Burial Insurance Plans | How Final Expense Insurance Works

Jeff Root Jeff Root Posted in Burial Types
Last updated on July 10, 2019

Did you know that the Social Security Administration only pays $255 when someone passes away ?

With the average cost of a funeral service in the United States being $9,000, loved one’s are responsible to pay for the difference.

If there are no savings to cover this, it leaves your loved one’s with the burden during such a difficult time.  It’s no wonder you’ve likely seen GoFundMe campaigns pop up all over social media.

Truth is, buying burial insurance is a cost effective way to make sure your funeral service and any outstanding debts are taken care of and not passed on to you loved ones.

It’s no wonder that these policies are one of the fastest growing segments of life insurance sales in the United States.

The Problem (& The Solution)

senior couple secured with final expense policyNobody wants to burden their families with the cost of a funeral and any debts they currently have.

If need be, families will take on personal debt, organize fundraisers, or sell personal belongings just to ensure they can commemorate their loved one with dignity.

Unfortunately, many people today do not have the cash on hand to outright pay for their funeral expenses.

For this reason, many people are eager to find a plan to ensure they never leave their family with the burden of unpaid funeral costs.

This whole situation has generated great demand for final expense life insurance policies.

The funny part about burial insurance is that it’s not an official type of life insurance.

It’s just a marketing term.

Case in point, you will often see burial insurance be frequently referred to as “funeral insurance” or “final expense insurance“.

Ultimately, they are all simplified issue whole life insurance policies. They don’t expire, the monthly cost is fixed for life, and the face value can’t decrease.

When it’s all said and done, they provide cold hard cash, so your family has the money to pay for your final expenses.

Fortunately, every funeral home, no matter where they are, accepts cash.

Given the propensity to payout the cash very quickly and considering these policies cover you immediately, they make the perfect vehicle to cover end-of-life costs.

There is simply no other way to instantaneously ensure your funeral costs are taken care of.

You might be wondering:

How do I find the best burial insurance policy for me?

Well, this article will show you just how to do that. We are going to go over exactly what you must do to find the best and most affordable final expense policy on the market.

But wait, it gets better.

We are also going to show you some common burial insurance pitfalls to avoid that may surprise you.

If you are shopping for or seriously considering a final expense policy, this article is a must-read.

How To Find The Best Burial Insurance Policy

Before we dig into this, its critically important that we clearly define what constitutes the best burial insurance policy.

The problem with most articles online is they lack clarity.

As a consequence, most people are left with no idea what actually makes a policy the best. Well, let’s take care of that right now.

The best burial insurance policy is one that costs the least and protects you as soon as possible. That’s it.

Notice that we didn’t say you need to make sure the company has a specific rating with A.M. Best, or that they have been in business for a certain number of years, or that they have an annual revenue of a certain amount.

At the end of the day, the best plan out there is the one from a reputable insurer that covers you sooner than later.

In addition, and most importantly, it costs less than what the other reputable insurance companies would charge you.

Consider this:

  • Most people are blissfully unaware that even basic funeral plans and arrangements almost always cost several thousands of dollars to finance.
  • When it comes to preparing for a funeral, expenses can include but are not limited to: funeral preparations, funeral arrangements, floral arrangements, food and refreshments, funeral parlor rental, funeral procession, burial preparations, casket with or without options, burial plot and headstone, the burial ceremony and other related expenses.
  • The average price for a funeral can be in the $5,000-$7000 range as a starting price.
  • The emotional grief and life stressors that your loved ones will have to deal with in the aftermath of your passing will be greatly magnified if they are then also left with the task of financing your funeral arrangements.
  • Your family could burn through savings or take on debt if left no other option to pay for funeral expenses.
  • The threat of bankruptcy and massive debt can stalk your family for years after your death.

It takes some people a little longer than others to come around to the truth of the need to acquire adequate life insurance, let alone basic funeral expense insurance.

Some people think that they are too old and therefore are too late to be insured for their mortality. Others may think that there are too many small print technicalities.

Or that rates will progressively get more expensive.

Or that there is a set grace period before a policy is paid out because of the nature of the insurance.

Every situation and circumstance is different and unique, but most funeral expense life insurance plans feature the same basic options.

The Myth

If you search online for the best burial insurance companies, you will run into a ton of articles that mostly share the same general advice.

