Pros And Cons Of Final Expense Insurance

Besides peace of mind, final expense insurance offers many unique benefits and features.

But there are always two sides to every coin.

In the sections below, you will see an objective analysis that compares the good and the bad these plans offer.

 

How Does Final Expense Insurance Work?

In short, a final expense life insurance policy is a small whole life insurance plan meant to pay for your funeral expenses.

Because its whole life, there are no price increases over time, and the policy cannot expire at any age.

Upon your passing, the insurance company will disburse the proceeds to the beneficiaries of your choice.

That gives them the money to cover your end-of-life expenses.

Policies vary greatly from company to company. Comparing multiple plans to ensure you find the right one to suit your needs is critical.

 

Pros Of Final Expense Life Insurance

Unsurprisingly, there are more pros than cons.

That’s likely due to the demand, which has caused carriers to enhance these products to make them more competitive.

Below are the primary reasons why these policies have become so attractive.

 

1) Affordable premiums

Final expense life insurance is generally very affordable. A policy usually costs $50-$100 monthly for a $10,000 policy.

It’s worth mentioning that insurance quotes depend on how much coverage you buy, gender, state of residence, and health.

 

2) Fixed rates

Burial insurance is a type of whole life insurance with a fixed monthly premium. You can rest assured that your rate will never increase.

 

3) Lifetime coverage

Since a final expense policy is a type of permanent life insurance, it will never terminate due to age.

Regardless of which insurance company you buy from, a whole life final expense policy will last forever.

 

4) No exam

You won’t have to undergo a medical exam as part of the application. The most you’ll have to do is answer some health questions. In fact, some policies don’t’ require you to answer any health questions.

 

5) No waiting period options

Some final expense companies offer no waiting period plans that fully insure you 100% for natural or accidental death. If approved, you’re covered the day you make your first payment.

It’s important to remember that you must qualify for an immediate coverage life insurance plan.

You won’t have to take a medical exam, but you will have to answer medical questions (and be approved).

Remember, all plans without health questions have a two-year waiting period.

 

6) Living benefits with most policies at no extra cost

Most burial insurance plans offer a living benefit called the “Accelerated Death Benefit Rider.”

You never pay for this rider. It’s always free.

If you have this add-on, you can access up to 50% of the death benefit while alive.

To take advantage of this rider, you generally must be diagnosed with a terminal illness and be given a life expectancy of 12 months or less.

The stipulations for this rider vary by company.

For example, a Living Promise whole life insurance policy from Mutual of Omaha includes a nursing home provision.

That’s in addition to the terminal illness stipulation.

 

7) Fixed death benefit

Your coverage is guaranteed never to decrease. The death benefit will always remain the same.

 

8) No health questions plans are available

One of the biggest pros of final expense insurance is that there are plans available that don’t require you to complete a health questionnaire.

These policies are commonly called “guaranteed issue life insurance.” In short, you’re guaranteed approval regardless of your previous health issues.

Bear in mind that these policies all come with a two-year waiting period. The insurance provider will only refund your premiums if you die during the waiting period.

 

9) Small coverage options

The best final expense companies offer very small death benefit options. Some will go as low as $1,000 in coverage.

That is a massive benefit because you can buy just enough coverage to pay for your funeral costs.

 

10) Lenient underwriting

Life insurance companies built these plans to accept applicants with pre-existing medical conditions.

That means seniors with diabetes, high blood pressure, and many other health conditions won’t’ be denied coverage.

In short, you don’t have to be in good health to qualify.

 

11) Virtually all ages are insurable

Funeral insurance plans are available to children as young as 14 days old. On the other end, seniors over 85 can still qualify for a new policy.

In many cases, burial insurance is the only way seniors over 80 can get life insurance.

 

12) Lots of carrier options

Final expense insurance is a big business. For that reason, there are literally dozens of life insurance carriers that offer these plans.

Insurers who didn’t offer life insurance in the past are entering this market. For example, even Aflac offers burial insurance now.

Everyone can compare multiple policy options to ensure they find the best deal possible.

 

13) Fast claims payments

Insurance companies typically pay out the death benefits within 24-48 hours once they approve a claim.

They know policyholders primarily purchase this coverage to ensure unpaid end-of-life expenses do not create a financial burden for their loved ones.

Funerals are a time-sensitive issue. For that reason, they all aim to pay out the benefits very quickly.

 

14) Quick approvals

Most final expense insurance applications render approvals within minutes.

Conversely, a few business days might be the longest you’d have to wait for a decision.

 

15) Variety of application process options

There are multiple ways to complete a final expense insurance application. Each carrier has a different application method, but by and large, there are various ways to apply.

Generally, you can apply 100% over the phone, via email, directly online, or through the mail (paper application).

 

16) Mulitple payment modes

Most companies will allow you to make your premium payments monthly, quarterly, semi-annually, or annually.

Most of the time, the payments will automatically come from a checking or savings account on the day you choose.

