Why Buy Final Expense Insurance?

August 31, 2022

Are you worried about how your loved ones will afford your funeral and burial expenses upon your passing? You can buy final expense insurance, which covers these expenses for your loved ones. Final expense insurance is unique because it doesn’t provide money for your loved ones’ well-being after you pass. Instead, it pays for your medical bills and burial expenses and nothing more.

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Final expense insurance payouts can be a welcome sight for your loved ones as they face the cost of funeral and burial. On average, you could be looking at between $10,000 and $20,000. That’s a large chunk of change for your loved ones to have to take out of their life insurance proceeds. Final expense insurance allows them to keep the life insurance proceeds and use this money to pay the necessary expenses instead.

The Important Details

Final expense insurance does not provide your loved ones with money to live off after you pass away. But they don’t have to use it for that. As long as you pay the premiums, the insurance will stay in place. While it would benefit your beneficiary to pay for your final expenses with this money, the insurance company doesn’t oversee what they do with the money.

Some insurance companies do offer the option to assign the benefits directly to your desired funeral parlor. This can give you peace of mind knowing that the premiums you pay are helping to pay for your funeral directly. It eliminates the risk of the funds being used for other reasons.

Keep in mind that insurance companies base the value of your final expense policy on the type of funeral and burial you desire. Typically, you can’t buy a policy for more than $20,000 unless you have unique circumstances.

Reasons to Get Final Expense Insurance

There are many reasons you should consider final expense insurance:

  • It can be affordable. While the premiums are higher from a dollar-for-dollar perspective, the amount of insurance you can buy is often low, which keeps your premiums on the lower end.
  • It doesn’t expire. Final expense insurance is permanent insurance. As long as you pay for it, the coverage will be there. If you stop making premium payments, though, the coverage goes away.
  • It helps your loved ones keep more of your traditional life insurance policy money for themselves. If you will leave your loved ones with many expenses, including a mortgage, college tuition, or credit card debt, they will need every dollar from your life insurance policy. The final expense insurance covers the burial and funeral, which could otherwise take thousands of dollars from their insurance proceeds.

Determining if You Need Final Expense Insurance

Now comes the real question. Do you really need final expense insurance or is it just another unnecessary monthly expense?

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There isn’t an answer we can give across the board. It depends on your situation. Do you already have life insurance? Will it cover all of your debts plus money for the daily cost of living for your loved ones? Are you the breadwinner in the family? Will your family be lost financially without you?

If so, then adding a separate policy for final expenses could be a good move. Your loved ones won’t have to dip into your life insurance funds to pay for your final expenses.

If you don’t have debts and your significant other does work or you aren’t the breadwinner, you may not need the separate policy. It depends on the financial needs of your loved ones in your absence.

Some families won’t even need any insurance. If your assets more than cover what your loved ones need including the cost of final expenses, insurance premiums could be wasted. If you are comfortable with ‘self-insuring’ or using your own assets, then you can save the premiums and invest the money yourself instead.

Other Options

If you are worried about how your loved ones will cover your funeral expenses, final expense insurance isn’t the only option. There are alternatives:

  • Term life insurance – You can buy a life insurance policy for a specific amount and for a specific term. This insurance does expire, though, so if you are still alive when it expires, your loved ones won’t have this coverage any longer. If you want to renew it, you’ll have to apply for coverage again and likely pay higher premiums because you’ll be older.
  • Whole life insurance – This insurance doesn’t expire. It is part term life insurance and part permanent life insurance. Your policy gains a cash value which you can leave for your loved ones or use during your retirement years when you need a larger cash flow.

Only you know what will help your family the most. While you don’t need to ‘over insure’ yourself, you do need to make sure your loved ones are protected. Final expense insurance can ensure that your loved ones will be able to properly grieve their loss without worrying about how they will pay for your funeral.

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