What most writers, who aren’t experts in this business by the way, encourage you to look for are companies that match this profile:

  1. A good A.M. Best rating
  2. They have been in business a long time
  3. Their annual revenue is a certain amount
  4. They have well-known household names

If you were to follow this “advice” you would greatly limit yourself, and you would surely overpay by a wide margin.

There are tons of wonderful very trustworthy insurance companies that can offer you a much better deal compared to companies that match that criteria above.

Here are some of the basic and standard policy options that come with most funeral expense life insurance plans.

The Basics of Final Expense Insurance Policies

Funeral expense life insurance is a basic form of life insurance that most people can qualify for between the ages of 50 and 85 without having to take a medical examination.

Of course, there are exceptions, depending on the circumstance, but overall such coverage is available to most people who qualify.

This type of insurance is very common and affordable because they are usually bought by people who just want to buy a basic form of life insurance without too much hassle, paying too much or focusing too much on the aftermath of their own mortality.

Some people have pre-existing medical conditions or are too old or infirmed to qualify for most other forms of life insurance.

The main goal of the insurance is to provide a buffer of financial protection to family and loved ones, people who will most certainly bear the brunt of financing, preparing and arranging for your, “final expenses,” or your funeral arrangements.

The Basics of Funeral Expense Life Insurance

Funeral expense life insurance is one of the most basic and affordable forms of life insurance. There is not really any reason not to apply for it.

Most basic plans qualify applicants up to a maximum age limit of 82.

Some policy plans may allow for an age limit of 85, the age ceiling range for such policies usually average into the 80-82 age range.

Applicants over the age of 82 can also apply but may be subject to requests for extra information or medical exam.

If you are under the age of 82, are not employed in a dangerous vocation or have a severe medical ailment or condition, then you qualify for this coverage.

Your current age and health status are the major determining factors for such policy qualification.

Most insurance companies will not insure people aged 80 and over without self-benefiting conditions, caveats or extra cost passed on to the policy owner.

Statistically speaking, most people die in their late 70’s. Most women on average pass away in their early 80’s.

Most funeral expense life insurance plans are designed to qualify people who may be disqualified for most other life insurance policy considerations and yet still limit as much risk as possible for insurance companies.

  • Premiums can be designed to meet your budget, lifestyle and prospective final expense needs. But on average, the younger you are, the cheaper the premium will be.
  • Most final expense life insurance policies offer coverage plans ranging from $2,500 and up to $50,000.
  • Most final expense life insurance plans are a kind of whole life insurance, meaning that premiums are paid throughout the lifetime of the policyholder.

There are also term life variations of the final expense life insurance policy plan, which may include more cost or different policy conditions.

Most funeral expense life insurance policies may feature a 2-year contestability clause condition.

What this means is that an insurance company or agent has the right to contest payment of death benefits and void payout of such if the owner of the policy dies within the first 2 years of policy coverage commencement.

Such a clause is a basic feature on most policies because of the risk involved to insurance companies who insure applicants of advanced age and/or infirmed health.

Your funeral expense life insurance policy can accrue cash value over time and can be leveraged against a loan by the policyholder.

As the nature of funeral expense life insurance necessitates, there are premium rate variations for applicants based on age. On average, the younger the applicant then the cheaper the premium

If you are looking for funeral expense coverage that surpasses $50,000 or more in policy coverage, then know that most plans can be converted into guaranteed universal, indexed universal, term life, whole life or any other forms of traditional life insurance products and packages.

It is more expensive, however, and will definitely involve a medical examination.

Guaranteed Issue or Graded Benefit Policy Options

The 2-year contestability clause condition is designed to protect the financial line of insurance companies from the aggregate and steadily accruing risk of death benefit payout against the number of policies taken on by applicants of advanced age and infirmed health.

Such conditions preclude qualification for most traditional life insurance barring caveat and cost and are the reasons for the enforcement of the 2-year contestability clause condition.

But all hope is not lost.

There are affordable insurance policy options of convenience even for applicants of advanced age or those suffering from a severe health condition.

Here is a brief example.

Most articles online will recommend you consider AARP or Colonial Penn.

They do this because both are highly rated, well known, and respectable insurance companies. Truthfully, these are all accurate statements.

However, none of those attributes alone mean their insurance will cost less and go into effect sooner.