Suppose you want to mail in payments instead of an automatic withdrawal. In that case, you’ll likely need to pay quarterly, semi-annually, or annually.

You cannot mail monthly payments for policies with no waiting period. If sending in a monthly check or money order is the only way you’ll pay, you will have a waiting period.

Lastly, if you have a Direct Express card instead of a bank account, some insurers will accept that too.

For example, Transamerica and Prosperity Life Group will automatically withdraw payments from a Direct Express card.

 

17) The money can be used for anything

Since final expense coverage is a type of life insurance, the final result will merely be a cash payout.

Your beneficiaries can spend the money on anything. There are absolutely no restrictions.

That means they can pay for your funeral bills, medical bills, credit cards, or other debt.

All unused monies stay with your family. A funeral home will not get any excess funds.

 

18) You can name any beneficiary you want, even a funeral home

You decide how many beneficiaries you want. The best thing is to name people, such as a loved one, as a beneficiary. However, you can designate a funeral home as the recipient of the funds if you’d like.

Most companies allow you to name multiple primary and secondary (contingent) beneficiaries.

Also, bear in mind that you can change and update your beneficiaries anytime you want in the future.

 

19) Someone else can pay for it

Someone else, such as a family member, can pay for your coverage. Children buying life insurance for their parents is quite common.

Essentially, anyone else (even if they aren’t related to you) can be the payer of your policy so long as you agree to it.

 

20) Cash value grows over time

A burial policy is a type of whole life insurance that builds cash value.

A small portion of each payment is directed to this account. Generally, it will also earn interest.

You are free to borrow from the money that accrues in the cash value account.

Also, if you ever cancel your coverage, the insurer will refund you the policy’s cash value.

 

21) Tax-free benefits payout

A funeral insurance policy will always pay out a cash benefit tax-free. Your beneficiaries will not be subject to a tax burden from the IRS.

 

22) It can be used as a charitable gift

Some people already have their final expenses accounted for. Perhaps they have a pre-paid funeral plan, pre-need insurance policy, or other means.

Final expense insurance is not just for the cost of a funeral. You can also use these plans to leave behind a charitable gift to a loved one or charity.

Remember, the policy will pay out cash that can go to anyone and be used for anything.

 

Cons Of A Burial Insurance Policy

Final expense life insurance is a worthwhile investment for anyone who needs a financial product to ensure their funeral expenses won’t burden their family.

However, these plans do have some drawbacks. It’s wise to consider these points before you sign on the dotted line.

 

1) Multiple names that often leads to confusion

Final expense plans have many alternate labels that can confuse some shoppers.

The terms “burial insurance,” “funeral insurance,” and “end of life insurance” are all synonymously used by companies that market these plans.

Know that all these names mean the same thing.

 

2) Beneficiaries can use the money any way they want

As mentioned before, your beneficiaries can spend the death benefit money on anything.

They don’t have to spend it exclusively on funeral expenses.

That can present challenges if you don’t have a person you can trust as your beneficiary.

Sadly, many seniors don’t have a reliable person they feel confident would execute their final wishes.

 

3) Large amounts of coverage aren’t available

Final expense insurers often limit their exposure to a maximum death benefit of $25,000 or $50,000.

So if you need a high amount of coverage, such as $100,000 or more, a burial insurance plan is likely not for you.

You’d either need to A) buy multiple burial policies or B) buy a traditional life insurance policy for a large amount.

 

4) Premiums are more expensive than other types of life insurance

Funeral policies are generally more expensive (per thousand of coverage) than other types of life insurance.

First, they don’t require an exam or copies of all your medical records.

That means the insurer does not know the full scope of your health history.

To compensate for that risk, they must charge a higher rate.

Second, most applicants are seniors who need final expense coverage.

Seniors, on average, deal with various health issues more so than younger people.

Because final expense plans accept applicants with many health issues, the life insurance company takes on more risk.

That higher risk also contributes to the more expensive cost.

Finally, burial insurance plans are always whole life insurance. Term life insurance is another type of policy.

With term, it expires after a period of time (usually around 80 years old).

For example, the AARP life insurance program often promotes their term life insurance policy to cover final expenses.

The price increases every five years and will only insure the policyholder until their 80th birthday. At age 80, they no longer have coverage.

A 60-year-old non-smoking female would pay $32.00 per month (initially) for $25,000 worth of AARP term life insurance.

But they have whole life insurance too.

$25,000 worth of AARP final expense whole life insurance would cost that same female $87.00 per month.

As you can see, whole life will always be more costly when compared to term policies.

But is a lower price initially worth it when you’re not going to have coverage after age 80?

Since most people live beyond 80, it’s unwise to take that gamble if you’re shopping for final expense coverage.

 

5) It may not be enough to cover all your funeral costs

A burial insurance policy does not contractually stipulate what your final wishes are or what the cost will be, for that matter.

Instead, the policy only provides a quick cash payout to your family so they can pay for your funeral.

