Last Updated: 04/19/2018
You’ve probably heard the saying, “There are only two things that are guaranteed in life, death and taxes.” Despite this inevitable fact, as of 2016, only 44% of Americans are currently covered by life insurance.
While buying life insurance for final expense and burial coverage isn’t exactly the favored topic of conversation for the dinner table, it may be a conversation worth having. Social Security provides a one-time death benefit of only $255…mere peanuts when you consider the fact that an average funeral cost more than $10,000.
Unless you have an ample amount of money set aside to pay for your burial costs, you probably want to consider some form of affordable final expense insurance to prevent your surviving family members from becoming responsible for these expenses.
In this article, we’ve provided a breakdown of common burial expenses and few questions that you should ask your agent before buying any final expense life insurance policy. We’ve also explained the most common forms of “final expense” insurance, and we’ve provided some sample rates by age and gender to help you estimate the cost of your insurance.
Quick Article Guide:
- How Much Life Insurance Should I Buy for My Final Expenses?
- Where Should I Buy My Final Expense or Burial Policy?
- Will My Rates Ever Increase? How Much Will My Insurance Cost in 5 or 10 years?
- Does My Policy Ever Expire? When Will My Coverage End?
- Does This Policy Have a Waiting Period? When Does Full Coverage Begin?
- Should I Purchase Term Life Insurance for My Final Expenses?
- What Type of Life Insurance Should I purchase for My Final Expenses?
- Why is the Best Choice for Final Expense Protection?
- Other Uses for Guaranteed Universal Life Insurance Coverage
- What if I Have Serious Health Issues?
- Can Everyone Qualify for Final Expense Life Insurance?
- We’re Here to Help
The average cost of funeral is well over $10,000, and this figure does not include the cost of the burial site. If you already have a burial site purchased, that will help your family with the cost of your funeral, but there are some other expenses you may want to account for as well.
Below we’ve provided a breakdown of the most common fees that families encounter when coordinating a funeral:
- Casket/Vault – $2,000 to $10,000
- Services Fee – $2,000
- Facility Fee – $900
- Embalming – $700
- Flowers – $100 to $500
- Clergy Honorarium – $250
- Obituary Publishing Fees – $150
- Preparing Body for Service – $250
- Service Limo/Van – $143
- Hearse Rental – $318
- Transfer of Deceased – $310
- Memorial Service/Viewing – $600 to $650
- Gravestone – $1,000 to $3,000
- Memorial Cards/Programs – $100
- Guest Book – $100
Total Cost of Funeral and Burial Expenses: $8,921 to $19,221
Remember, this figure does not include the cost of the burial site, or preparing the burial site for the ceremony. These services typically average at least $2,000 to $4,000, depending on your location. In addition to these expenses, other funeral expenses may include: traveling, catering, and a reception lunch or dinner.
When taking these expenses into account, we often recommend purchasing a final expense policy that will provide at least $20,000 of coverage. While some people are disciplined enough to have a savings set aside to cover these expenses, others choose to purchase an affordable final expense life insurance policy instead.
Purchasing final expense insurance will allow you to spend your retirement savings guilt-free, and prevent your family members from having to contend with your burial expenses. However, it’s important to shop the market before you buy your policy because there are hundreds of “final expense” insurance policies available, but some offer much better coverage than others. Before you buy your coverage, make sure you understand exactly what you’re buying.
Before being frightened into an overpriced policy which may not provide your family with the protection they need, do your research. We always recommend working with an independent agency that represents multiple companies so they can provide you with the pros and cons of each policy.
Life insurance policies vary greatly by price and coverage and some policies are much better than others. Many companies will lure you in with a low rate, only to double the cost of your coverage every 5 years, pricing you out of your policy when you need it the most.
Be especially wary of the postcards and TV commercials which promise whole life insurance for only a dollar a month, if it seems too good to be true, it probably is. Most of our clients prefer a straightforward policy that provides lifetime coverage with payments that are guaranteed not to increase as they get older.
As an independent life insurance agency, we’re able to compare rates and policies from dozens of top-rated life insurance companies. Having access to more than 60 top-rated insurers allows us to provide our clients a wide variety of coverage options for their needs and budget.
If you’re already working with another agent, the following is a checklist of questions to ask before buying any final expense life insurance policy.
