Category Archives: Insurance

What is Final Expense Insurance and How Much do I Need?

As the name implies, Final Expense Insurance is an insurance policy that is designed to cover the final expenses of the named insured when they pass away. This insurance policy, which is commonly whole life insurance, is the funding vehicle that will provide the money your beneficiary will need to take care of your final expenses and eliminate passing these expenses on to surviving loved ones.

Is it Whole Life or Term Insurance?

Although term insurance is less expensive than whole life insurance, the fact that it isn’t permanent insurance makes it a less than ideal product for a legitimate final expense insurance policy. There are certain circumstances, however, when term life insurance makes a lot of sense for final expense insurance. For example, if you purchased a large term policy at age 40 and then you were subsequently diagnosed with a terminal illness that will likely result in your death before the end of your term policy, then it makes better financial sense.

Many individuals have multiple life insurance policies, and some of them designate each policy for a specific purpose such as paying off the mortgage, replacing income, paying off all your debt, or leaving a financial legacy to your children. Without a final expense policy in place, these other policy death benefits would be substantially reduced and thus likely fall well short of your intended purpose.

If Term Life Insurance is so Cheap, Why should I Use Whole Life?

Yes, term insurance would be the least expensive product, but in most cases, it will not be the best choice. Let’s consider the following scenario to illustrate why.

Let’s use a 45-year-old male nonsmoker and a $30,000 Term policy for 30 years.

The monthly premium would be about $24 or $267 per year. At age 75, when the policy expires, the insured would have no life insurance and will have paid $8,010 for the insurance coverage. If the insured dies just one week after the policy expired, there would be no death benefit for the beneficiary and thus a loss of over $8,000 on the transaction.

Using a level benefit whole life policy, the same amount of insurance would cost about $60 per month or $713 per year. If the insured dies at age 76, there would be a $30,000 death benefit available for the beneficiary and the insured would have paid about $22,000 for the insurance coverage. Plus, since the whole life policy accumulates cash value over time, the insured could have accessed it tax-free during a financial emergency.

It’s also important to note that any severe or chronic health conditions will more than like disqualify you from being able to purchase term insurance.

What about the Guarantees?

Whole life insurance is all about guarantees:

Whole Life insurance is permanent insurance coverage and will stay in force for as long as the policyholder is alive as long as the periodic premium is paid. The insured cannot cancel your policy for any reason other than non-payment.

Once the policy is issued, the periodic premium will never go up. This means if you become terminally ill or as you get older, the insurance company cannot raise your premium.

Your whole life insurance policy builds cash value over time. This cash value can be accessed using tax-free policy loans for any reason without a credit check. You can elect to pay back the loan or not pay it back; it’s your choice. Any loan balance will simply be deducted from the death benefit when you pass away.

Your whole life policy is an asset that you can surrender in exchange for the available cash value, or you can sell your policy to a third party.

How much Final Expense Insurance Should I Buy?

On a scale of one to ten of frequently asked questions about Final Expense Insurance, this question is typically in the top three. How much insurance you buy, your death benefit depends on your final wishes for a funeral or cremation service and other final expenses that are typically outstanding.

The cost of a moderately priced funeral can be as much as $15,000 depending on the state you live in, and a cremation service is generally about 40 percent of that. There are several online resource sites that can help with the planning and pricing of a funeral based on where you live.

According to Parting.Com, a well-known resource for end-of-life planning, the average cost of a traditional funeral is:

“Funeral prices, like everything else, have increased with inflation. Today, the average North American traditional funeral costs between $7,000 and $10,000.  This price range includes the services at the funeral home, burial in a cemetery, and the installation of a headstone.  While cremation is gaining in popularity, the traditional funeral is still the most popular manner of disposing of the deceased. Here is a reasonable “ballpark” estimate of the main funeral costs.It’s important to notes that funeral prices vary considerably between funeral homes and geographic areas of the country,

fee for the funeral director’s services: $1,500
cost for a casket: $2,300
embalming: $500
cost for using the funeral home for the actual funeral service: $500
cost of a grave site: $1,000
cost to dig the grave: $600
cost of a grave liner or outer burial container: $1,000
cost of a headstone: $1,500

In this example, total costs would approximate $9,000….and that’s just for the “main” items.  There could be additional charges for things like placing the obituary in the newspaper and buying flowers.” Read More…

Plan your own Funeral and pay for it with Final Expense Insurance

You can really show your loved ones some love by pre-planning your funeral and then paying for it using final expense insurance. Taking this action in advance will significantly relieve the stress associated with losing a loved one and bring peace of mind to your family and friends. Should you decide to plan your funeral in advance, be sure and discuss it with your intended beneficiary so he or she will understand your final wishes.


