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Searching the web for life insurance to cover funeral costs can be a frustrating endeavor. There are so many sites that have conflicting information that it almost makes you want to just give up the whole thing.
Can you relate to this?
More times than we can count we have had clients who came to us on the brink of giving up permanently.
Sadly, there are tons of articles online written by authors who have little to know experience in this business.
Today is your lucky day
We are going to set the record straight, so you have the facts you need to make an informed buying decision.
We’ll explain the differences between each type of life insurance for final expenses, and give you our professional recommendation based on the numbers. Furthermore, we’ll show you rates, give you some helpful advice and much more.
It’s all right here.
Article Quick Guide
- The Rundown On Buying Life Insurance To Cover Final Expenses
- The Different Kinds Of Life Insurance
- Choosing The Right Type Of Coverage
- Quotes for $10,000 In Final Expense Coverage
- How To Find The Best Policy
The concept is pretty simple really. Life insurance merely pays a tax free cash benefit to your beneficiary(s) when you pass away. This is a true statement regardless of which kind of life insurance you have (there are many as discussed below). As long as your policy is in force, the insurance company will pay cash directly to your beneficiary.
The cash payout gives your family the money needed to pay for your final expenses. This assumes of course you purchased enough coverage that is equal to or greater than what your funeral will cost.
If you don’t buy enough coverage, someone will need to make up the difference. This is why it’s important to carefully calculate your expected funeral costs when you purchase a life policy to pay for it all. Just make sure you buy enough and you will be good to go.
Remember these two key things
First, when you buy a life insurance policy specifically for your burial expenses, it does not mean all the money must be used for the funeral. Remember, the policy merely pays cash. There are no requirements so to speak that come along with the payout.
Thankfully, every funeral home will accept cash so this isn’t a bad thing. Many people think the proceeds must be used specifically for the funeral costs. This is not true.
Technically, your beneficiary could take the money and head to Vegas for a nice weekend. As long as you select a trustworthy individual as your beneficiary, this shouldn’t be an issue.
Here’s something else really cool
The second thing to remember is that since the money can be used for anything, any leftover money stays with your family! That’s right; all additional proceeds can stay with your family to help them out. Rather than going to the funeral home, your family can use the left over money as they see fit.
Here’s the most important thing to understand about life insurance.
There are many different types of life insurance, and they all work differently. Selecting the appropriate one that is most suitable to achieve your desired goal is critically important.
Lots of people just think life insurance is life insurance. They have no idea there are different types that operate in their own way. Understanding the different types will help you figure out which type is most appropriate for your goals.
There are two main types of life insurance coverage. There is permanent coverage, and there is term coverage. There are actually 3 different types of permanent coverage. They are whole life, universal life, and guaranteed universal life.
Below we’ll explain how each one works, and then give you our recommendation. However, it’s your choice which type you go with.
Term Life Insurance
Term is short for terminate. Term life insurance is temporary life insurance that you rent for a specific period of time. The term might be a set number of years such as 1, 5, 10, 20, or 30. On the other hand, it may last until a specified age such as 75 or 80. Term life insurance is by far the least expensive type of life insurance. There is no debate about this fact.
In either scenario, when your coverage reaches its predetermined expiration date, it’s simply over with. You are no longer covered. You don’t get any money back. Depending on your age, you may or may not be able to take out another term policy.
Remember this about term life coverage
In general, term life policies will only cover you until about 80 years old. The insurance companies will not issue you a term life policy that would provide coverage beyond the 80-85 year mark.
For example, if you are 75 right now, some companies will still issue you a 10 year term (not many). They will not issue you anything greater than a 10 year term because that would mean you would be covered beyond the age of 85. The risk on their behalf is just too high which is why they don’t do that.
If you go with term life, you are looking at having coverage until age 85.
Term Life Underwriting
The underwriting for term life coverage is usually what makes it a non option altogether. You have to understand that the insurance company is betting on you outliving the policy. This is why term life coverage is so much cheaper than all forms of permanent coverage.
Because their risk is so high, they must manage that risk through underwriting. You will find that the underwriting for term life insurance is significantly more restrictive than permanent life insurance.
Don’t believe us? Here’s the math to prove it.
Let’s say we have a male age 75 who is a non smoker in average health.
A 10 year level term with Transamerica for $25,000 in coverage at a standard rating (average to below average health rating) would cost $129.02 per month. That’s $1548.24 every year. After 10 years, this person will have paid a total of $15482.40.
From day 1, the insurance company is on the hook for $25,000 and yet all they will ever receive is $15,482. Does this look like a winning proposition for the insurance company?