Almost every final expense insurance policy that is marketed through the mail or on TV tantalizes shoppers with “teaser rates” only to increase the cost of their coverage every year or every 5 years. Some of these policies even double in cost every five years, and in 10 years, you can expect to be paying more than four times what you were originally paying for the exact same policy.
Here’s a Real-Life Example:
New York Life offers a life insurance policy for seniors on AARP’s website and through the mail. For males aged 50 to 54, the rates for $100,000 of coverage are among the lowest in the industry, only $73.71 per month. To most shoppers, this seems like a great deal because other insurance policies, like the one we recommend from A+ rated Mutual of Omaha, charge $82.93 a month for the same amount of coverage.
However, by the time you turn 71, the rates for AARP policy have more than quadrupled to $305.25 per month! While the policy from Mutual of Omaha may have initially costed a few extra dollars a month, it would still be the same price in your 70’s, only $82.93 a month. In addition, the AARP policy will expire when you turn 80, while the policy United of Omaha offers level rates and coverage until you turn 100.
Both companies will allow you to apply online or through the mail, and neither policy requires a medical exam for approval. While saving a few dollars upfront may seem advantageous, buying a policy with fixed lifetime rates will save you a considerable amount of money in the long run.
We often receive calls from clients who’ve reached a point where they can no longer afford the AARP/New York Life policy that they purchased just 10-15 years earlier. Unfortunately, now they’re older and they have a few health issues, finding an affordable life insurance can be a challenge.
Many life insurance policies do not offer “whole life” or lifetime coverage. In fact, most life insurance policies will cancel your coverage by the time you turn 80. Americans are living longer, and with more than half the population living past the age of 80, the chance of outliving your “final expense” policy is a chance most people don’t want to take.
Yet, every year we receive hundreds of calls from potential clients in their 80’s that no longer have life insurance. We do our best to help, but buying life insurance in your 80’s is extremely difficult. Most companies stop offering coverage to clients after the age of 80, and if you’re fortunate enough to qualify for coverage, it’s usually cost prohibitive.
If you need lifetime coverage for your final expenses, purchase a policy as soon as you realize you need it. If you’re in average or better health, avoid traditional “whole life” insurance and guaranteed acceptance insurance. These policies offer limited coverage at inflated rates because they do not require a health exam for approval.
Instead, purchase a GUL that offers level rates and guaranteed coverage until age 90, 95, 100, 105, 110, or 121. You can choose the best fit depending on your lifetime expectancy, family longevity, and your budget. These policies are available to applicants in fair or better health until the age of 80, but if you lock in your rates when you’re in 50’s or 60’s your policy will be a fraction of the price.
If you are in average or better health, you do not want to buy any type life insurance policy that offers “guaranteed acceptance” with “no health questions”. These are high-priced policies that are meant to provide minimal coverage to people whose health issues prevent them from qualifying for any other type of final expense insurance.
Last month I spoke with a lady in excellent health who was willing to pay DOUBLE for her life insurance, and wait TWO YEARS for full coverage, just because she was worried about her application getting declined. While the “guaranteed acceptance” policies you see on TV are guaranteed to approve you, these polices have a two-year waiting period where you do not have full coverage.
During a policy’s waiting period, death from a health-related issue is not covered, only a death that is the result of an accident. In addition, these policies are extremely expensive compared to other lifetime policies that offer immediate coverage and larger death benefits. If you’re declined for another policy, you can always buy a “guaranteed acceptance” life insurance policy, but if you’re in average or better health, it should never be your first choice.
Although the cost is appealing, do not buy term life insurance if you’re purchasing life insurance to cover your final expenses. Term life insurance is meant to provide income replacement protection or mortgage protection, not burial expense protection. Most term policies end by the age of 80, so you do not want to risk paying into a policy that you will likely outlive.
Term life insurance does offer a “conversion” guarantee, however, which allows you to exchange (“convert”) a portion of your term policy into permanent coverage. This benefit is invaluable to people with serious health issues because you’re able to convert your term policy at the same health classification your policy was originally approved at. You don’t have to answer any health questions or complete a new health exam.
If you’ve had a serious health issue since you originally bought your term policy, and your shopping for lifetime coverage now, this may your best option for coverage. To learn more about term life policy conversions, read this article about policy conversions, or feel free to give us a call at: 855-902-6494, and we can help you determine if your existing term policy offers this benefit.