That’s why it’s useful to use a funeral cost calculator or a similar tool to select the right amount of coverage.

If you don’t have enough coverage to pay your funeral bills, your heirs must pay for the remaining amount.

As a reference, the National Funeral Directors Association 2021 report states the average funeral costs $7,848 for burial with a viewing.

Cremation costs aren’t much less either. The average cremation service costs $6,970

 

6) Misleading marketing is abundant

Final expense life insurance ads are on television, in the mail, and online.

Sadly, dozens of companies regularly use deceptive marketing to confuse and mislead shoppers.

For example, the Colonial Penn $9.95 plan is one such example.

Their ads give the impression that seniors can buy ten or twenty thousand dollars of coverage for just $9.95 per month.

However, the truth is that most seniors get less than $1,000 of coverage for $9.95 when they buy from Colonial Penn.

Other common examples include ads like “Coverage starting at just $10 per month” or “Policies cost just pennies per day.”

While those statements aren’t technically a lie, they are very close to it.

Those figures are typically generated by quoting $2,000 in coverage for a healthy 40-year-old female.

Some companies will even go so far as to design their marketing pieces to look as if the offer is connected to a government program.

For example, direct mail pieces that say “new state regulated life insurance program” are rampant.

Recipients of these ads think it’s the government offering them a burial benefit of some kind.

The biggest issue with misleading marketing is that it causes severe distortion of price expectations.

Seniors see these ads and form a general opinion about what a final expense insurance policy will cost.

But when they speak to an honest final expense agency that sells this type of coverage, they learn the actual cost.

And they don’t move forward with an honest insurance agent because they think the price is much higher than it should be.

It’s the prices on TV that are wrong.

 

7) Some scandalous agents hide the truth about waiting periods

Every business has its fair share of bad apples, and insurance is no exception.

Tragically, some insurance agents will intentionally fail to inform policyholders that their policy includes a waiting period provision.

They often employ tricky explanations to mask the truth.

For example, one common tactic unscrupulous agents utilize is twisting the term “effective date.”

They will proclaim that a policy with a waiting period is “effective” as of the date the first payment is received. That’s actually a true statement.

However, that statement does not in any way mean a policy does not have a waiting period.

The effective date of an insurance policy is merely the day on which the terms and conditions begin. It’s essentially the policy’s birthday (the day it started).

Put another way, a policy with a waiting period has an effective date. The same is true for a policy that doesn’t have a waiting period.

All insurance policies have an effective date.

 

8) Most options sold through agents

Most burial insurance companies do not sell their plans directly to consumers. Instead, they rely on licensed insurance agents to market their products.

Generally, the only time you can purchase directly from a life insurance provider is via a guaranteed acceptance policy that includes a two-year waiting period.

There are some anecdotal exceptions to that rule, of course. For example, Globe Life and TruStage are two such instances.

But by in large, most insurers mandate that you work with an agent.

 

10) Final expense insurance is life insurance

Burial insurance is life insurance (read: burial insurance vs. life insurance). If you already have a life insurance policy, you can rely on it to pay for burial costs.

Aside from that, some people think there is insurance to cover burials that isn’t life insurance.

That simply is not true.

A burial only happens when a life ends.

That’s why an insurance policy to cover final expenses will always be life insurance coverage.

 

11) Your premiums could exceed the death benefit one day

While uncommon, your total premiums could exceed the death benefit if you live a very long time.

Please note that nothing changes if your total payments ever match your death benefit. You would still have to continue making payments.

Some people object to this concept.

It’s important to remember two key factors. First, this is insurance. It’s not a loan.

No type of insurance is priced using a formula such as [(Death benefit total) / (monthly premiums)] = how long you pay.

Second, the insurer risks losing thousands of dollars for many years.

Yes, they could come out ahead at some point if you live much longer than they expect.

But if that happens, it doesn’t discount the prior peace of mind you enjoyed.

For example, car insurance has no guaranteed payoff.

If you never file a claim, nobody looks back and suggests they wasted their money.

They had peace of mind that whole time, knowing that they would not be financially ruined if an accident happened.

 

How Much Does Final Expense Insurance Cost?

Final expense quotes vary based on gender, age, coverage amount, health, and state.

That said, below is a chart that shows some sample prices.

You can also use our free quote calculator to see prices from dozens of carriers in your state.

 

Age	Female $10,000 Simplified Issue (Monthly Rates)	Female $10,000 Guaranteed Acceptance (Monthly Rates)	Male $10,000 Simplified Issue (Monthly Rates)	Male $10,000 Guaranteed Acceptance (Monthly Rates)
45	$22	$28	$27	$33
50	$24	$30	$30	$36
55	$27	$38	$35	$45
60	$32	$42	$43	$55
65	$41	$51	$54	$66
70	$51	$69	$70	$89
75	$71	$98	$99	$121
80	$98	$140	$139	$166
85	$135	$170	$192	$230