offer are guaranteed to stay the same price for the rest of your life, and they do not expire at the age of 80.
12. Self-Insured vs. Buying Insurance
Self-insurance is the concept of saving money to insure oneself. Self-insurance can be ideal for someone who is otherwise uninsurable or for someone who would only qualify for very expensive rates due to age, health factors, or smoking.
Self-insurance involves saving the amount of money you would spend on insurance premiums each month and letting it accumulate in an interest earning account.
We recommend self-insurance for anyone over the age of 85 who expects to live longer than 8 years. The reason behind this is that at the age of 85, a life insurance policy will pay for itself within roughly 8 years. If you fall into the healthy 85-year-old category and need insurance, you are better off saving your money. Read more about self-insurance here.
13. Determining the Amount of Coverage You Need for Final Expenses
The amount of coverage you need for a final expense policy can vary significantly depending on your needs. According to Parting.com, the average funeral as of 2022 runs between $8,000 and $10,000, not including any additional items such as flowers.
This number continues to increase each year, and for this reason, we recommend no less than $12,000-$15,000 of coverage for burial costs. In addition to the cost of burial, we also recommend adding any additional debts you may have.
For example, let’s say you owe $5,000 on your auto loan and $3,000 in credit card bills. In this situation, you will want no less than $20,000 of life insurance. ($12,000 for burial + $5,000 for the auto loan + $3,000 for your credit card bills). Keep in mind that this number does not include any medical expenses that may arise. If you think you need more than $50,000 of coverage, you will want to consider term or guaranteed universal life insurance.
14. We’re Here to Help
Still have questions? Please call us! We are experts in life insurance and we will work with you to make sure we find you the best policy you can qualify for. We can help you determine the amount of coverage you need, and our service is completely free.
Our independent agency works directly with over 50 companies, and we are licensed throughout the US. Call us toll-free at 855-247-9555, or click the button below to get a free quote online.
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.