Most of our clients prefer a final expense policy with fixed monthly rates and no waiting periods to avoid surprises. Our agency works with dozens of companies that meet these criteria, and they offer fixed rates until age 100 or later. These policies are known as “whole life” insurance and they do not require a medical exam for approval. While “whole life” insurance policies are the most convenient, they’re also expensive, especially for people in good health.
If you’re willing to take a medical exam, you’ll get the lowest rates, but the minimum amount of coverage you can purchase is $25,000. The policies we recommend are called guaranteed universal life insurance, and they’re also commonly referred to as a “term-to-100” or lifetime term policy. They do not require an investment, and they work just like a traditional term life policy with level rates and fixed coverage until the age of your choosing.
If you don’t want this much coverage, or if you don’t want to take an exam, the options and each company offers vary in cost depending on your gender and age. Most policies are sold in $5,000 increments, beginning at $5,000 and offering a maximum of $50,000. Tobacco use is usually not factored in these smaller death benefit policies, so if you’re a smoker, this is a bonus.
However, if you’re not a smoker, this is one of the many reasons why these policies tend to be more expensive than policies that require an exam. Whole life insurance companies charge all their customers the same price based on their age and gender. If you’re a non-smoker in average health for your age, you’ll save money by taking a free in-home exam.
While these policies do not require a medical exam, they will ask you a few health questions and may they screen your medical records to determine your mortality risk. If you’re in average or better health, we can arrange for a free in-home medical exam, likely qualifying you for double the life insurance coverage at around the same monthly cost. If you’re not willing to answer any health questions or to take an exam, you’ll have to purchase a “guaranteed acceptance” policy with a two-year waiting period.
Life insurance companies want to know who they are insuring. If the insurance company cannot evaluate your current health by reviewing results of a medical exam, they charge a higher rate to protect themselves. Another reason why a $25,000 no-exam lifetime policy is roughly the same price as a $50,000 lifetime policy that requires a medical exam.
If you’re shopping for $25,000 of coverage or more, Guaranteed Universal Life (“GUL”) is probably your best option for final expense protection. These policies carry no risk, and they offer guaranteed lifetime coverage at the most affordable rates.
GUL policies differ from the old “cash value” Universal Life insurance policies that we always recommend avoiding. Life insurance is designed to provide financial protection, it is not good vehicle for investing. Cash value policies rarely perform as advertised, and any gains are usually consumed by an adjustable cost of insurance (COI), and expensive management fees before they are realized.
Guaranteed Universal Life insurance can be described as a hybrid of term life and whole life. It combines the best features of term and whole life insurance by offering affordable lifetime coverage. Whereas term insurance offers fixed rates for a set number of years, a GUL policy provides fixed rates until a specific age, usually 90 or later. Here’s a cost comparison of GUL insurance to traditional whole life insurance:
Whole Life vs Guaranteed Universal Life Insurance – $50,000 to Age 100 for a Male
|Current Age||Whole Life||Guaranteed Universal Life|
*Displayed monthly rates are for individuals in excellent health, and are provided for illustrative purposes only. Rates are accurate as of 09/18/2017.
Whole Life vs Guaranteed Universal Life Insurance – $50,000 to Age 100 for a Female
|Current Age||Whole Life||Guaranteed Universal Life|
*Displayed monthly rates are for individuals in excellent health, and are provided for illustrative purposes only. Rates are accurate as of 09/18/2017.
Along with final expenses, GUL policies can be ideal for high wealth families who heirs will be facing estate taxes. Guaranteed universal life insurance policies are a common choice for estate attorneys, bankers, and financial planners because they are less expensive than other types of “permanent” life insurance, and most companies will offer at least $5,000,000 of coverage.
In addition to finding an irrevocable life insurance trust to avoid estate taxes, guaranteed universal life insurance can also be used to leave a tax-free inheritance, fund a buy-sell agreement, fund a special needs trust, or maximize a pension. To learn more, please read our article, “What is Guaranteed Universal Life Insurance?”
If you have serious health issues, or if you have been declined for life insurance in the past, please give us a call before you settle on an insurance policy. We are experts at matching our clients with the companies that offer the most leniency for their specific health issues, and we can find your best options. Toll-free: 855-902-6494.
