Planning to buy a final expense policy? Well, it may be something to write home about or it may not be. Like all other types of insurance, final expense insurance has some pros and cons, and taking them into consideration will help you make up your mind on the right policy.

Well If you ever try to get a general life insurance think about the hassle you went through even just for being eligible for it.

Final Expense

The biggest pro of this policy is the convenience. Unlike most other insurances, you can qualify easily for the Final Expense Policy regardless of your age and medical condition. Meanwhile, disadvantages include increased cost per thousand, chances of overpayment, and potential misuse of the funds.

Once you reach a certain age, it's natural to wonder about the day they bury you. Everyone wishes it would go smoothly and their loved ones would have nothing to worry about other than mourning for them. The best way to ensure that is Final Expense Insurance.

Well, despite its appeal, the policy isn't without its drawbacks. So, it's mandatory to weigh the pros and cons of final expense insurance before getting into it.

The biggest pro of this policy is the convenience. Unlike most other insurances, you can qualify easily for the Final Expense Policy regardless of your age and medical condition. Meanwhile, disadvantages include increased cost per thousand, chances of overpayment, and potential misuse of the funds.

Are you considering applying for final expense insurance? Then, carefully consider the pros and cons discussed below. You would also find out whether or not you fit the types who benefit the most from this policy.

What Are The Advantages Of Final Expense Insurance?

Final Expense is one of those few policies where the insurer doesn't judge your age and health. Their only concern is your commitment to paying the premiums. Plus, the low amount of the death benefit makes the policy more affordable overall.

By-pass Medical Exam

Medical exams are an obstacle for many applicants seeking approval from insurance companies. Especially, when you have crossed or are nearing the general life expectancy. The same goes for individuals who are suffering from chronic conditions, obesity, or bad lifestyle habits.

In contrast, the final expense insurance requires no medical exam. Besides making approval easy, it renders the process overall more convenient.

For instance, there is no tardiness associated with testing and evaluating medical samples. As a result, you get approved much faster than other policies. This is also great for individuals who don't want to disclose their medical information and maintain privacy.

Unimpeded Funeral

You don't want your family members to do anything other than reminiscing your memory and sending their prayers on the funeral day. However, two things can keep that from happening.

Firstly, financial concerns can keep your loved ones from fully immersing in the ceremony. A typical American memorial service can cost $7000-$12000. This is a fairly significant amount to arrange for on short notice. In this case, the death benefit from your insurance can save the day.

Secondly, your final expense insurance reflects the way you would've wanted the ceremony to go. This saves your family from a lot of debates and arguments regarding the funeral process. Instead, they can peacefully focus on you.

Stable Insurance Policy

Once you have locked in the premium of the Final Expense Insurance, you need not worry about it for the rest of your life. The rate is fixed and it wouldn't change no matter how the price of everything else does.

This makes it easy for the insured to plan their budgets around the periodical premium payments. It's especially helpful for retired individuals living off pension or interest from their savings.

In contrast, traditional insurance can increase the premiums as the insured gets older or sicker. Your premium might also increase if your policy's cash value fails to perform as expected due to unfavorable market conditions. There are no such concerns with Final Expense Insurance.

No Expiration Date

You are secured till the end of life when you get a Final Expense Insurance. As long as you pay the premium, the insurance will pay out the benefit as promised to your beneficiaries. It doesn't matter how long you have lived after taking out the insurance.

In comparison, policies like Term Insurance will only provide coverage up to a certain period. You won't receive a payout if you outlive the term. This can be mentally distressing for the insured.

Cash Value Accumulation

Final Expense Insurance is a type of whole-life policy and therefore often has a cash value component.

In other words, each time you make a payment, a portion of the premium goes to the cash value account. It keeps earning interest and over time grows into a significant sum of money. And until you withdraw the amount, there is no tax to be paid on the growth either.

The money can come in handy if you have to take care of any emergency expenses. For example, medical or legal bills. You can also use the cash value to pay for the premiums. Thus, making the policy pay for itself. The insured might also get the cash value as a lump sum if they decide to cancel the policy.

Flexibility For Beneficiaries

Although funeral expenses are the main purpose of the policy, some applicants are just looking to leave some cash for their families. It might not be a fortune, still, it can sustain them for a few weeks following your death. Especially, if the beneficiary is a dependent minor; for example, a grandchild.

Your beneficiaries can also use the funds to clear off any credit card bills, mortgage loans, or any other loans you left behind.

Other burial-related insurances usually don't offer such flexibility. For instance, the Pre-need plan, another popular burial insurance, strictly allocates the funds for funeral services.

Comparatively Affordable

Few policies have such low levels of coverage as Final Expense does at $2000-$50,000. This low coverage naturally makes the policy much cheaper than other life insurance.

For instance, the coverage level for an average term life insurance is $100,000 and upwards. This huge coverage translates to higher policy prices (although the cost-per-thousand is reduced).

Similarly, Whole Life Insurance is more expensive than Final Expense since it offers a savings component. Meanwhile, Universal Life Insurance costs can accumulate quickly with its range of additional features.

First-Day Coverage

Although this is not true for everyone, many companies offer first-day coverage for final expense insurance. This means your beneficiaries will be eligible for the death benefit if you just pay the first premium and die the next moment.

In the case of guaranteed issue policies, you will qualify for first-day coverage even with pre-existing conditions. These include heart disease, diabetes, obesity, COPD, and others. Remember, not all companies offer this and most of them have a two-year waiting period.