Nope it sure doesn’t. Can you see the risk they exposed to? This is why the underwriting has to be much more restrictive. They simply cannot afford to take on term life clients who they feel may pass away during the life of the policy.
The only possible way this makes sense for the insurance company is if they never have to pay a death claim on this policy which is why term life insurance expires.
We have been in the burial life insurance business for many years now. The cold hard truth is that most folks we speak with simply will not qualify for a term life plan even if they wanted one. Their health simply prevents them from qualifying given the underwriting requirements for term life insurance.
Whole Life Insurance
Whole life coverage is the safest type of permanent life insurance. It comes with iron clad guarantees. Unless you stop making your payments, you can rest assured that nothing can result in you not have coverage for an indefinite period of time.
Whole life coverage is definitely the most costly of all types of life insurance. Essentially, you are paying for the guarantees which is why it costs more. Unlike with term life, the insurance company will be paying a death claim if you have a whole life policy.
Whole life policies are super simple to understand.
- They cannot expire at any age
- The monthly payments can’t increase
- The death benefit cannot decrease
A whole life policy also builds what’s called cash value. This is like a little savings account in the background. As you make your payments over the years, this account grows.
You can access this money for emergencies, or use to pay your premiums if you ever get in a bind. It’s important to note that when you access the cash value on a whole life policy that it’s considered a loan.
The insurance company expects you to pay it back, and they do charge a little bit of interest. If you fail to pay back your loan, they will reduce your death benefit by whatever the amount of the outstanding loan is.
Whole Life Underwriting
You will quickly see how much easier it is to qualify for a whole life insurance plan compared to a term life plan. The risk on behalf of the insurer is substantially less with whole life, so they can in turn take on clients who are less healthy.
Here’s the key difference
When you have a whole life policy, you will one day pay total premiums that are equal to what the policy will pay out as a death benefit. Furthermore, you will continue paying. Your payments don’t stop just because you have matched what the policy will pay out.
Some people think the payments should stop because you’ve paid into it what the policy will now pay out.
Let’s be clear on one thing here
This is insurance; not a loan. Insurance companies don’t loan you money. If you want to make payments to pay back a set amount, you need to take out a loan for that.
First of all, it will take many years (usually well over 20) before you will pay into the policy what it will pay out. Second, your are paying each month for protection. Starting on the first day of your policy, the insurance company is on the hook for tens of thousands of dollars.
Imagine how much they lose when you have paid in $2,000 but they have to pay out $20,000. You are paying for protection. At some point, they need to make a profit or there is no reason for them to offer the insurance.
With a whole life policy they will pay a claim. It’s just a matter of when.
Don’t get hung up on the numbers as if it’s a bad deal. If you never get a in a car accident, how much money do you get back? None. If you never file a home owners insurance claim, how much do you get back? None.
With whole life insurance, you will one day have your claim paid as long as you continue making your payments. No other kind of insurance can claim that.
To get back to the original point, whole life insurance carries far less risk so the underwriting is much more relaxed.
Burial Insurance | Final Expense | Funeral Insurance
No doubt you have heard the terms “burial insurance”, “final expense insurance”, and “funeral insurance”. All three of those terms are merely marketing terms used to describe a specific type of life insurance.
At the end of the day, all three of those terms refer to a specific type of whole life insurance. Final expense whole life insurance policies have three very unique features not found with any other life insurance policy.
- The underwriting is incredibly lax. They are designed to absorb the risk of very serious health issues. The vast majority of seniors can easily qualify for a burial insurance policy that covers them in full immediately, and comes at the lowest price offered by the carrier.
- For the super unhealthy, there are actually no health question final expense policies. These have no underwriting of any kind. They literally just issue the policy. There is a two year waiting period, and they do cost more. It’s rare someone would need these, but its nice to have for those who do need it.
- The face amount options go super low. You can literally buy as little as $1,000 in protection. Most traditional life insurance policies require you to purchase no less than $25,000 in coverage.
For seniors who are looking for a small life insurance policy to ensure their final expenses don’t become a burden to their loved ones, a burial insurance policy offers unparalleled value.
No matter what health issues you deal with, there is a final expense policy available to you.
Universal Life Insurance
A universal life insurance policy is kind of like a hybrid of term life and whole life. It also goes by the names “variable premium life” or “flexible premium life”. All terms refer to the same thing. For purposes of this article, we will stick to the term universal life.
It’s still considered permanent life insurance because it can technically last forever. If you go with a policy like this, it’s very important you understand exactly how they work. These types of policies can go south if they are not managed properly.
A universal life policy relies heavily on the cash value growth in order to keep the policy in force. Basically, as times goes on and you make your monthly payments, the cash value grows. A majority of the growth comes from the insurance company investing.
