What is the Difference Between Life Insurance and Final Expense Insurance?

Final expense insurance is a type of life insurance policy, but it does have its differences from traditional life insurance. Final expense insurance is a more affordable, targeted life insurance policy that offers a smaller coverage figure. This means that in exchange for a lower death benefit, consumers will enjoy lower monthly premiums. Traditionally, people use this coverage for burial expenses and other end-of-life expenses. Read more to understand the difference between life insurance and final expense insurance.

What is Final Expense Insurance

As stated above, final expense insurance is a type of life insurance policy. However, final expense policies are capped at $50,000, a much smaller coverage plan than traditional life insurance plans. Final expense insurance is meant to cover the costs associated with the end-of-life. These normally include funeral costs, mortgages, property taxes, medical bills, etc. However, beneficiaries can use the death benefit funds for whatever they choose. The flexibility and lack of restrictions are one of the major selling points of final expense insurance.

Who Should Purchase Final Expense Insurance

Final expense insurance is for people who cannot afford or qualify for life insurance. Life insurance generally has a higher monthly premium because it has a higher payout in the end. People who cannot afford that premium can instead purchase final expense insurance. Additionally, life insurance normally involves a physical exam and medical questions. Many people with serious medical illnesses are turned away from life insurance policies. Final expense policies are generally much more accepting of medical risks. This allows people who would otherwise go without coverage to instead qualify for a limited plan.

Do I need final expense insurance if I already have life insurance?

The major confusion that people often have is whether they need final expense insurance on top of their preexisting life insurance policy. The short answer is that you do not need burial insurance if you already have a life insurance policy. Final expense insurance is already a type of life insurance. In effect, having two policies would be redundant. However, there are certain types of life insurance policies in which your coverage may lapse. Specifically, you should confirm that your life insurance policy is a permanent policy rather than a term limit policy. A permanent policy is more expensive but covers you for your entire life. A term policy only covers you for a certain amount of time. After that time runs out, you are no longer covered. This means that your life insurance may not cover your final expenses.

Burial insurance, or final expense insurance, is a type of life insurance meant to cover end-of-life expenses. It generally offers a lower death benefit for lower monthly payments. Beneficiaries can use the death benefit however they wish. Usually, it is used to cover funeral expenses and outstanding bills, but they can also use it for personal reasons. You do not need to purchase final expense insurance if you already have life insurance, but you do need to understand the limits of your current life insurance.