Final Expense

A final expense plan, or burial insurance, is a policy that pays for costs that follow a client’s demise

Final expense plans are purchased to cover events and costs like funerals, remaining debts, and probate charges. Funeral expenses can easily reach upwards of $10,000. Depending on the policy and premiums paid, the death benefit can range from $2,500 to $25,000. The cost of the premium is dependent upon the client’s age. Most plans are available as whole life or term life plans. While whole life plans cover a client for their entire life, term life plans need to be renewed after the term expiration. If a client is in poor health, graded death benefit plans are available. Depending on the plan, if a client dies within the first three years, the beneficiary will receive increasing proportions of the death benefit, with the full benefit being paid if the policyholder dies three to five years after the policy purchase. Either way, a death benefit is paid within 24 hours of the policyholder’s passing. Unless a client leaves documentation stating their preferences of funerary proceedings, the beneficiary is free to use the death benefit how they see fit. If the costs of the funeral and death-related expenses are less than the death benefit, the beneficiary is allowed to keep the difference.

WellPath Partners
WellPath Partners

Final expense plans are simple to apply

For with little underwriting and no physicals or medical exams required. With simplified issue policies, a prospective policyholder is usually required to only answer several medical questions. This makes burial insurance a viable option for clients who need coverage for end-of-life expense, but have been disqualified for purchasing life insurance at some point in their life. In addition to fewer requirements, final expense plans cost about $5,000-$50,000, while regular life insurance plans can typically range from $250,000 to $1,000,000 in face value. Since final expense plans have lower face values, they also tend to have lower monthly premiums.

A final expense plan is not recommended if a client already has a life insurance policy that will allow portions to be allocated to towards funeral expenses. Allocating life insurance funds might prove a less expensive option.

Final expense insurance can qualify as an asset when being considered for Medicaid eligibility

so the policy might have to be forfeited if the policyholder wishes to qualify for Medicaid. In order to qualify for Medicaid, clients can create irrevocable funeral trusts, which are not included in pre-needs regulations for Medicaid and other programs. Funeral trusts can hold a maximum of $15,000, and the money earns about 1-1.75% in interest. These trusts only pay for final expenses through the funeral, with the rest of the funds going towards the client’s personal estate.

It is not uncommon for prospective purchasers of final expense policies to consult with funeral directors about the costs of their ideal funerals in order to estimate their needed expenses. The typical funeral ranges from $1,000 to $10,000.

WellPath Partners