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Why Choose Joint Life Insurance?

A joint life insurance policy is an alternative for couples who would like to provide for each other if one of them passes away. Life insurance for couples and partners is an important component of financially supporting your spouse or partner, and buying a joint life insurance policy can be a straightforward, affordable, and practical way to meet the needs of both individuals. Before you buy, identify your options and locate the very best policy for you and your spouse.

A joint term life insurance policy is a preferred way to cover two individuals on one life insurance policy. The policy provides a level death benefit for two people for only one premium. It enables the owner of the insurance policy to have the ability to name each other as beneficiaries. The insurance policy will function just like a term life insurance policy because it will last a specific number of years and the whole premium payment will cover the death benefit amount. There are several advantages to term life that make a joint term policy an appealing option for you and your spouse or partner.

The Options: First to Die and Second to Die

First to die life insurance policies pay out the death benefit solely on the first named insured that dies. Consequently, if a husband and wife were covered under this kind of insurance policy, using a death benefit of $500,000 and the husband passes away first, the spouse would collect the death benefit of $500,000.

The insurance policy would then be exhausted. This might also be an ideal mortgage life insurance plan because when the first dies, the death benefit could pay off the mortgage balance allowing the remaining insured to live mortgage free in the family home.

Second to die life insurance policies, also called survivorship policies, will pay the death benefit on the second to die. In the scenario previously mentioned where the husband died first, the insurance policy would not have paid out until the spouse died leaving the death benefit to their particular named beneficiary or contingent beneficiary if applicable. Second to die life insurance also provides coverage for two or more people for one premium.

Because the death benefit is not paid out until the last insured passes away, the life expectancy for the policy is based on a lengthier life expectancy that allows for a lower cost. Also known as survivorship policies, these policies are popular for many circumstances. Frequently, husbands and wives or non-married partners who are retired and do not depend on each other for money will purchase a survivorship insurance policy to assist their children with estate tax liability. They are also purchased by business partnerships where after the last partner passes away, it is used to pay any kind of business expenses.

Monthly premiums are typically lower with joint life insurance policies than with purchasing separate insurance policies. Not all life insurance companies offer joint life insurance. Look for companies that carry this kind of policy that enjoy an excellent rating from A.M. Best rating services.

Always check the Free Advice insurance company rating site and stay with insurance companies that have an A to A++ rating. Additional insurance coverage may be necessary in some cases. If you have first-to-die insurance coverage, the survivor may need to purchase an additional policy just after the first death to cover remaining expenses. If you believe that might be your situation, ask your insurance agent about a small insurance policy that will cover each individual and buy that right now. It will be simply more expensive if you put it off.

Health differences or a large difference in age between the insured parties will typically mean the younger, healthier insured paying more for insurance coverage than he or she would under a traditional individual policy. Consider all of your options. Always remember, on the first to die, the younger person will then have to get additional insurance at an older age.

Having Joint Life Insurance and getting Divorced

Bear in mind, insuring two lives is less expensive than what it would cost to insure both individuals separately. Nevertheless, it can become a difficult situation if the married couple divorces. Now you have a joint policy on your ex-husband or ex-wife! In the situation where there are children involved, it may be good to talk about setting up a trust where the insurance proceeds can be designated for the children in years to come.

If the two individuals determine that continuing the joint policy might not be in their best interest, both insureds will then be looking for additional insurance at an older age and possibly not at outstanding health, which could possibly lead to an increase in premium payments.

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Final Expense Insurance Explained

Final expense insurance is specifically designed to cover all the bills, debts, and expenses that will be left for your loved ones upon your passing. These costs can be quite varied and be anything from funeral cost and burial expenses to medical bills and final debts. Final expense insurance is also known in some circles as burial insurance. Even the most basic funeral can cost your family thousands of dollars. All of the nuances of life insurance can get quite tricky. Let’s go over the main points that you should keep in mind when shopping for life insurance and  make sure we get final expense insurance explained.

The Basics

Final expense life insurance is not the same as “insuring your life.” Insuring your life means that upon your passing, you leave funds for your family that take the place of your income that has been lost. Term and permanent life insurance place a value on your wages as of now and for the rest of your life in order to fill this need.

