Final expense insurance: how much it costs and who it's for

Most people who ask us about final expense coverage have the same goal: they don't want their kids or spouse scrambling to cover a funeral. The right policy does that for a predictable premium. The wrong one can cost more than it needs to, or not pay the full amount when your family needs it. Here is how to tell the difference.

What is final expense insurance?

Final expense insurance, sometimes called burial insurance, is a type of whole life insurance with a small face amount. Like any whole life policy, it's designed to last for your entire life, with premiums that generally stay level. The death benefit goes to your beneficiary, who can use it for anything: funeral costs, medical bills, credit cards, or simply to give the family breathing room.

It's different from a prepaid funeral plan, which pays a specific funeral home for services arranged in advance. A final expense policy pays your beneficiary in cash, so your family decides how to use it.

Because the face amount is small, the cost per $1,000 of coverage is often higher than on a large policy. That's the trade-off for easier approval and lifelong coverage.

How much coverage do people usually buy?

Final expense policies are sized to cover end-of-life costs, not to replace years of income. The minimum and maximum amounts you can buy depend on the carrier, your age and the type of policy, so the right number starts with your own costs.

To pick an amount, add up what you want the policy to handle:

• Funeral or cremation: ask a local funeral home for its price list. The FTC says the law requires funeral homes to give you written price lists for products and services.
• Burial costs: cemetery plot, opening and closing, headstone or marker.
• Final bills: medical costs not covered by insurance, credit cards, a last month's rent.
• Minus what you already have: savings set aside, existing life insurance, or a prepaid plan.

Our life insurance calculator can help you estimate a number before you talk to anyone.

What affects the cost of final expense insurance?

We don't publish sample prices, because a quote that isn't built on your age and health isn't useful. The Texas Department of Insurance says insurers consider your age, gender, medical condition, tobacco use, hobbies and occupation when setting a premium. Texas Department of Insurance: life insurance guide. For final expense, the factors that move the price most are:

• Age when you buy. Premiums are based on your age at purchase. Buying sooner usually means a lower level premium.
• Health. Your answers to health questions decide whether you qualify for a policy with full coverage from day one.
• Tobacco use. Smokers and tobacco users generally pay more.
• Face amount. More coverage costs more.
• Policy type. Guaranteed issue usually costs more for the same coverage than simplified issue, because the insurer takes on unknown health risk.
• Carrier. Each company prices differently. That's why comparing carriers matters.

Simplified issue vs guaranteed issue: what's the difference?

What is a graded death benefit?

A graded death benefit means the policy pays a reduced amount if you die from natural causes during the first few years. According to the Florida Department of Financial Services, with graded benefit whole life, during the first few years the death benefit equals the premiums paid, and after that period it increases to its full amount. Florida DFS: life insurance overview. New York's Department of Financial Services describes the limited period as generally the first two or three policy years.

Exactly what the policy pays during the waiting period, and whether any causes of death are treated differently, varies by carrier, so read the policy before you buy. The key point: if you can qualify for a simplified issue policy, you usually avoid the waiting period entirely. Don't settle for guaranteed issue before checking.

Final expense or term life: which fits you?

Term life covers a set number of years, and it's generally the most affordable way to buy a large amount of coverage. Final expense is permanent, smaller and simpler.

• Term life fits if you're protecting a mortgage, replacing income for a spouse or kids, or covering debts that will be paid off by a certain age.
• Final expense fits if you're older, your big obligations are behind you, and you mainly want funeral and final costs covered no matter when you die.
• Both can make sense for some families: term for the working years, a small permanent policy for final costs.

If you have health conditions that make term hard to get, final expense may be the most practical way to leave something behind.

What to have ready for a quote

• Date of birth and whether you use tobacco
• A list of health conditions and current medications
• How much coverage you want (or your calculator estimate)
• Who your beneficiary will be
• Any existing life insurance or prepaid funeral plan

How Redline Insurance helps

We're an independent agency in Colton, licensed for life insurance in California, Texas and Florida. We compare carriers including Mutual of Omaha and Transamerica, and we start by checking whether you qualify for full coverage from day one before we look at guaranteed issue. Phone, video or in person. Hablamos español.