Final expense insurance: what it pays for and how to compare it
Final expense insurance, sometimes called burial insurance, is a small whole life policy designed to cover funeral costs, medical bills and other debts so family members do not have to. It is usually marketed to people aged 50 to 85.
How it works
- Coverage is small, often a few thousand to around $25,000.
- Premiums are fixed for life and the policy does not expire, as long as you keep paying.
- The payout goes to your named beneficiary, who can use it for anything, not only the funeral.
- Underwriting is either a short health questionnaire (simplified issue) or none at all (guaranteed issue).
Watch for graded benefits
Guaranteed issue policies often pay only a return of premiums plus interest if death from natural causes happens in the first two or three years. If you can answer health questions, a simplified issue policy may pay the full amount from day one.
How much do you need?
Price the funeral you actually want. The FTC advises getting written price lists from at least two funeral homes: the law requires funeral homes to provide them, and you can buy items individually rather than as a package, including a casket or urn from somewhere else. Add expected medical bills and small debts.
Compare with alternatives
- Term life insurance is far cheaper per dollar if you are healthy enough to qualify and the need is temporary.
- Savings or a payable-on-death bank account avoids premiums entirely if you can set the money aside.
- Prepaid funeral contracts lock in services with one funeral home, but protections vary by state, so ask what happens if the home closes or you move.
Before you buy
Add up premiums over the years you expect to pay. If you are likely to pay more in premiums than the policy’s face value, savings may be the better option.