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The Definitive Final Expense Life Insurance Guide (with Do’s & Don’ts)

Final Expense Insurance, sometimes referred to as “burial insurance” is a common policy type that has been around for decades.  For numerous reasons it has become increasingly popular in the view of buyers and agents alike.  This guide is designed to give you all you should need to know about Final Expense Insurance – the companies, the marketing tactics and the agents who sell it.

In this way we strive to arm you as a consumer with all you require to make a “need based” decision without regard to the hype and misdirection that surrounds this segment of the industry.

What is Final Expense Life Insurance?  

It is whole life insurance designed to offset the costs associated with a person’s last wishes.  Also known as burial insurance or funeral insurance, it may technically be used for any purpose by the beneficiary (the person to whom the proceeds are given).  Common uses of proceeds include, burial, funeral home expenses, cremation, celebration of life events and smaller endowments to family members or valued friends.

If you are seriously looking at final expense insurance you are generally older.  In fact, numerous companies limit the enrollment ages to no younger than 40 or even 50.  Later on, we will illustrate the “do’s and don’ts” when buying burial insurance.  First let’s focus on what the common attributes are to all plans and insurers.

  • This is permanent insurance.  It will not lapse as long as it is in effect unlike term insurance which has an “expiration date”.
  • It is “whole life” insurance.  It builds cash value that may be borrowed against.  It endows, meaning once the cash value equals that death benefit, the policy is paid in full and no additional payments are required.
  • It does not require a medical exam.  Also known as a “Paramed” these exams are common with many other forms of life insurance.
  • The monthly payment (premium) will not increase.
  • The death benefit will not decrease.
  • The death benefit is always income tax and estate tax free to the beneficiary.  Other than giving to your heirs while alive (from warm hands rather than cold hands) life insurance is a great way to endow without a tax burden.  Why pay tax on the same money twice?
  • The proceeds are exempt from probate.  This relieves the family or the burden of paying for the final expenses at a most difficult and in many cases unexpected time.   Probate can tie up assets of the deceased for months.

How Much Does Final Expense Cost?

Final Expense premiums, that is what you pay monthly for the policy are based on age, health, lifestyle and nicotine use.  Unlike other life insurance, final expense or burial insurance has unique rating categories that determine your rate based on answers to specific health and lifestyle questions.  Let’s look at these ratings starting with the one that produces the lowest rate.

In a Final Expense Application “No” is the kindest word.

Level Coverage – This type results in the lowest rate and certain life insurance companies may refer to this as Preferred, much like with term or other permanent life insurance.  With Level coverage when the insured passes, the death benefit is paid out in full regardless whether from illness or injury and effective from date of policy issue.

To qualify for Level Final Expense rate and coverage, you must answer “No” to all the health and lifestyle questions.

Graded Coverage – You qualify for this policy rate if you said “yes” to any of the insurer’s “graded” health questions.

Graded plans are called so as they pay out in “grades” or percentages of the face amount.  Most graded plans pay out 30% of the death benefit if you pass away from an illness during year one.  During the second year of the policy, it will pay out 70% of the death benefit.

The exact percentages can vary among insurers.  Accidental death is always paid out at 100%.  If you qualify for Graded be sure to evaluate both rate and the grading structure to choose the plan that’s best for you.

Pro Tip: All insurance companies have “look back” provisions for (especially serious) illnesses.  A look back provision is the time lapse since you were last treated.  Some may have more favorable underwriting that as you will discover can seriously affect your rate.

Modified Coverage – The highest risk plans a company offers, you would qualify for this plan if you had any of the health issues (Yes answers) in the “modified” section of their health questions.

Modified plans are always “return of premium” during the first two years. This means if you passed away during the first two years of the policy, the insurance company would refund your premiums paid plus interest.  These plans are offered to all regardless of health in the ads you see on TV.

Guaranteed Issue – These plans have no health questions.  If you have answered yes to any of the initial health questions in any final expense insurance application that is cause for decline.  Guaranteed issue is your only option.  You need only to be mentally aware and capable of entering into a contract.

These policies have a 24-month waiting period for illnesses only.  Passing during that period returns all premiums paid plus interest (usually 10%).  Accidental death pays out 100% from day one.

Pro Tip: If you only qualify for modified coverage only, you should explore Guaranteed Issue Final Expense.  Often the rates are lower and the payout stipulations are no different.

So now that you know how final expense life insurance is rated for cost and initial coverage, let’s look at the application process. (Spoiler alert: It could not be easier!)

Applying for final expense insurance has gotten easier with advances in technology.  Also, since there is no health exam required you can get approved the same day you apply.   Let’s look at the options.

Voice Signature Enrollment – This has become the most popular final expense life insurance enrollment method as it is convenient and fast.   You get approved right on the phone in direct contact with the insurance company and merely verify your application by formal attestation.  More companies are moving to this form of enrollment for all types of insurance.

Electronic Signature Enrollment – Also known as an “e-sig”, this is an easy way for those who are computer friendly to get all the info needed to enroll.  Decisions happen within hours.   The agent will take the application online to get vital information, health questions and the like.  The application will only move ahead when complete with all needed data.  The agent locks the application so it cannot be changed and sends a secure link to you for an electronic signature.

You open the link and “follow the bouncing ball”.  It would require you to review the application for accuracy, read and agree to the terms and lastly type in your name and date as the electronic signature.  The application goes back to the agent for a final review and is submitted.  The whole process takes minutes and agents are trained to guide you through each step.   Nearly all companies provide this option as the only other choice is…

Paper Enrollment – Welcome to the land of inkwells and whiteout.  Companies are increasingly moving away from this method as there are numerous unsolvable problems.  Time to issue is affected by illegible writing, errors and omissions, and impropriety (Yes, we said it).  For this reason we emphatically recommend avoiding this form of application.