A universal life policy will have a minimum guaranteed interest growth rate and a speculative interest rate. Most life insurance companies will show you an illustration that depicts your policy’s performance for both the guaranteed interest rate and the speculative one.
For what its’ worth, most life insurance companies will determine their speculative interest rate based on their past performance.
A universal life policy does cost less per month than a whole life policy. This is because there are less guarantees in place.
How They Work
When you first take out your policy, your monthly payments will be much greater than your cost of insurance.
For example, at age 50 let’s say that your cost of insurance is $50 per month. That’s the amount of money it takes to insure a 50 year old for whatever benefit amount you selected. If you are making payments of $100 per month then the remaining $50 goes toward your cash value. These contributions along with the interest earned are what make your cash value grow over time.
The key thing to understand is that over time your cost of insurance rises. It’s no secret that life insurance on a 55 year old is more expensive than a 50 year old. While the cost of insurance rises with time, your monthly payments do not.
As you age, less and less money is being contributed to your cash value because of the higher cost of insurance. One day your cost of insurance will be greater than your monthly payment. At this point your policy will begin to draw from the cash value to make up the difference. This happens instead of you having to pay more money each month.
Once this begins, your policy will forever have a declining cash value. If your cash value gets to zero, bad things happen. If this ever happens, you are left with a few choices.
- You can pay more money each month that is consistent with your true cost of insurance. This amount would be substantially higher than your prior monthly payments. Expect to pay anywhere from 200-500% more.
- Your policy ends. If you don’t contribute more money to cover the increased cost of insurance, your policy ends and you no longer have protection.
- Your death benefit starts reducing to an amount consistent with the monthly payments you are making. Eventually, your policy would zero out and you would no longer have coverage.
If you have a universal life policy that ever gets to the point where the cash value is gone, you are screwed. Unless you can afford to make massive monthly payments, it’s a done deal.
The key thing to remember about a UL policy is to make sure you are putting in enough money each month where you can reasonably expect that it will never run out of cash value. Unfortunately, most UL clients don’t do this, so they lose their coverage between the age of 75 & 85 when the cost of insurance gets really costly.
Universal Life Underwriting
A UL policy isn’t as lax as whole life when it comes to underwriting, but it’s much better than term life that’s for sure. You will find that you can still qualify for a universal life policy with minor to mediocre health issues.
However, if you deal with some pretty major stuff, you probably won’t qualify. Even if you do, the payments would probably be so high that it would be much better to just apply for a whole life policy.
Guaranteed Universal Life Insurance
This type of policy is very similar to universal life, but with a twist. This policy will build very little to no cash value. Do not expect it to generate cash value that you can access or see growth in. The whole idea behind a GUL is to pay just enough to cover the cost of insurance and keep it in force.
The insurance company will issue what’s called a no lapse guarantee. This guarantee states that as long as you make your payments, the policy will not lapse.
Here’s the key thing to understand
With A GUL your monthly payments are not sufficient to support the actual cost of insurance. If you ever miss your payments, your no lapse guarantee goes away. Without that guarantee, your actual cost of insurance would be required which would be substantially higher than what your previous monthly payments.
A guaranteed universal life policy is the lowest cost form of permanent life insurance. It can be a good way to secure low cost lifelong coverage. However, if you ever miss a payment because you change banks, you miscalculate, or something happens to your money, your put yourself at serious risk of losing your coverage.
While the underwriting is definitely more lenient compared to term life insurance, the insurance company is still taking on a considerable amount of risk. The insurance company will never receive premiums that are equal to or greater than the death benefit.
Similar to term life insurance, the insurance company is banking on you dropping the policy at some point, or missing a payment which would drop your no lapse guarantee.
Folks with some minor health issues can still qualify. However, if you deal with anything major, you likely won’t qualify.
The first step in buying life insurance for burial expenses is to determine which type of life insurance you feel is most appropriate for you.
We already went over the various types of life insurance and how they function. You might be puzzled still about which type is best for you.
Here are some questions you should answer to help you figure it out:
- If your policy is specifically to cover burial expenses, are you comfortable with the idea of it expiring before the age of 85?
If you said no to that question, cross term life insurance off the list. A term life policy can’t cover you beyond 85.
- Are you comfortable with your policy possibly needing more money to keep it in force later on in life?
If you said no to that question, cross universal life insurance off the list. UL policies frequently underperform and thus require additional money each month to keep them in force. If you can’t put in more money, you lose your policy.
- Are you comfortable with the idea that if you miss a monthly payment at any point in the future that you could lose your policy because it would require a much higher payment?
If you said no to that, cross guaranteed universal life off the list. If you miss a payment you lose the no lapse guarantee. That would mean your payments would increase by a lot. If you can’t make these new payments, you lose the policy.
