Final Expense 101 - The Basics

Final Expense 101: Basics of Final Expense

Final expense insurance, also called burial insurance, is like a smaller, more affordable life insurance policy. It’s intended to help the policyholder’s loved ones cover end-of-life expenses. Final expense insurance is relatively flexible, accepting many high-risk people that standard insurance would normally reject. Read on to learn the basics about final expense insurance.  

How Final Expense Insurance Works

Final expense insurance works like any other type of insurance plan. First, you choose a company and plan that appeals to you. Then, you purchase that policy by signing a contract and paying a monthly premium, which you’ll pay for the rest of your life. At the end of your life, the insurance company pays your loved ones the “death benefit” — the amount that your policy was worth. Policies typically range between $2,000 and $50,000. These funds are normally used to cover final expenses, like medical bills or funeral expenses, hence the name.  

Types of Final Expense Insurance 

There are four types of final expense policies: level, graded, modified, and guaranteed issue. 

1. Level plans are for people in excellent health. They cost the least. 

2. Graded policies are for people with mild health problems. These could include things like well-controlled diabetes or a distant heart attack. 

3. Modified insurance is for people with more serious problems. 

4. Guaranteed issues are technically for anyone but are most often sought after by people with the worst health. Since the guaranteed option is best for people with the most risk, it’s also the most expensive choice. Each one is outlined briefly below. 

Level

  • Applicant Health: Excellent
  • When You Are Eligible for Benefits: Immediately after death
  • Cost of Plan: Low

Graded

  • Applicant Health: Minor Health Problems
  • When you’re eligible for benefits: 2-year waiting period
  • Cost of Plan: Medium

Modified

  • Applicant Health: Serious Health Problems
  • When You Are Eligible for Benefits: 2-year waiting period
  • Cost of Plan: High

Guaranteed Issue

  • Applicant Health: Generally the most serious problems
  • When You Are Eligible for Benefits: 2-year waiting period
  • Cost of Plan: Very High

What Does Final Expense Insurance Cover?

Final expense insurance is very flexible. The modest policies mean that the monthly premiums are much lower than standard life insurance policies. Like life insurance, final expense insurance is also very flexible. It allows the beneficiaries to spend the money on whatever they feel is necessary. Since the policies are less substantial, beneficiaries often focus on immediate costs, like medical debt, outstanding bills, a mortgage, loans, and the cost of their funeral. However, there are very few restrictions on what they use the money for. The beneficiaries can generally use the money as they see fit. 

How Much Does Final Expense Insurance Cost?

The cost of final expense insurance depends on a few variables. The biggest variable is the death benefit amount. Typically, the higher the death benefit is, the higher the monthly premium will be. Generally, anyone who’s expected to live longer will have a lower monthly premium. This is because they’re expected to pay for more months, so the monthly premium itself is less expensive. That means that younger people, women, non-smokers, and healthier people often pay less. 

Let’s look at concrete examples. Below are typical monthly premiums depending on the variable. To estimate how much your monthly payment would be, match yourself to the variables listed. 

People Age 55

Female No Waiting Period:

$5,000: $15.80

$10,000: $28.40

$15,000: $41.00

$20,000: $53.60

Female Tobacco & No Waiting Period

$5,000: $20.66

$10,000: $38.32

$15,000: $55.88

$20,000: $73.44

Female Guaranteed Acceptance

$5,000: $18.38

$10,000: $35.84

$15,000: $53.30

$20,000: $70.77

Male No Waiting Period:

$5,000: $19.15

$10,000: $35.09

$15,000: $51.04

$20,000: $66.98

Male Tobacco & No Waiting Period

$5,000: $25.24

$10,000: $47.27

$15,000: $69.30

$20,000: $91.33

Male Guaranteed Acceptance

$5,000: $23.51

$10,000: $46.11

$15,000: $68.70

$20,000: $91.30

People Age 65

Female No Waiting Period:

$5,000: $22.11

$10,000: $41.01

$15,000: $59.91

$20,000: $78.82

Female Tobacco & No Waiting Period

$5,000: $29.60

$10,000: $56.00

$15,000: $82.40

$20,000: $108.79

Female Guaranteed Acceptance

$5,000: $28.19

$10,000: $54.51

$15,000: $80.76

$20,000: $107.02

Male No Waiting Period:

$5,000: $29.48

$10,000: $55.76

$15,000: $82.04

$20,000: $108.31

Male Tobacco & No Waiting Period

$5,000: $41.10

$10,000: $78.99

$15,000: $116.88

$20,000: $154.77

Male Guaranteed Acceptance

$5,000: $34.60

$10,000: $68.29

$15,000: $101.98

$20,000: $135.67

People Age 75

Female No Waiting Period:

$5,000: $37.81

$10,000: $72.41

$15,000: $107.01

$20,000: $141.62

Female Tobacco & No Waiting Period

$5,000: $48.54

$10,000: $94.43

$15,000: $140.31

$20,000: $186.20

Female Guaranteed Acceptance

$5,000: $45.60

$10,000: $90.29

$15,000: $134.98

$20,000: $179.67

Male No Waiting Period:

$5,000: $51.37

$10,000: $99.53

$15,000: $147.69

$20,000: $195.85

Male Tobacco & No Waiting Period

$5,000: $67.57

$10,000: $132.49

$15,000: $197.42

$20,000: $262.34

Male Guaranteed Acceptance

$5,000: $62.79

$10,000: $124.49

$15,000: $185.74

$20,000: $246.98

People Age 85

Female No Waiting Period:

$5,000: $69.55

$10,000: $135.90

$15,000: $202.25

$20,000: $268.60

Female Tobacco & No Waiting Period

$5,000: $96.45

$10,000: $180.70

$15,000: $282.95

$20,000: $376.20

Female Guaranteed Acceptance

$5,000: $103.10

$10,000: $204.20

$15,000: $305.31

$20,000: $406.41

Male No Waiting Period:

$5,000: $93.18

$10,000: $183.15

$15,000: $273.13

$20,000: $363.10

Male Tobacco & No Waiting Period

$5,000: $141.39

$10,000: $279.58

$15,000: $417.77

$20,000: $555.97

Male Guaranteed Acceptance

$5,000: $150.43

$10,000: $298.86

$15,000: $447.30

$20,000: $595.73 

How It’s Different from Life Insurance

People often get confused and wonder whether they need final expense insurance if they already have life insurance. Final expense insurance is a type of life insurance. It’s a smaller policy that’s more affordable and more inclusive of people with different health histories. Since it is a kind of life insurance, you don’t need both types of policies. If you already have life insurance, you don’t need to buy final expense insurance. Final expense insurance is just a smaller whole life insurance policy.

To understand more about your end-of-life costs and how to minimize them, contact us at Senior Life Services today.