Planning for the end-of-life can be daunting at any age. There are a variety of factors you have to anticipate to better plan for your future. Below are some things you should consider when planning for end-of-life financial decisions.
The first decision branching point is understanding your current finances. You need to know if you can afford traditional life insurance or final expense insurance. Final expense insurance has a cheaper monthly premium but also has lower coverage. Traditional life insurance is more expensive but also has much more robust coverage. Experts agree that if you can afford traditional life insurance, you should purchase traditional life insurance instead of final expense insurance.
Your current and future debts
To choose a face amount of coverage for your policy, you should understand what debts you have now and anticipate future debts. For example, if you have a large mortgage now that will most likely exist at the time of your passing, you should purchase a larger policy so that your loved ones will be able to pay back your mortgage upon your death.
Finances of Your loved ones
You should also consider the finances of your family members and loved ones when considering your policy coverage. The end-of-life is associated with many costs, such as medical bills, mortgages, funeral expenses, etc. Understand what your family is capable of paying for with and without assistance.
Your current age will influence the type of policy you qualify for. People past a certain age have a difficult time qualifying for life insurance policies. Final expense options are great for older people who need end-of-life coverage but cannot qualify for traditional life insurance policies.
Additionally, younger people have lower monthly premiums. Sometimes it is better to secure a policy at a younger age to lock in lower premiums. However, keep in mind that you may pay more in the long run if you live a long life.
Your current health conditions
Like your age, your current health conditions may prevent you from purchasing traditional life insurance. If the conditions are severe, they may even stop you from purchasing certain final expense insurance plans. You may have to purchase a guaranteed acceptance final expense plan. These plans are more expensive. Knowing this information upfront can help you plan financially. Additionally, knowing your current health condition can help you anticipate your health condition later in life.
Your expected health conditions
Your health conditions at the end of your life may dictate what financial resources you need during that time. For example, you may need a skilled nursing facility or may acquire major hospital bills at the end of your life. Whatever plan you purchase should be able to cover the debt accrued at the end of your life.
Health insurance status
Your level of health insurance will dictate what is covered at the end of your life. Medicare only covers about 80% of hospital bills on the original plan, meaning your family is liable for the remaining 20%. You should consider buying supplement insurance to cover this gap in addition to a life insurance plan that can cover whatever end-of-life costs your health insurance does not cover.
Current life insurance
You may already have life insurance, but there are a few things you should think about if you do. You should understand whether or not you have traditional life insurance or final expense insurance. Traditional life insurance is more robust. Next, you should know whether or not you have permanent life insurance or a term policy. If you have a term policy, your term may end before the end of your life. In that case, you will not be covered.
Wishes for end-of-life care
End-of-life care is difficult to anticipate but essential to consider when you can make your own medical decisions. You should plan for whether you would like to receive care at your home using a caregiver or a skilled nursing facility. Both of these options are expensive, so you should plan ahead to purchase insurance policies that will help your family address these expenses.
Additionally, you should file your health wishes with your doctor in the form of an Advanced Directive. This document helps doctors and your loved ones anticipate your wishes if you cannot make those decisions. Lastly, you can set up a medical power of attorney that appoints someone your decision-maker in the event you are no longer able to make decisions.
Wishes for Burial/Funeral
While a final expense policy can cover funeral expenses, you can currently help your loved ones by paying for certain things in advance. For example, if you know you would like to be buried, you can purchase your plot now, saving your family members anywhere between $1,000-$4,000. You can also pre-pay your funeral, but you may not want to if you have a robust life insurance policy that can cover these expenses.
Using the above guide, you can start to understand your own needs and plan for your financial future.