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Final Expense Life Insurance For Seniors

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According to the National Funeral Directors Association, the median cost of a funeral can be over $11,000. With no way to pay for these expenses, surviving loved ones often experience a financial burden during a time of intense grief.

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Many of us have experienced the death of a loved one and remember how stressful it was to juggle our grief, the funeral planning, and the financial obligations we had. The thought of our spouse or children going through the same experience is unbearable.

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Burial insurance for seniors is a smart and compassionate insurance solution for seniors looking to protect their loved ones from rising funeral costs. It’s typically easy to qualify because it’s issued based on answers to health questions. In many cases, you don’t need to take a medical exam.

Common Final Expense Questions

Can Final Expense Policies Have Living Benefits?

You can technically use final expense policies to cover living benefits, but with its smaller payout, it may be a bit more limited than other plans—but not impossible.

How Final Expense Payouts Work

All life insurance policies provide a death benefit, or payout when the policyholder is no longer living. This money will then go towards the policyholder’s desired expenses and beneficiaries.

On average, final expense death benefits range anywhere from $5,000 to $40,000.

What You Can Use the Payout For

There are virtually no limitations a plan can enforce on what you can put this money towards. However, the amount you set for the payout will greatly determine what you can really use it for. These can potentially include:

  • Funeral Expenses
  • Medical Bills
  • Financial Support for Loved Ones
  • Personal Loans
  • Inheritance
  • Business Partner Shares
  • Estate Taxes, and More
Limitations of the Final Expense Death Benefit

However, for all of these potential uses, you must divide your payout of $5,000-$40,000 to each of them. So, you must choose what and how much to contribute towards it. 

While it wasn’t listed above, living expenses are another potential use of the final expense payout. When you as the policyholder have passed on, you may leave people behind who need help covering their living expenses until they can get back on their feet.

You can absolutely set aside funds for this purpose, but it may be extremely limited based on how much they need and what else you want to use it for.

Say, for instance, you want to use it for your funeral expenses and your loved one’s living expenses. If the average funeral costs around $6,000, you’ll need a payout that’s more than $6,000. Then, let’s say you want to set aside another $6,000 for living expenses. You’ll need at least a $12,000 death benefit, and even more if you want to use it for other things as well.

You can also use your final expense policy for your own living expenses. However, this may be risky. Once you start tapping into the death benefit, your monthly payments won’t change, and the payout won’t increase, only decrease.

Alternatives for Living Benefits

If you want to use your life insurance policy for your own living expenses, final expense may not be your best option. Term life policies are a bit bigger and easier to use for this purpose. Term life, however, is more difficult to qualify for than final expense. And, this doesn’t mean that final expense is a worse option—it’s still incredibly beneficial.

How Many Quotes Should I Get?

With the services we provide we always recommend getting 2 – 4 quotes. The proper insurance carriers out there don’t advertise there prices online, so you’ll need to get with an agent to do some shopping. At Kovach Consulting Group, we feel like comparing two to four quotes is a perfect start to give you a general idea on the cost.

Depending on your age, health conditions, the amount your looking for and if you want any living benefits, we at Kovach Consulting Group have our “go-to” carriers. They will be the first ones because we know the will give you the best coverage for your unique condition at the most competitive price.

For Example: There is a carrier that will allow male and female smokers to get a non-smokers rate for the first three years. THEY ARE THE ONLY ONE… Giving our client a chance to quit smoking allowing to reap the rewards as if they never picked up the habit. And down the road, if they decide to keep smoking or unable to quit in the time allotted, then we can have a conversation around that in year 3. But most importantly the coverage is in place and a family is protected…

How Much Coverage Should You Buy?

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There is no one size fits all when it comes your specific situation. So, here are some guidelines to help your better prepare yourself for a conversation with us.

Step 1: Calculate Household Expenses

If it is doable, we all would like to leave extra to our surviving spouse or children to be able to handle things after we pass. For example any remaining medical bills that will be passed on, disposing of cars, and/or homes, this includes furniture, taxes and any living expenses.

To estimate your family’s expenses, take the amount of a normal month’s expenses (include utilities, car expenses, house payments, food and transportation, insurance fees, etc.) and multiply the total by three. This will be about what your family needs to survive for a few months. A few months may not sound like a long time, but it gives them time to grieve the loss of a partner or best friend before they have to face the reality of leaving retirement to get another job or selling the home.

So, if your total monthly expenses are $3,500, then your amount for family expenses will be $10,500 ($3,500 x 3 = $10,500). 

Step 2: Consider Funeral Expenses

Funeral and burial expenses vary on the type of services you plan to have. We can predict that on average it is $10,000 – $15,000 for a burial and $4,500 to $6,500 for a cremation.

But we all know how it goes… The person in charge of your remains and getting your things in order are going to be the one taking care of everything. And unfortunately, in their time of grieving the funeral director will use this time to encourage the more expensive casket or funeral service. It is easy for someone to spend over $20,000 in a burial service.

That is why it is very important to have a plan in place. So, lets assume you have a specific plan for how things are going to happen and you can leave $12,500 for your loved ones to take care of you.

Step 3: Add to Get Total Final Expenses

Next, add the above numbers together. In this case, it’s $10,500 (family expenses) + $12,500 (funeral expenses) = $12,500. So, this $23,000 would be the minimum coverage needed to account for both of these expenses.     

