Insurance sellers promise so many wonderful things about Final Expense policy. For instance, it has comparatively smaller premiums. Also, there aren't many health or age restrictions to getting approved. These sound nice. But is Final Expense Insurance worth it?

Final Expense Insurance provides enough cash to your beneficiaries to take care of the funeral and them some more. From that perspective and considering the easy approval, it's worth buying. However, it doesn't have the investment value that Whole or Term Life policies can boast.

Should you buy Final Expense Insurance or put your money in one of its alternatives? The following discussion makes a comparative analysis to help you reach a decision.

Pros and Cons of Final Expense Insurance

The most attractive feature of final expense insurance is the age limit. Most whole life insurances wouldn't be interested in selling to someone over sixty. In comparison, final expense insurance welcomes this age group. You can qualify for final expense insurance up to the extreme age of 85.

Apart from age, final expense insurance is easy on medical conditions too. Usually, there's no medical exams. Some policies won't even ask you health questions.

As a result, you can even get this insurance with chronic health conditions. For instance, applicants with diabetes, heart disease, obesity, etc can still get approved. Meanwhile, these conditions render you unqualified for the typical insurance.

Most seniors choose final expense insurance for peace of mind. They find comfort in knowing that the rituals of their final day on earth won't be a burden on their loved ones.

The Death Benefit from their insurance will be promptly handed over to their beneficiaries when they pass away. It can then be used to cover burial costs or pay off any debts the deceased left.

However, the cost of this insurance is somewhat of a debate. For instance, the Death Benefit is a considerably smaller sum than other whole insurance payouts. As a result, the total payment covered with premiums is also lower. From this aspect, final expense insurance is quite affordable.

On the other hand, insurers have to make up for the risk they take by requiring no medical exam. So, they increase the insurance's cost per thousand. This results in comparatively higher premiums.

What's Good About Final Expense Insurance-

● Easy to qualify regardless of age and health

● Find solace in knowing you've taken care of your own burial costs

● You can take a loan against the insurance's cash value

● The Benefit is promptly handed over to your beneficiaries

● All rates are fixed for life.

What's Bad About Final Expense Insurance-

● A two-year waiting period during which the death of the insured will result in the beneficiaries not getting the whole benefit.

● Those who live longer than their expectation will end up paying more in total premiums than the benefit

● Greater cost-per-thousand

● Beneficiaries have freedom with how they use the benefit, thus, the potential for misuse.

Final Expense Insurance Vs. Whole/Term Life Insurance

Whole and Term life are two of the most well-known insurance policies. How do they compare with Final Expense Insurance? Our parameters are amount, purpose, costs, and ease of approval.

How Much Do They pay?

Final expense insurance pays out a modest death benefit. This can be as low as $2000 and not usually exceed $50,000. The benefit is sufficient enough to cover the typical funeral costs of $7000-$12000. Depending on the amount, the beneficiaries will even have something to pay off any medical or credit card bills the deceased had.

In comparison, Whole Life Insurance offers a much greater amount. The upper limit of the payout can be five hundred thousand dollars or even more. Meanwhile, Term Life Insurance offers the highest coverage. A typical policy of this type can start at $100,000. The upper limit is $1 million plus.

This shows that final expense insurance is best fitted for burial costs and a little something after that. Meanwhile, Whole and Term life policies can serve big plans in your absence. This is why people have different purposes when they apply for each of these policies.

Purpose and Intention

Are you buying insurance to leave a fortune for your family? Then don't buy final expense insurance.

Since the Death Benefit is such a limited and specific amount, you cannot consider it an inheritance. So, the main intention behind taking out the insurance is to lighten the financial burden on your family member during the funeral.

In contrast, whole life insurance can be the inheritance you leave behind for your family. Or, it can keep contributing to a charitable cause you supported during your life.

This is possible because the policy has a robust savings component which accumulates more money with time. From this perspective, Whole Life Insurance is an investment while Final Expense isn't.

Term Life Insurance has a slightly different purpose than the above policies. For instance, Final Expense and Whole Life insurance's purpose is to pay a benefit after your normal death.

