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Your Guide to Final Expense Life Insurance
There are numerous reasons as to why people may purchase life insurance. Some people will buy insurance in order to pay off their debt, to pay taxes on the estate, or to replace the income of the breadwinner in the event of their death.
However, in almost all of these cases, funds are required to pay the deceased’s final expenses.
These final expenses will most likely include the funeral cost and also the expenses that are related to this. The costs of a funeral can really start to add up when you realize that you will need to pay for a casket, a headstone, a burial plot, the service and other such things.
Generally, when there is a funeral service service, these costs will need to be paid. But many families may not have the money to pay and are then obliged to put it on credit and create debt for themselves.
Final expense life insurance has been created though to cover these costs. Let’s take a look and find out exactly what this type of life insurance is, how it works, and how you can apply yourself.
Final Expense Life Insurance Explained
So what is final expense life insurance? This is a life insurance coverage type that is generally sought out and purchased by seniors. The emphasis of this insurance is on the ability to pay for a funeral, a burial plot, a burial, and other associated costs.
You are able to get a final expense policy in two different forms.
The first of these is a term policy that will only provide a death benefit. These will not have a cash value build up.
A permanent plan offers insurance coverage with a cash value component. The money that is accumulated in this policy will not have any tax on it.
There is then no tax that has to be paid whilst the funds grow until it is time to make a withdrawal. The policyholder is also able to draw funds from the policy if they need extra liquid cash. Any loan that has not been paid at the time of the insureds death will count against the amount of the death benefit.
The death benefit can range from $10,000 to $25,000. The coverage amount is small because a final expense life insurance is not geared up to pay off debts or any estate taxes and is used for pirmary costs. The proceeds from the death benefit are income tax free.
There are many plans offering final expense life insurance for seniors that will cover the insured up to the age of 100. As an applicant for this type of coverage you will not be required to have any underwriting requirements.
There are some cases where final expense life insurance policies are guaranteed. This means that you will not have to go through any medical exam so that you are approved for the coverage. On the other hand, the policy might be referred to as a simplified issue. You will then need to answer some questions about your health, but there will be no medical exam.
Graded benefits might be used by insurers. In the case of graded benefits, If the insured dies within the first two years of the policy, the listed beneficiary will only receive part of the death benefit. This is to protect the insurance company.
Once the plan has been enforced for a specific number of years then the beneficiary is able to receive the full death benefit with the insured dies. This is not to be confused with burial insurance, which is for those generally up to 85 years old.
Final expense life insurance is able to give many seniors the chance to have financial protection when they have been denied for other types of coverage. The premiums on final expense life insurance are quite high though because of their guaranteed or simplified status.
Who should buy a Final Expense Life Insurance Policy?
People of all ages are able to buy final expense life insurance, but they are more geared towards the elderly. A final expense policy can then be a good alternative to the more traditional types of coverage, especially if a senior has been declined insurance for the other types.
Combining Insurance with Other Plans
With final expense life insurance, some may opt to have a funeral that has already been arranged may with a specific funeral home. By doing this, the beneficiary can be named as the funeral home. The payment from the final expense life insurance will then go directly to the paying of the individual’s funeral. Funeral directors may carry out the funeral as agreed upon.
These plans can then be a good alternative for individuals that are looking for a simple way to pay for their own funeral as well as the associated costs without the need of dipping into estate assets, savings or other inheritances that have been marked for loved ones.
What to take into account Before Purchasing a Final Expense Life Insurance Policy
Before you make the decision to buy final expense life insurance there are numerous things to take into consideration.
The first aspect to consider is that you will need to decide on is the coverage type that you will need. That is should the coverage be term policy or should it be a permanent policy.
Once you have decided on the type of policy that you need, you will need to consider the amount of death benefit. You will need to estimate the final expenses by adding up the costs of the funeral, the burial plot, the headstone, or the price of cremation and other related costs. You can get an idea of these expenses by calling a funeral home or speaking to a funeral director.
After this, you will need to review the strength and the reputation of the insurance company that will be underwriting the final expense life insurance. You are able to find reviews of insurance companies and get a final expense insurance quote online.
Getting the Best Rates
Getting the best rates for final expense life insurance will depend on different factors. You will be able to keep your rates low by:
- Shopping Around – when you shop for insurance it is best to use a company that is able to access multiple insurers. You are then able to get information about the policy as well as quotes for the premiums from various insurance companies. The rates for this type of coverage are able to vary especially across the different life insurance companies. It is best to compare the coverage and the premiums that are on offer to you, so that you can make the best decision.
- The Payment Plan – most of the plans will be paid on a month-to-month basis. However, you may find that you can pay on a yearly basis and will receive a small discount for doing so. Annual plans are less common, but it may be worth asking your insurance representative if they offer that those types of payment plans.
- Reviews – you will find that many insurance companies have reviews posted from previous customers. You should read these reviews and find others so that you can select an insurance company that the experience you are looking for and a good reputation.
- Plan your Funeral – you are able to save funeral and burial expenses by planning your own funeral. When you plan your own funeral you are able to choose how much to spend and are able to buy the final expense life insurance based on this.
- Your Health – you will need a clear knowledge of your current and past health. Most insurers will go about five years back. If you suffer from a serious health condition then your only option might be guaranteed issue life insurance.
If you are ready to get final expense life insurance then you are able to go online and find a company that will gather the quotes for you. These companies work with reputable insurance companies so that they are able to bring you the best offers with the best coverage.
It is important to go through each policy to see what the coverage is and the premium you are paying. Getting quotes online is a time saving exercise as you are able to compare the plans side by side.
If you have any questions about the insurance policy then you should ask a reputable insurance company. It is important that you ask all the questions that you need to so that you have a better understanding of the final expense life insurance policy.
Remember that you are able to get final expense life insurance as a guarantee, so no matter what ailments you have or your age you are able to get the coverage that you need. This coverage could become invaluable to your family as they will have a way to pay for your funeral.
You are able to plan and pay for your own funeral with final expense life insurance policies so that your loved ones do not have to foot the bill and have one more thing to worry about after your passing.