Final Expense

What is Final Expense Insurance?

Final Expense insurance is an insurance policy used to pay for funeral services and a burial when the named insured dies. Such a policy helps ease the financial burden placed on a family when a loved one passes.

The Benefits of Final Expense Insurance

Final Expense insurance allows the named insured to feel safe knowing that funeral-related expenses are covered regardless of the status of their estate at the time of death. Final Expense insurance is to protect those whom you love. At your death, aside from the emotional pain, a tax liability is created for your estate. This, in turn, lessens the amount of cash available to pay expenses from the estate. Life-insurance proceeds are paid tax-free to the beneficiary, named by you, to pay for these expenses.

The amount paid in insurance premiums for a Final Expense policy seldom would ever exceed the benefit amount paid at death. Different from other forms of life insurance, Final Expense policies are generally intended to pay for funeral and burial needs. They can range in amount from as little as $2 – 3,000 to about $35,000. (The current estimated cost of an average funeral in Colorado is $8,000.) This tax-free benefit amount can be assigned by the beneficiary directly to the funeral home, thereby confining the amount to be charged for the funeral expenses and not tying up other life insurance benefits that might have been left for other purposes. 

We find that many people today have not taken care of Final Expense insurance and have left the end of life burden on their loved ones. We have all seen donation cans left at check-out counters or at church requesting donations to help pay for the burial needs of a family member when the loved ones just do not have the room in their finances to afford the expense. Yes, there’s the VA and Social Security. However, most do not realize that the VA, in most cases will pay only $300 as a reimbursement, once they’ve received the death certificate. Social Security, in a similar way, will pay about $230. Even a simple cremation with no memorial service will demand more payment than the government provides and there can be additional fees due to probate, medical expenses, and unpaid medical bills or other debt. 

Types of Life Insurance

There are two basic types of life insurance: Term and Permanent (or Whole Life).

Term life insurance is for a specific amount of money over a specific period of time and has no cash value. Term life insurance tends to be comparatively in-expensive (especially at younger ages)and is in force for a set period of time (or “term”). While you might pay a small monthly premium for a 10-year term policy, you must realize that you are 10 years older at the end of it and the premiums for any new policy are likely to be significantly higher.

Permanent or Whole Life insurance is designed to last a “whole lifetime.” Often these policies are defined to last to a specific age, such as age 120 or more. Different from Term Life policies, which have no cash value, Whole Life policies gain cash value over time. They can be used in many ways, such as to cover a mortgage for loved ones, as a tax-free inheritance, or to build a cash reserve that can be drawn upon or used as collateral later in life. A Final Expense policy is a form of a Whole Life product, but it is generally for a smaller dollar amount and intended for those end-of-life expenses.