In contrast, the intention to buy Term Insurance is to support your family in case of an unexpected death. The insurance is designed in this way too. It expires after a specific term, like 10 or 30 years, and is not for a whole life.

You should also remember that Term insurance doesn't have a savings component. That's something only those other policies have. So, you can't take a loan against the cash value like you can with the other two.

Premiums and Affordability

Comparatively healthy and young buyers might pay a monthly $30-$70 premium for final expense insurance. In the case of people above 70, the rates are around $70-$100. Remind you again, that the ultimate payout is not more than fifty thousand dollars.

In contrast, Whole Life Insurance has a much higher premium rate. Even the healthy, young buyers have to pay around $450/month for a $500,000 insurance. Meanwhile, a term life policy with similar benefits can cost around $150/month.

At a glance, Final Expense Insurance's premium rates might look more affordable than other policies. And greedy insurance salesmen often use this to mislead seniors into buying the policy.

However, things look much different when you compare the premiums against the benefits. You'll find that the Final Expense policy actually costs more than the two. That's because you are paying more money for each thousand dollars compared to the other two. From this perspective, Term Life is the most affordable insurance.

Approval and Underwriting

It's quite difficult to get approved for Whole or Term Life Insurance for sick and older applicants. These policies have stringent underwriting. You will go through a full medical exam to determine eligibility. Moreover, the insurer will conduct a thorough review of your lifestyle and habits.

You are very unlikely to get approved for these policies if you are suffering from an illness. In case they approve you, the coverage will be low with low premiums. The same will happen if you are obese or they find out that you're a smoker.

In contrast, Final Expense insurance has a much lenient underwriting. Guaranteed Acceptance plans will not bother with even health questions to approve you, let alone medical exams. However, to minimize risk, the insurers will wait around two years before approving the full Death Benefit.

Final Expense Insurance Vs. Pre-need Insurance

Final Expense and Pre-need both have the same purpose- paying for your burial. The estimated coverage amount is also the same. So, what makes Final Insurance worth more than Pre-need or vice versa? The answer lies in their subtle differences.

Choosing The Beneficiary

The main difference between the two insurance is in flexibility. For instance, the insured can appoint virtually anyone as their beneficiary in the Final Expense Policy. You can choose a family member, friend, legal professional, or even an organization.

In contrast, Pre-need insurance is quite restrictive about the beneficiary. You can only choose the funeral home service whom you've chosen for your service. This is helpful for individuals who don't have any willing or available family or friends to care for the rituals.

Spending the Benefit

The beneficiaries are allowed to spend the Final Expense benefit on a priority basis. That means they can spend it on things other than your funeral.

For instance, unpaid mortgage loans, nursing home bills, legal costs, etc. They can even choose to use it to cover personal expenses. You are not limiting them only to your funeral. However, this also creates the option for potential misuse.

Meanwhile, there's no such opportunity with Pre-need insurance. The designated funeral home will only spend the money on your funeral and nothing else. Thus, ensuring no misuse of the funds.

Payment Plans

It's easier to pay for a Final Expense Policy. You have the option to make monthly, quarterly, or yearly payments. In contrast, Pre-need insurance requires a direct purchase from the funeral home. Which means you will be paying considerably greater upfront costs. Yes, there are payment plans available for this policy too. However, they aren't as flexible as that of Final Expense insurance.

Verdict: Is Final Expense Insurance Worth It?

Final Expense Insurance is worth buying for two types of people. The first type is those who want their family to have some cash on hand right after their death.

It's good if they spend it on the funeral. However, the policyholder also understands, and is mostly okay with, the possibility of the money being spent for other priorities at that moment.

The second type of people who can consider buying this policy are seniors with bad health. Since they can't get any other insurance, this is their only option.

Final Expense Policy isn't worth it for those seeking to buy insurance as a major investment for their family. Whole or Term Life is your best option in that case. It's also not the best option for those who are adamant that the money is only spent on their funeral. They would be better off with Pre-need insurance.