Quick Payout

Rarely would you find another policy that pays out as quickly as Final Expense insurance.

Your beneficiaries can get the money within 24-72 hours after placing the claim. That's because the whole life policy recognizes the urgency of the situation and makes it a priority to arrange for the funeral expenses.

In contrast, other insurances require several weeks to months to finalize the payout.

What Are The Disadvantages Of Final Expense Insurance?

The factors that make Final Expense Insurance an easy, affordable, and flexible policy can also work against it. So, consider these major disadvantages before you get involved.

Low Purchasing Power Of Payout

Firstly, the limited amount of the Death Benefit doesn't make this policy anything close to a wealth transfer. Your beneficiaries can't do much with the payout other than arranging the funeral.

However, that too might get difficult considering the ever-rising prices of goods and services.

Suppose, you calculate a budget for your funeral based on today's costs and settle for a fixed Death Benefit accordingly.

Five years from now, when you pass away, the prices of a funeral might've gone so high that the payout can only cover a fraction of it. Meanwhile, you cannot add anything to the benefit during your lifetime since it's unchangeable.

High Cost Per Thousand

The low coverage amount of the policy can be quite a dilemma for the applicant. On one hand, the insurance is overall affordable. However, to compensate for the risk of insuring without a medical exam, the insurer sets a greater cost per thousand.

For example, a typical $10,000 Final Expense policy can cost $75/month for a 60-plus male. Which means, the cost per thousand is $7.5. Meanwhile, a $250,000 term life policy might require a payment of $100/month. This means the cost per thousand is only $0.4.

Overpayment Risks

Final Expense is a whole life insurance. So, you've to keep paying the premiums until death if you want your beneficiaries to receive the payout. This isn't a problem, but rather an advantage, for seniors with only a couple of years of life expectancy.

However, some individuals might also outlive this expected period. In that case, you will end up paying more in premiums than the actual Death Benefit your family receives. And if you stop paying the premiums your beneficiaries are likely to receive nothing. This can make the whole thing a loss project.

Misuse of Funds

The flexibility of the Final Expense Policy can become a disadvantage in the wrong hands. Since your beneficiaries can do whatever they want with the money, they might not spend it the intended way.

For instance, instead of spending it on your funeral or taking care of your debts, they might spend it on vacations, partying, drugs, etc. Therefore, it's crucial to choose a trustworthy beneficiary. Or, you can go for strict burial insurance like the Pre-need Plan.

Two-year Waiting Period

The final expense insurance often has a two-year waiting period. Your family won't receive the full death benefit if you pass away during this time. Instead, the company might pay them a partial amount. For instance, return the premiums with some interest percentage.

Policies that don't have this waiting period usually require higher premium payments.

Who Can Benefit The Most From Final Expense Insurance?

You probably know whether the Final Expense insurance is ideal for you from the above discussion. Still, confused? Well, here are two categories that will benefit the most from this policy. See if you fit among them.

Seniors With No Savings or Insurance

After paying off nursing and medical bills many seniors can end up with essentially no savings in their final years. However, you might still want a dignified funeral and to be able to pay for it. A Final Expense Insurance can be your best option even if you settle for a smaller Death Benefit. Plus, it's also one of the few policies that approves seniors (age: 80 plus).

Recent Diagnosis

Individuals who have been recently diagnosed with a terminal illness (given a couple of years to live) can benefit much from Final Expense Insurance. Firstly, there is no medical exam to render you ineligible. Secondly, the fast approval saves you time in activating the policy.

Special Expense

Those who already have savings and a funeral plan still might want to buy insurance to cover a special expense. This might be a fancy casket, a full-length obituary in a leading newspaper, or a burial spot. It's something that the average plan doesn't cover.

In this case, you can settle on a small to midsize Death benefit which will take care of this specific expense and not burden others.

Who Doesn't Need Final Expense Insurance?

Final Expense Insurance can be redundant or unnecessary for some categories. Check out if you fall into one of them-

Minimalist Approach

Some people might find elaborate funerals a waste. They might prefer a simple direct cremation or being laid down in a family burial ground. For these people, the end-of-life costs might be too little to match the minimal Death Benefit. Thus, there won't be any point in buying the insurance.

Healthy and Relatively Young

Insurance companies will sell Final Expense Policy to people as young as 45. They will lure you with cheap premiums and a pitch regarding the general uncertainty of human life.

However, chances are high that you will end up paying more in premiums than the actual benefit. Instead, invest the money somewhere more rewarding.

Wealthy Seniors with Well-To-Do Families

Individuals with enough savings don't need to bother with Final Expense Policies. This is also true for seniors who have a robust insurance portfolio that includes whole-life or universal life policies. Also, if your children or immediate family is financially stable and have strong ties, they will most likely handle the funeral expenses on their own.

Conclusion

It's quite a loss if you quit Final Expense Insurance halfway. So, calculate the pros and cons of the policy properly before getting into it. An insurance advisor can help you here. Also, don't forget to compare policies from several renowned companies before buying one.

You must also remember that the marketing language for selling insurance can be often misleading.

For instance, salesmen might overstate the benefits of the policy. Or, they might omit certain parts, like waiting periods, refund policies, etc. to sell their product. They might also exploit the vulnerabilities of the senior age group to make a sale. So, beware of these tactics when dealing with them.