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Having life insurance in place, whether you are young or old, is vital when you die. When young, we have life insurance to cover income replacement and debts, like a mortgage.
As we get older, the debts get paid off and the children grow up, but the need for life insurance is still there. You many not need as much coverage as once before but you will still need coverage to pay for things like:
- Burial Insurance
- Any Remaining Debt
Final Expense life insurance is the answer for many consumers, especially those with health issues.
Final Expense Life Insurance Explained?
When you here someone mention final expense life insurance, they are really talking about a whole life policy used to cover funeral expenses or minimal debt, such as a credit card or auto loan.
Final Expense life insurance is sometimes referred to “burial insurance” or “funeral insurance”.
Coverage amounts for final expense life insurance ranges from $2,000-$50,000 for consumers age 50-85. They do accumulate a cash value that can be borrowed from if the need arises, but this is not recommended. All of final expense whole life insurance requires no-medical exam.
These policies are designed to relieve you loved ones of the financial strain of a funeral costs, which is around $10K-$12K.
Types of Final Expense Life Insurance
There are 3 different types of life insurance. They are:
- Simplified Issue Whole Life
- Graded Death Benefit Whole Life
- Guaranteed Issue Whole Life
SIMPLIFIED ISSUE WHOLE LIFE
These policies are commonly used for final expense life insurance. The underwriting on these policies allow for certain health conditions that traditional life insurance policies do not.
They are tailored to senior consumers who have had typical health situations for their age and have them under control at the current time.
Death Benefits range from $10,000 to $50,000 with issue ages from 50-80 years of age. The death benefit is paid in full for any type of death starting day 1 of the contract.
Top 5 Simplified Issue Whole Life Insurance Company’s
- Assurity Life
- Transamerica Life
- Foresters Financial
- Mutual of Omaha
- American Amicable
All these companies have an “A” with the rating agencies, which means they all have a strong financial outlook when it comes to paying claims.
GRADED DEATH BENEFIT WHOLE LIFE
A graded death benefit whole life policy is very similar to a simplified issue whole life in that they both have a cash value build up with a guaranteed premium and death benefit.
A graded death benefit policy allows for more health problems than the simplified issue policy, but the way the death benefit pays out is significantly different. This is how a graded death benefit policy would pay your beneficiary:
- If you die in the first year of a sickness, your beneficiary would receive 25% of the death benefit. If by accident they would receive 100% of the death benefit.
- If you die in the second year of sickness your beneficiary would receive 75% of death benefit, and if death is by accident then 100% of the benefit is paid.
- If death is after the second year, then 100% of the benefit is paid whether it’s caused by sickness or accident.
The terms of how the death benefit pays out on graded death benefit whole varies by company so it’s important to understand and ask questions.
Top 5 Graded Death Benefit Whole Life Company’s
GUARANTEED ISSUE WHOLE LIFE INSURANCE (GIWL)
Guaranteed Issue Whole life is considered the final option when it comes to buying life insurance. If you have been declined for all other types of final expense life insurance, this is what your only choice will be.
Just like the name, the GIWL is guaranteed issue with no medical questions asked at all. If you can sign your name, you will be approved for this policy.
Death benefit amounts range from $5K to $25K with a guaranteed premium and death benefit. These policies do build up cash value but are usually purchased for death benefit purposes.
The premiums tend to be higher that the 2 types of policies above and that’s because the risk the company’s take on by not asking any health questions.
The death benefit payout is also different compared to the 2 other type of final expense life insurance in these ways:
- If you die in the first two years from a sickness your beneficiary would receive the premium paid plus interest. If by accident then 100% is paid.
- After two years, the full benefit is paid on sickness and accident.
Top 5 Guaranteed Issue Whole Life Company’s
Why Consider a Final Expense Life Policy?
If your like most consumers you buy term when your young because you need a lot of life insurance and a permanent policy would be pricey. With this said, most terms have an expiration date, which could leave you without life insurance when you need it most.
Funeral costs are high and only get higher as time goes by. Having a final expense policy would relieve stress on your loved ones during their time of sorrow.
If you have had some health problems, a final expense policy could give you the coverage you need without all the exam hassles or having to qualify for a traditional life policy.
How Much Coverage Should I Buy?
Determining how much coverage to buy can be a daunting task. We all want to take care of our loved ones, but most seniors our on a fixed budget, which means not a lot of money for life insurance.
It’s important to always to have your funeral costs accounted for first, then you can move on to any other debt that you may have accrued. No loved one wants to worry about how to pay for a funeral if possible and a final expense policy can ensure this.
Also remember, you can only purchase up to $50,000 with most final expense policies. This means covering large financial obligations would not be best served using a final expense policy.
My Two Cents
If you are financially secure with minimal debt, then final expense life insurance could be the answer to cover any funeral expenses for loved ones. It’s important to understand which type of final expense product you are buying because each is different when it comes to paying out the death benefit.
We always recommend working with an independent agent with experience to help guide you to the policy that best fits your needs. If you have any questions or comments please don’t hesitate to give us a call. We hope you enjoyed this article.