Here’s What We Recommend Based Off Years Of Experience
The vast majority of our clients prefer to know with absolute certainty that their policy will always be there to ensure it will cover their final expenses. There is only one type of life insurance that can fully guarantee that.
Final expense whole life insurance is the only kind that will ensure the following:
- The policy will never, for any reason, expire
- The monthly payments will never change
- The death benefit won’t decrease
- Folks with major medical issues still qualify
Every other type of life insurance lacks the guarantees that whole life offers. The key thing to ask yourself is this:
If you go with a policy other than whole life and you lose it for the stated reasons why it might go away, how then will you pay for your burial expenses? Furthermore, how will that financial burden impact your family?
Here’s the bottom line with policies other than whole life
They all either expire, contain the capacity to expire, or have the potential to increase in cost where you can’t afford the payments. Sadly, these potential outcomes usually play out. If you are comfortable with that risk. we wish you the best of luck. It’s not going to end well and it will happen when you are too old to do anything about it.
And remember this if you have health issues
If you deal with multiple minor things or some major health issues, a burial insurance policy for seniors is probably the only way you can secure a life insurance for burial expenses.
Here are some quotes for those who go with our recommendation of selecting whole life final expense coverage to ensure burial expenses are taken care of. Keep this in mind when you view these quotes.
- These quotes are all for $10,000 in protection
- They are all non tobacco rates
Age Female Non Tobacco Male Non Tobacco
50 $24.67 $29.16
55 $28.40 $35.09
60 $32.87 $42.76
65 $41.01 $55.76
70 $53.24 $73.70
75 $72.41 $99.53
80 $98.43 $132.65
85 $135.90 $183.15
Age Female Non Tobacco Male Non Tobacco
50 $26.05 $32.00
55 $31.16 $36.86
60 $35.41 $45.19
65 $42.80 $55.75
70 $53.42 $72.91
75 $75.08 $102.69
80 $111.08 $146.74
85 $165.92 $200.75
Age Female Non Tobacco Male Non Tobacco
50 $23.06 $27.73
55 $26.94 $34.43
60 $33.79 $42.42
65 $42.42 $53.82
70 $53.12 $69.93
75 $76.34 $97.43
80 $108.30 $147.07
85 $160.85 $202.75
Age Female Non Tobacco Male Non Tobacco
50 $32.21 $37.91
55 $35.91 $44.21
60 $36.51 $47.81
65 $42.61 $56.11
70 $53.11 $71.31
75 $76.11 $105.31
80 $105.31 $146.61
85 $141.81 $202.71
Gerber only has a no health question policy. This has no underwriting of any kind because everyone is guaranteed to be accepted. This kind of policy is more expensive and has a waiting period. Most people should not be buying this kind of policy. It’s only good for folks who have very dire illnesses.
Age Female Non Tobacco Male Non Tobacco
50 $28.14 $38.41
55 $35.84 $46.11
60 $46.48 $56.65
65 $55.46 $68.29
70 $68.75 $87.91
75 $90.29 $124.67
80 $152.17 $220.92
85 NA NA
AIG, like Gerber, only has a guaranteed issue policy.
Age Female Non Tobacco Male Non Tobacco
50 $35.83 $51.92
55 $39.86 $56.50
60 $45.14 $63.17
65 $54.51 $73.09
70 $70.41 $93.14
75 $95.82 $124.49
80 $135.12 $175.15
85 $204.20 $298.86
Once you have pinpointed which type of policy you prefer, the next step is to find it. Before you jump into that, it’s very important to know exactly what you are looking for. Here’s a little cheat sheet for you.
Look for a policy that has the following:
- The insurance company is financially secure
- The policy covers you as much as possible as soon as possible
- It costs less than what other companies charge
Maybe you have shopped for life insurance before, but maybe you haven’t. Here’s something most people don’t really understand.
Life insurance companies don’t sell their low priced policies directly to the consumer. They are sold via their agents and agencies. In fact, if you call these life insurance companies to get quotes or buy a policy, they will merely refer you to one of their agents.
What does this mean?
To get the best rates (regardless of which type of life insurance you want) you need to buy your coverage through an individual agent or agency.
Now it’s just a matter of finding the right agency to help you find your policy. Here’s what you need to look for.
- The agency must be independent
- They must have access to no less than 10 different life insurance companies
- They need to have at least a couple years of experience
When you work with an agency like this, here’s what will happen…
They will gather all your health information, and become familiar with your goals. Then they will sort through the prices from all the insurance companies they represent. Finally, they will identify for you which insurance companies will offer you the best deal based on your individual situation.