Although thinking about the end of your life is unpleasant, it’s important to make plans to ensure you leave the legacy you want for your family. In addition to writing a will, it’s worth investing in burial and final expense insurance. This will remove one more financial burden for your family and give you more control over your funeral or celebration of life ceremony.
What Is Burial and Final Expense Insurance?
Burial and final expense insurance is a form of life insurance that specifically covers costs related to your final arrangements. This may include:
- Funeral home services
- Obituary notices
- The casket
- Transportation
- Burial expenses, including the plot and the opening and closing of the grave
- A headstone
- Cremation
- An urn
- Flowers
Usually, a policy accumulates a cash value while it’s active and then provides the beneficiary with anywhere from $5,000 to $75,000.
It’s important note that burial insurance differs from pre-need funeral insurance. With a pre-need policy, the funds go to the funeral home. In contrast, with a burial and final expenses policy, funds go to the family members. This means that any amount left over is available for your loved ones to use for other expenses, such as medical bills, credit card debt, and mortgage payments.
Riders for Burial Insurance
Some insurers also offer policy riders that you can add to your burial insurance. These may include:
- An accelerated death benefit — Pays a percentage of the death benefit if the policyholder is diagnosed with a terminal illness.
- Benefits according to the cause of death — Provides an additional death benefit depending on the cause of death. In some policies, this applies for death due to natural causes; in others, accidents.
- Children’s term insurance — Provides additional coverage for a child, grandchild, or great grandchild.
How Do Premiums for Final Expense Insurance Work?
It’s important to be aware that there are a few forms of premiums for burial insurance policies. These are:
- Capped premiums — You only need to pay premiums until you reach a certain age, after which point you still have the policy but don’t need to pay anything.
- Leveled premiums — Rates are set according to your age, your sex, and the size of the policy. They stay the same throughout the duration of the policy.
- Stepped premiums — Rates are again set according to your age, your sex, and the size of the policy. However, they change every year, increasing as you become older.
Who Needs Final Expense Insurance?
Stand-alone burial insurance is ideal if you’re only interested in the death benefit of life insurance. It’s a good idea to have a policy if you don’t have another life insurance policy. Plus, you may find final expense insurance more appealing because it’s easier to qualify for than most other types of life insurance. For instance, there are few (if any) health questions and often no medical exam required.
The main advantage of having final expense insurance is it will provide your loved ones with tax-free funds to pay for the costs related to your funeral. In addition, these funds will be available to your family immediately. According to the National Funeral Directors Association, the median cost of a funeral in 2021 was $7,848 for a burial and $6,970 for a cremation. Having funds specifically designated to this expense is helpful if you know your family members may struggle to come up with such an amount, especially since it often takes time for loved ones to receive their inheritance.
Final Expense Life Insurance Carriers
Although not all life insurance carriers sell burial insurance, there are several final expense life insurance carriers. This should mean you’re able to find a policy that meets your specific needs, including if you need low-cost coverage.
AARP from New York Life
The burial insurance from AARP is underwritten by New York Life, which has a rating of A++ from AM Best. It is available for policyholders between the ages of 50 and 80 (up to 75 in New York), although it is not available in every state. To qualify, you’ll need to be an AARP member or the spouse of a member. Coverage is between $5,000 and $25,000, but there’s also a death benefit of 110% of the premiums paid if death is due to natural causes and occurs in the first two policy years.
State Farm
Another insurer with a rating of A++ is State Farm. Its burial insurance is available in all states except Massachusetts and Rhode Island. In some states, only $10,000 is available, whereas coverage of up to $15,000 is available in other states. To be eligible, you must be aged 45 to 80 (or 50 to 75 in New York). You’ll need to work with an agent and answer some questions about your health to submit an application.
Mutual of Omaha
For a larger coverage amount, consider Mutual of Omaha. The insurer offers burial insurance with up to $50,000 in coverage if you answer some health questions and up to $25,000 without any underwriting. In either case, enrollees must be between the age of 45 and 85. The death benefit is reduced if the policyholder dies of natural causes within the first two years, after which the policy pays the full benefit for any cause of death.
Fidelity Life
Fidelity Life has a rating of A- from AM Best. The insurer offers two final expense polices: RAPIDecision Final Expense and RAPIDecision Guaranteed Issue. The first requires a health screening and provides up to $40,000 in coverage. The second does not require applicants to answer any health-related questions and provides death benefits of up to $25,000. For both, you need to be between the age of 50 and 85. Although you can receive a quote online within seconds, you’ll need to talk to an agent to complete your application.
American Family Insurance
The senior whole life insurance from American Family Insurance is a good option for a final expense policy. To take out a policy, you need to be between the age of 50 and 80 and live in one of the 24 states where the policy is available (Arizona, Colorado, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Nevada, North Carolina, North Dakota, Ohio, Oregon, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, or Wisconsin). Coverage is on the low end, ranging from $10,000 to $15,000. It’s also possible to bundle the policy with other insurance products from the carrier to save money.
Ethos
A policy available just for older seniors is the final expense insurance from Ethos. The good thing is you’re guaranteed to receive approval (without the need for a medical exam) if you’re between the age of 65 and 85 and live anywhere but New York. The application process is fully online and takes just five minutes. You’ll receive coverage of between $10,000 and $25,000 as soon as you’ve paid the first premium. After you turn 100, you’ll stop paying premiums but retain the coverage.
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