Step 4: Keep Inflation in Mind

Finally, there’s an inflation factor that varies for men and women. This factor depends on your age range. For example, for men ages 63-65, the multiplier is 1.83. So, you’d multiply 1.83 by the total you had from Step 3 for the total estimated cost.

After the math is computed, the $23,500 (total needed) x 1.83 (for inflation) = $43,005.  So, for a male in between the age of 63-65 is a policy for $43,005.

Is it doable???, is it actually something that can be done? At Kovach Consulting Group, we are just as concerned about the affordability of your policy as you are. If you can’t afford it then you can’t keep it in place and that would put the stress back onto your spouse or children. We can have a realistic discussion on what you want to happen and still keep within your budget.

It’s better to leave your family pointed in a direction than to not be protected at all.

What Questions Do Seniors Have About Final Expense Insurance?

Qualifying for a final expense policy is often easier than qualifying for other types of life insurance (such as term insurance). But there are still important questions to ask, such as:

Does the policy expire?

Final expense policies don’t expire like term policies because they are a type of whole life insurance (learn how whole life insurance works). Your coverage won’t expire as long as you pay your premiums.

Do I have to take a medical exam?

In most cases, a medical exam isn’t required to qualify because the face amount is typically under $50,000. Coverage is usually issued based on the applicant’s answers to health questions on the application.

What features are included in the policy?

Depending on the life insurance company, your final expense policy may have added features such as child riders, accidental death and dismemberment, or support benefits for surviving loved ones such as funeral price shopping. Not all policies are the same, so make sure you review the policy’s benefits carefully.

How can the death benefit be used?

The hardest thing we must ever face is the death of a loved one. On top of this, surviving loved ones are often left to handle any end-of-life medical expenses and funeral costs. These expenses can add to the sense of grief and stress surviving friends and family members feel. Final expense life insurance was created to prevent this added pressure.

Even though final expense insurance focuses on covering funeral costs, the death benefit can be used for anything: medical bills, credit card debt, mortgage payments, etc. How the death benefit is spent is ultimately up to the beneficiary of the life insurance policy.

 

How Much Does Final Expense Insurance Cost?

The average final expense policy costs between $50-$90 a month and depends on your age, sex, health, coverage amount, and life insurance company you choose. If you have significant health conditions or are over the age of 70, your premium will probably be higher and may cost between $90-$250 a month (though it may be less).

Younger applicants who are in good health may qualify for rates in the $30-$50 range.

Remember, a cheaper rate usually means fewer features and benefits for surviving loved ones. A few extra dollars a month could make a big difference in the support your family receives when you’re gone.

Cost is often the #1 factor people focus on…but it’s not the most important factor! Instead of focusing on how much the policy is going to cost, look at how many expenses will be left behind and how much they’ll cost your family. Common expenses include medical bills, credit card debt, and funeral costs. We’ll cover each of these costs below.

 

Medical Bills

The current state of the healthcare industry has led to higher prescription costs, expensive medical procedures, and health insurance that doesn’t always cover consumer needs.

Of the 2.85 million people who died in the U.S. in 2019, more than eighty percent were on Medicare before they passed. A disproportionate share of Medicare spending occurs in the last year of life, covering costs related to chronic conditions, inpatient hospitalizations, and hospice care.

But government programs like Medicare and Medicaid only cover about two-thirds of healthcare spending by the elderly, according to the National Bureau of Economic Research. The report, which is based on data collected through the Medicare Current Beneficiary Survey between 1996 and 2010, found that healthcare spending for people aged 65 and over was approximately $18,424 per person, per year.

Medicare paid an average of $153 per day, per person, in 2016 to cover hospice care, in the following categories:

  • Routine home care – $193 per day for services that patients need on a day-to-day basis.
  • Continuous home care – $41 per hour for services during crises or at least eight hours a day to manage acute symptoms.
  • Inpatient respite care – $173 per day to relieve unpaid caregivers on an occasional basis for no more than five days at a time.
  • General inpatient care – $744 per day for care that cannot be provided in other settings.

Patients may still be responsible for co-payments, prescription drugs, emergency care, inpatient facilities, nursing care, and other end-of-life expenses. This leaves many people with a significant financial obligation that they can’t always afford. Final expense life insurance can help protect loved ones from the financial responsibility of any outstanding medical bills.

Debt

73% of American consumers die in debt according to research from Experian FileOne and Credit.com. The average total balance left is roughly $61,554 (including mortgages). Unfortunately, this debt doesn’t just disappear. In most cases, the estate pays off as many debts as possible before any assets are distributed to surviving family.

Here’s the average breakdown of consumer debt according to the research:

  • Student Loans = $25,391
  • Auto Loans = $17,111
  • Personal Loans = $14,793
  • Credit Card Debt = $4,531

Family members who count on the deceased’s assets to cover the final arrangements are often surprised to learn that there isn’t enough left over once all of the deceased’s bills have been paid.

Traditional life insurance is often used to leave your family enough money after you pass away and is often proportionate to the income your family would lose with your passing. Term insurance is the most common type of income replacement and can have face amounts in the millions of dollars.

Final expense life insurance is different. It’s uncommon for a final expense policy to be more than $50,000 because it focuses on paying for a very specific debt: funeral/cremation arrangements and medical bills.

Families often expect their loved one’s estate will cover the cost of the funeral or that the funeral won’t cost much. But most families don’t realize the average funeral cost can be $11,000 or more. Final expense insurance can help reduce these costs and prevent families from emotionally overspending, especially when they know there’s a designated amount available.

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