We specialize at finding affordable coverage options for clients who are a “high risk” for life insurance, and over our 50+ years of collective experience we’ve helped thousands of clients with health issues. Some of our clients are surprised to learn that issues like: prostate cancer, diabetes, or history of heart attacks won’t prevent them from qualifying for affordable “fully underwritten” life insurance!
If your health prevents you from qualifying for a fully-underwritten policy with any of the 63 top-rated life insurance companies we work with, a couple forms of whole life insurance may be available. If you’re permanently disabled, currently undergoing treatments for most forms of cancer, kidney failure, or if you have been diagnosed with any type of “life threatening” health issue you’ll likely be limited to the following three options:
1. Guaranteed Issue/Guaranteed Approval Insurance
These are the “no health questions asked” policies that you often see advertised on TV and in the mail. For most companies, the minimum application age is 50 and maximum age is 85. Accidental death coverage begins immediately, and after a 2-year waiting period, death from any type of medical condition is also covered.
If you were to pass away during the first two years of your policy, the life insurance companies will refund your premiums and 10% interest to the beneficiary that is listed on your policy. These policies are available to almost anyone except: applicants who confined to a nursing home, assisted living, hospice, or a sanitarium.
2. Graded Life Insurance
Graded life insurance policies pay a percentage of the policy’s death benefit if the insured dies within the policy’s two to three year waiting period. These policies offer fixed premiums that don’t typically increase as you age, and most also have few health restrictions that would cause your application to get declined.
These policies generally provide more coverage per dollar than a “guaranteed issue” policy, but they also require their applicants to be in slightly better health. Ask your insurance agent to compare the health requirements, benefits, and cost of each policy to determine your best option.
Self-Insurance is insuring yourself by saving your own money each month, instead of buying a life insurance policy. If you’re over the age of 80, this will probably be your best bet because most $25,000 final expenses policies at this age are at least $350.00 to $500.00 per month.
By putting the money that you would have paid to the life insurance company, you’re building a savings account that can be used to cover the cost of your final expenses when you pass away. You also have the flexibility to adjust your contributions as needed if your income or expenses change.
Although self-insuring can be a better option than policies with 2 year waiting periods, self-insurance take a lot of discipline. If you question your ability to pay your “final expense” savings account like your other monthly bills, then it’s best to purchase a graded life policy or a guaranteed life policy.
We want to help everyone that calls us, but in some situations, we simply can’t. We often receive calls from people looking to purchase life insurance on their elderly parents, and usually we are unable to help them. As much as we’d love to help, it’s important to remember that life insurance is a legal contract, and every company is regulated by the State and Federal Government’s insurance commission.
Simply put, you cannot purchase life insurance for someone else, unless they are directly involved in the process. Whomever is being insured must be able to sign their own application and be consciously aware of the fact that they are purchasing life insurance. If you want to facilitate the process and pay for the policy, it’s perfectly acceptable, if the person being insured is aware of the life insurance and provides their consent.
Therefore, life insurance is not available to people who are confined to a nursing home, assisted living, hospice, or in a sanitarium, you also can’t qualify if you have a history of treatment for dementia or Alzheimer’s. Power of attorney is not acceptable, and you must be a U.S. citizen or legal resident with proper documentation. Anyone in these situations must rely on self-insurance for final expenses and burial costs.
You’re making the right move by doing some research before shopping for a life insurance policy to cover your final expenses. Talking about the issue and being proactive is the best gift that you can give your loved ones after passing away. It’s also important to read the fine print and know exactly what you’re buying so that you know that you don’t end up wasting your money.
At Term Life Advice, our independent agency is owner-operated and our agents are ethical, knowledgeable, and experienced. As a no-cost broker, we offer a complimentary service of comparatively shopping your options for life insurance to match you with the company that is the best fit for your needs and health profile.
Our agents offer at least 5 to 10 years of life insurance experience, and we work with over 60 top-rated companies to make sure our clients always get the best deal from a reliable insurer. By asking you a few health questions about your health and lifestyle, our agents can compare your options and provide you with accurate life insurance quotes. Call us today, Toll-Free at: 855-902-6494.
If you’re not ready to talk to someone now, you can also request a free instant “lifetime” quote below to compare rates from dozens of companies in less than a minute.