End of Life Insurance Guide: How to Plan for Final Expenses

If you are considering end of life insurance, then give yourself a pat on the back. You are thinking ahead … and beyond.  Only 30% of families entering a funeral home have the financial resources available to make funeral arrangements. 

For most people, retirement planning involves figuring out how to make our money last as long as possible.  Fixed incomes are almost a fact of life.

Some folks sadly consider how much money will be needed to wrap up our affairs after we’re gone and the money pit they could leave behind for their family.

Whether or not to buy end of life, funeral insurance is not always simple decision. That’s because, like most insurance, end of life insurance has a language of its own. To make this easier, we’ve completed a lot of legwork for you.  Here is a recommended process, step-by-step, to aid you in making a comfortable decision.

You can call it what you want I guess.  Lots of names for it, even death insurance.  I don’t personally like to use that last term so we will leave it there.

Some people and companies “label” end of life financial protection differently.  Common terms are funeral insurance but it’s often referred to as burial insurance or final expense life insurance.  There are some subtle subjective differences but for ease of illustration, these products are really same thing, end of life insurance.

Now, before we consider the purchase of final expense insurance or getting a final expense insurance quote, ask yourself these questions:
  • Which type of policy to purchase?  Temporary or Permanent?
  • Can you afford the policy amount you want?
  • Where should you buy the final expense policy?
  • How to get started shopping for funeral insurance?
  • Do I actually need funeral insurance?

Step 1: Estimate Your Final Expenses

Your first step is to figure out how much you’ll need to cover your end-of-life expenses. The cost of your funeral is the first thing that comes to mind and it’s often the largest single cost. But there are other “final expenses” to consider – remaining medical bills, legal costs, living expenses, and credit card bills, to name a few. You can use our funeral planning guide that will have you pull this all together nicely.

Step 2: Determine If You Will Leave Behind Enough Money to Cover Final Expenses

The key question is will there be enough money in your estate to cover your final expenses? You may need the help of a financial advisor to figure this out. A secondary question is–will your survivors have immediate access to the funds in your estate to pay your bills? Your money could be tied up in probate and that could be a problem since funeral providers (and cemeteries) expect payment at the time of the funeral. It’s likely there will be other bills that come due upon your death. Who is going to pay them if your money is not readily available?

Step 3: Decide If You Actually Need Insurance For End Of Life Expenses

If you believe you will probably not have money at the end of your life to comfortably cover any final expenses then a Final Expense insurance policy might make a lot of sense for you.  Remember, even if you expect you will have enough money left over from funeral and burial expenses, you may not want your estate to be depleted by your final expense costs. Having a final expense policy in place is one way to ensure that your entire estate will be available to your family or that the full costs that burden your family otherwise are covered.

If you want to “keep it simple” look for a Policy with the following:
  • Level premiums –  premiums never increase.
  • Top rated insurance company – with an A.M. Best rating of A- (Excellent) or better.
  • No medical exam – although you will have to answer very basic health questions for an underwritten policy.  Coverage is designed typically for people 50-85 at the date of application.
  • Ideally a permanent policy – that can stay in force until the end of your life and may also offer cash value accumulation.
For maximum savings you may want to consult us regarding more complex options that will require a full paramedical exam in your home.

Step 4: Decide on the Type of End of Life Insurance You Want

There are many specialized policies available on the market today to help you cover your final expenses.

Mentioned earlier, they may be marketed as funeral insurance, burial insurance or final expense insurance. One feature these policies have in common is that the coverage is typically capped at $25,000 to $50,000.  This is compared to common life insurance coverage starting at $50,000 or more.

The smaller amount of protection specifically designed to pay for typical end of life expenses like funeral, burial. Though the policy benefit can be used for anything, final expense life insurance policies are not intended to provide a lot of supplemental income to your survivors like regular life insurance. Here are the key questions about funeral insurance and what you need to know:

What is the difference between Guaranteed Issue and Medically Underwritten Policies?

When choosing an insurance policy for final expenses you have two basic options: guaranteed issue or medically underwritten. Knowing the difference is important, particularly if you have concerns about your medical history.

With guaranteed issue policies, almost qualified applicants are accepted regardless of medical history.  In fact, you don’t even need to answer health questions to apply.

So what’s the catch with Guaranteed Issue whole life insurance?

There are something limitations written into these policies the first 2 or 3 years.  It varies from the insurance company.  There is more risk being assumed by the insurance company so the cost is higher than for other types of whole life insurance policies.

A guaranteed issue or “guaranteed acceptance” policy will not have full benefits during the “waiting” or limited benefit period.  That means that the full death benefit for natural death will not be available until the policy has been in effect for some specified period of time — usually 2 or 3 years.

Since the waiting period varies, be sure to look out for this important detail. Should you die before the 2 or 3 year limited period is over, your beneficiaries will only receive a limited death benefit amount.

Now, with a medically underwritten policy, the insurance company “underwrites,” or evaluates, your health based on your answers to a series of questions regarding your medical history.  End of Life insurance typically is offered to applicants age 50-85 in a no medical exam, whole life insurance policy.

Since burial insurance limits are lower than traditional whole life insurance, the underwriting requirements are generally less rigorous, but it is still possible for you to be declined based on health or lifestyle factors.  Preexisting conditions, certain prescriptions or combinations or even risky activities can all cause your application to be declined.  However, working with an independent professional who works with all the top carriers and their products helps you find a policy that is the ideal fit.

So which type do you choose? Of course, that will depend on your particular situation but if you have concerns that your health may cause you to be denied for coverage, or just do not want to share any health information, then you should talk with professional about a guaranteed acceptance whole life policy. 

Guaranteed acceptance whole life insurance should be the last policy to choose though.  It is high risk life insurance which carries limitations with it.