Funeral insurance, however, is different. The only factor taken into account for the face amount of the policy is the expense of the insured’s desired funeral and other final expenses like outstanding nursing home bills. Many other forms of life insurance can reach face amount values into the millions of dollars; final expense insurance policies rarely go above $30,000.

Why would I need Final Expense Insurance?

There are many different reasons a person would need final expense life insurance. If a person already has term and or whole life insurance policy, then final expense serves a very specific purpose. A final expense policy can be the policy that helps your loved ones pay for final expenses, while your term or whole life policy can afford them a lifestyle in light of your missing income. However, if you have a term life insurance policy and you happen to outlive the policy term, things are quite different. In that case, you may want to consider final expense insurance as a solid backup.

Another scenario could be that your family has access to lots of liquid assets that will aid them once you pass. In this case, you could undergo a process called “self-insurance.” “Self-insurance” is a term that can appear complicated at first glance; however it is much more simple than it seems. To self-insure simply means that upon your passing, the money that you have accumulated will be used for all final expenses and needs.

Would your family be able to self-insure to take care of your final expenses? The average funeral cost $10,000. One thing to keep in mind is whether or not you would like the food services catered after the service. Perhaps you would like your family to take a trip abroad to scatter your ashes in a designated location. It is possible that you would leave a lot of expenses behind. If any of these sound like things that could be of interest to you, then final expense insurance is something you should look into. Another thing to keep in mind for anyone hoping to utilize the lump sum death benefit from Social Security is that it only pays $250 per individual. This is nowhere near enough for any type of burial.

How Much will it Cost?

How much you will pay for your final expense insurance policy will be dictated by your age. Unfortunately, as time passes and you get older, the premium you will pay for your policy will increase. This happens because the older the insured is, the insurance company is closer to having to pay out a death benefit. If you purchase final expense insurance at the age of 45, it will be significantly less expensive than if you purchase the same policy at the age of 75.

Why not just Prepay My Funeral?

Prepaying for your funeral expenses is possible, and many people do this. There are pros and cons that come along with this approach. One of the biggest benefits to prepaying for your funeral is that you have the ability to personalize everything. You also have the ability to reach out to funeral directors and determine which ones you prefer. You have the ability to pick out the perfect casket, and the make a great choice on picking a plot in the cemetery. Most importantly, pre-paying will likely prompt you to initiate a conversation with your loved ones about the choices you have made. This may give both parties more peace of mind in the long run.

States have varying guidelines on funeral pre-payment. These guidelines work to prevent you from paying unscrupulous folks who can take your money and run. It helps protect you or your family from overpaying on top of what you pre-pay. Before you pre-pay, check your state guidelines for how the money will be held until your death.

Make sure that you fully understand the details in the insurance plan you purchase. Be sure to determine whether or not you have the ability to lock in your rate. By doing this, your family will not be stuck with a much higher rate later. When pre-paying for your services, be sure to keep all the proper documentation to prove what has taken place. By maintaining the proper documentation, this gives you and your family the proper peace of mind that things will be taken care of properly.

There are disadvantages of pre-payment for a funeral. One of the biggest problems is that it is less flexible than burial insurance. If you decide to change your funeral arrangements or you decide to move, you and your family may not receive the money back that was already paid. Another negative possibility is that the funeral home could potentially go out of business altogether and there will be no means of retrieving those funds. Final expense insurance has the benefit of providing your surviving relatives with a payout that can be used in anyway and anywhere they see fit. In this scenario, you have much less control; however, your family has much more flexibility in what they choose to do.

The Bottom Line

If you would like your final wishes documented but do not want to commit to any particular funeral parlor, it is possible for you to combine burial insurance with documentation that clearly states your final preferences. You should always have a will, and this document should be kept in the same location for ease of access. This documentation would detail things such as whether you prefer being buried or cremated, and whether or not you prefer an open casket ceremony or a closed casket ceremony.

You may choose to opt for a life insurance policy that will provide for your family after you pass away. You may choose to purchase a dedicated final expense life insurance policy simply to cover burial costs. You may even decide to pre-pay for your funeral expenses. Regardless of your decision, all of these will put you and your loved ones in a much better position to take care of your final wishes. Putting in the effort to deliberate and create documentation to support your end-of-life wishes could be slightly uncomfortable now; however, it will make a world of difference once your time has come and your loved ones are left to grieve and fulfill your wishes.


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