Pro Tip: Always answer questions truthfully to the best of your ability and recollection.

Insurance companies are masters of risk management but sometimes an application slips under the radar.  Thing is, if you die from circumstances however related, that should have been disclosed in an application and are discovered post mortem, your claim will be denied.  It’s insurance fraud and well, you’re dead but somebody close to you is going to suffer financially and most likely needlessly.

How Does The Final Expense Life Insurance Application Work?  

Once you go to our free quote engine and select a plan, you will confirm all the important details.  This happens either in a short interview with the insurance company directly on the phone or in an electronic application where you will attest to your age, health and lifestyle.

In the application you give what is called “consent”.  Consent allows the insurer to remotely access your medical records and driving history (we call this and MIB pull and DMV pull).  The MIB is not “Men In Black” but Medical Information Bureau, an electronic repository containing your recent medical history.  No effort is required on your part and the process takes as little as seconds up to a few minutes.

This process validates the answers to your health and lifestyle questions and allows the voice application to proceed to signature.  You give your ok on the phone and the result is given to do on the spot.  Easy right?

With an “e-sig” the process is identical but since you are not on the phone, the insurance company underwriter will pull in MIB and DMV information as your turn comes up.  Generally approval is within 24 hours and many times on the same day.  Due to pitfalls that we elaborated on earlier in addition to cost and delivery issues, we shy away from paper applications.

Do’s and Don’ts When Applying for Final Expense Life Insurance.

Do establish a budget first – Our free quoting tool allows you to quote as many times as you like comparing top Burial Insurance companies.  We like the approach of a budget that you would prefer first, then what you might afford.  It’s easy enough to add coverage later bearing in mind that rates increase with age and your health might change.

Don’t buy from the TV – Insurers that advertise on TV are selling Modified coverage or Guaranteed Issue Plans.  Even with moderate health you will pay more for less benefit.  Also, these are proprietary plans that do not allow you to shop around on demand.  Shop then Choose as we say “the Mall”.

Do use an independent concern – “Captive” agents are contractually bound to sell only the plans of the company they are captive to.  The natural human tendency is to diminish and even disparage what one cannot provide it pains us to say it; the most unscrupulous may misrepresent the facts.  When you use our free Final Expense quote tool, you discover that many companies will be close in rate and it is up to you to go with the one that is most likely to issue the plan based on your health and lifestyle.  One size does not fit all.

Don’t believe everything you hear – Unfortunately whether it is an agent on the street or a TV pitchman, there is no shortage of hype in the Final Expense and Burial Insurance business.  Plenty of agents out there will tell you what you want to hear.  If you answer “Yes” to any health or lifestyle question on a Final Expense life insurance application you will not get a “Level” rate or payout on passing within a certain time frame.

Do get guaranteed issue coverage if that is all you qualify for – Although it can be viewed as expensive in terms of value.  Remember these important facts.

  • It takes money from a taxable state (federal and state income tax to heirs) to a non-taxable state.  With Final Expense life insurance payouts can happen within 48 hours from claim.  Don’t you pay enough in taxes for what you get in return without burdening your heirs unnecessarily too?  (Assuming you will have accessable cash on hand to cover the final expenses).
  • You get interest should pass away early (generally 10%).  This is in addition to return of premium in the first two years should you pass (from an illness only) during that period.  Where else can you get guaranteed 10% on your money tax free?  Accidental death pays out 100% from day one.
  • You avoid probate.  In a hectic and emotional time, good decisions don’t come easy.  Knowing your family has one less burden or at least some measure of relief is a better outcome and even fonder memories when you pass.

Life expectancy once you reach 65 is close to 85 years old and going up. 

Don’t buy term if you want permanent coverage – There are companies in the market (and plenty of agents) that attempt to sell term as Final Expense life insurance.  The level premium ends at 80 or 85 and increases dramatically after that.  The premiums start lower but if you outlive the policy you have nothing to show and the cost of insurance at 80 is very high.

Pro Tip: Most companies have “conversion options” that will allow you to convert term life policies to permanent plans.  The terms and time to convert vary as do the product choices.  A knowledgeable agent is indispensable in guiding you to possibilities.

Do shop other options for larger death benefits – Final Expense and Burial life insurance plans cap as low $15,000 based on age, health and location.  Although $25 – 30K is a common ceiling for these policies, especially of you have no health issues whole life, GUL and even IUL may possibly be a better fit.

These other life insurance types are permanent as well and have attributes that can be more desirable particularly for legacy purposes.

Don’t believe everything you hear (reprise) – All life insurance plans have a “money back guarantee”.  It is called a “free look” provision and is adopted insurance regulation nationwide.  All true Final Expense plans built on whole life have a “rate lock guarantee” that is foundational to the plan type (Alex Trebek we’re talking to you).

Do shop other life insurance options if you are under 40 – Life insurance is a “need” solution.  Needs can be categorized as either “protection” or “accumulation”.  Chances are if you are looking for permanent coverage there are more economical choices and term insurance is better for temporary risk management.

Unlike a wedding where planning has the luxury of time often taking six months or more, funerals and end of life provisions many times take families by surprise and must be completed in days. Add the emotional impact of the loss of a loved one and the process can be daunting. Final Expense life insurance alleviates the worry of paying for the event.

Use our free quote tool to see rates from a large stable of highly rated life insurance companies privately and without obligation.

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