What is the difference between Whole Life and Term Life Insurance?

As if deciding between guaranteed issue and medically underwritten were not enough, you also need to determine if a whole life policy is best for you or if you should turn to term insurance.

The key difference between these types of policies is that a whole life policy is guaranteed protection for life.  This price will never increase and the death benefit will never decrease.  Of course you must do your part and keep up with your premium payments as scheduled.

A term policy premium will expire at a specified point in time. The time period may be a span of 10, 15, or 20 years, or expire when you reach a certain age, such as 75 or 80 years old.  Some term policies go up in price every 5 years such.  Most expire all together at age 75 or 80.  Term policies should NEVER be used for final expenses. 

The distinction between whole life and term life is particularly important when it comes to funeral insurance if you want to be sure that your coverage is in effect at the time of your death.

A permanent policy, while it can be more expensive than term life, will ensure that you have coverage when you need it.

Wise Shopper Tip: When shopping for funeral insurance be sure to read the fine print. For example, it’s not always clear whether the advertised policy is whole life or term life. AARP/NYL Term Life Insurance policies are famous for expiring in the drawer or getting very expensive in later years, age 75 in particular. You don’t want to be fooled into thinking that you are getting a great deal on a whole life policy only to find out later that it is really a price increasing term policy.  This can leave your family without the money you wished them to have.

We always recommend permanent life insurance for end of life expenses. 

What is Pre-Need Insurance?

Pre-Need Insurance is linked to a funeral goods and services contract with a specific funeral provider, such as a funeral home. The contract spells out all of your funeral arrangements in advance and you are billed at current prices.

It may be possible to transfer the contract to another funeral provider if the need arises, but this is not always to case. There are risks to these kinds of policies so you need to be sure that you are contracting with a reputable provider that will still be in business when you need them. If you are ready to nail down your funeral arrangements and know which funeral provider you want, then pre-need insurance is an option to consider. The key advantage to a Pre-Need policy is the ability to lock in today’s prices for your funeral. (For more on Pre-Need Funeral Insurance click here)

Does Life Insurance Cover a Funeral?

For most of us the main purpose of life insurance is to provide financial security for our loved ones. If your family also depends on your income, life insurance can partially replace the income lost due to your death. It can also provide an inheritance for your heirs even if you do not have assets to leave them.

Life insurance policies are generally purchased for larger amounts than the $25,000 to $50,000 limits of a funeral insurance policy. As we have discussed, unlike life insurance, the main purpose of funeral insurance is to cover end of life, final expenses. You might want both, as funeral insurance is often used as supplemental coverage to life insurance proceeds rather than depleting the resources left behind to protect

Step 5: Request a Quote

Since the exact price of funeral insurance will depend on your unique situation, the only real way to know what it will cost is to request a quote. Our funeral insurance finder is a great way to start. It is absolutely free and you are under no obligation.

It may be possible to complete the entire shopping process online but we highly recommend that you talk with an insurance agent. You will get the best possible coverage at the lowest price if you are buying only what you absolutely need. The best way to do this is to talk with an agent so that you can ask questions, get clarifications, and make sure that you understand exactly what you are buying.

Step 6: Decide How Much End of Life Coverage You Can Afford

Are you a savvy consumer? Do you pride yourself on finding the best deal? If so, you might be in for a rude awakening when shopping for life insurance because you won’t find any “deals.”

Insurance is a highly regulated product. Policies and rates must be filed state-by-state by the insurance companies and are not offered later at a discount. Rates will vary from policy-to-policy and also from state-to-state due to differing state regulations for funeral insurance.

Always be wary if you see an offer for a great deal on funeral insurance. Be sure to read the fine print and research the company offering the policy. It doesn’t do much good to get a good deal if the policy has limitations built into the policy you did not know about.

What If I Cannot Afford To Pay The Quoted Rates?

You have a couple options if the monthly premium quoted is more than you can afford. Your first is to rework specifically what you will be doing for your funeral and burial plan.  You can go down to the funeral home of your choice and discuss want you want.  They can work with your policy and budget to design and record your funeral plan.  This is then attached to your policy and kept with your important records.   See our Funeral Costs article for tips on managing your funeral cost.

We do not recommend this, but you could consider buying a term policy instead of whole life.  While harder to qualify for, term policies can be less costly than whole life. The risk is that your term policy could easily terminate before you die and you will be left without coverage. Term insurance may not a good solution but, under certain circumstances, it may be your best option.

Term should not be considered an ideal option.  Term life insurance is designed for the “what-if’s” in life.  That is why it is temporary insurance and expires.

Step 7: Choose an End of Life Insurance Provider

Final Expense insurance policies can be purchased through insurance agents and through funeral service providers and their agents.

In some cases they can also be purchased directly from some insurance companies.  This however is not a good choice and you do not save a nickel in doing so.  All rates are set with your state.  Rates are based on you as a “risk” and nothing else.

The advantage of buying through an independent agency like Special Risk Life is that it gives you access to the full spectrum of insurance companies and policies on the market.  We help you save money by shopping your needs out.  The insurance company compensates us.  Our help is always free to you. 

We are a specialist agency working with top life insurance companies in the industry.  Why not go straight to the agent that has the most affordable rates from all the top life insurance companies?

Remember,  a funeral home is not a specialist in health risks or in the business of getting consumers the the most competitive rates in the industry and neither in any particular insurance company.  

Whether you buy from an agent in the insurance company’s home office (cannot shop rates for you) or from an specialist independent agent like Special Risk Life, you should purchase coverage issued by a top rated insurance company.

A.M Best is usually the go to resource for reviewing the financial stability of insurance companies you may be considering. 

Let a true professional help you find the best policy for your needs to get the job done right the first time.  We’re here to help you accomplish your goals.  269-230-3464