You contrast this to other highly rated, been in business a long time, non-household name companies, and they will lose every time.

The cold hard truth is that in 100% of circumstances neither AARP nor Colonial Penn can offer you the best price.

Literally, they cannot ever, in any scenario, give you the best deal. You can easily get a better price from other insurance companies.

The caveat is that these other companies don’t spend millions on advertising, so you don’t know their names.

They have still been in business a really long time and are very reputable. Ultimately, they will offer you a policy that goes into effect sooner and it will cost less.

Now that you know you need to be open to insurance companies that aren’t on TV, the next question is:

How do you find them?

We are one step ahead of you.

Honestly, this goes back to the original question about how you find the best policy in the first place. The thing you must accept is that YOU alone can’t find these companies.

Think about, how would you?

We can’t even think of a way you could find them on your own.

Fortunately, there is an easy way. It just doesn’t involve you personally finding them.

To find the best burial insurance policy, you must consult with a highly experienced independent brokerage who represents multiple highly rated insurance companies.

In essence, an agency like this will have the underwriting knowledge to know which carriers are suitable given your health conditions, and they will have the freedom to choose which insurer will give you the best deal.

One of the industry’s best for burial insurance is an agency named Choice Mutual, who works nationwide with all the top providers for final expense.

Of course, we can help you, too. 🙂

Other Options

Now, the basic funeral expenses policy isn’t always perfect for everyone.

If health is an issue, you may not quality.

There’s also the situation where you simply don’t even need one, unless you want to leverage today’s dollars for a tax-free payout later.

Let’s discuss those other options.

Guaranteed Issue (or Graded Benefit) Funeral Expense Life Insurance

Almost every applicant who applies is accepted, with no consideration of age or medical status.

Like most funeral expense life insurance policies, the 2-year contestability clause condition is still in effect.

If the policyholder passes away within the first 2 years of policy coverage, then the policy is voided altogether.

However, unlike most funeral expense life insurance packages, with a guaranteed issue policy or graded benefit policy, a pre-determined percentage of the original policy coverage amount and equivalent cost amount of paid premiums with interest are paid out to listed beneficiaries in the event of policyholder death occurring within the first 2 years of coverage.

This type of coverage may be a little more expensive but is worth it, especially for hard to qualify applicants who want some kind of coverage.

Premium rates are locked-in and do not feature premium rate increases over time.

The Self-Insurance Option

Insurance companies and agents alike will advise of the benefits of self-insurance practices to applicants of funeral expense life insurance.

Self-insurance is the practice of dedicated financial saving for the express purpose of the funds being posthumously used to pay policyholder funeral expenses.

It may sound simple, but it may be easier to save your financing in a good savings plan as early as possible to prepare for your final expenses.

Pitfalls To Avoid

When you dive into the world of burial insurance, you need to be aware of some traps waiting to snare you.

Sadly, there are companies that will attempt to trick you.

Usually, their goal is to sell you an inferior product without you really knowing what it is.

Burial Insurance Offers By Mail And TV

These plans are typically guaranteed issue life insurance policies.

They have no health questions or medical checks. That may sound good, but know that these kinds of plans are not the best option for most folks.

Usually, the vast majority of applicants can get approved for a plan that has lower prices and immediate protection by going with a company that asks health questions.

AARP, Globe Life, & Colonial Penn

All three of these companies are grossly overpriced. There is just no chance that you can’t find a better deal elsewhere.

Furthermore, AARP and Globe will attempt to sell you life insurance that expires.

Yes, you read that right.

Their flagship plans expire at a certain age leaving you without protection.

The Incredible Value Of An Independent Agency

When you need legal advice or you are sick who do you turn to for help?

You ask a lawyer or your doctor right? Of course, you do because they are qualified experts in their business.

In similar fashion, you lean on the expertise of a qualified burial insurance agency to help you find the best final expense policy.

Essentially, it’s an impossible task for you to learn the underwriting for 30 different companies so you could hopefully diagnose which one is best for you.

Funeral expense life insurance is the most basic form of life insurance that one can apply for.

And given the stark realities of bankruptcy, debt and the compounded emotional grief that can haunt the family and loved ones of people who don’t prepare for the expenses of death, there is no excuse not to apply for such coverage.

Contact us today to begin the application process for your final expenses. Do it soon, for yourself and for the sake of your family.

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