After more than 20 years in financial services and over a decade as an independent agent, I’ve helped thousands of families understand their life insurance options. One of the most misunderstood yet valuable products I work with is what many people call an “insurance on death policy” – more commonly known as final expense or burial insurance.
For a complete overview, see final expense insurance explained.
These policies serve a specific and important purpose in family financial planning, yet I frequently encounter confusion about how they work, who needs them, and when they make sense. Let me share what I’ve learned from working with hundreds of clients in this space.
What Is an Insurance on Death Policy?
An insurance on death policy is essentially a small whole life insurance policy designed specifically to cover end-of-life expenses. Unlike term life insurance that’s meant to replace decades of income, these policies focus on covering immediate costs that families face when someone passes away.
The coverage amounts typically range from $5,000 to $25,000, though some carriers offer up to $50,000. The money can be used for funeral and burial costs, outstanding medical bills, credit card debt, or any other expenses the family faces during a difficult time.
What makes these policies unique is their simplified underwriting process. Most final expense policies require only basic health questions – no medical exams, no blood work, no extensive medical records review. Some even offer guaranteed acceptance with no health questions at all, though these come with waiting periods for full coverage.
How Final Expense Insurance Works
Having walked hundreds of people through this process, I can tell you that final expense insurance operates differently from traditional life insurance in several key ways.
First, the application process is streamlined. Instead of the detailed medical underwriting that comes with larger policies, you’ll typically answer 5-10 basic health questions about recent hospitalizations, current medications, or specific conditions. The entire application can often be completed in 15-20 minutes.
Second, these are whole life policies, meaning the premiums stay level for life and the policy builds cash value over time. Unlike term insurance that expires, final expense coverage is permanent as long as premiums are paid.
The claims process is also designed to be simple. When someone passes away, beneficiaries typically receive the death benefit within days of filing the claim, not weeks or months. This quick payout is crucial because funeral expenses need to be handled immediately.
Who Needs Final Expense Coverage?
Through my years of experience, I’ve identified several groups of people who benefit most from final expense insurance.
Seniors with limited traditional life insurance options make up the largest group. If you’re over 65 and either don’t have life insurance or have a small amount, final expense coverage can fill a critical gap. Many people lose their group life insurance when they retire, leaving families vulnerable to burial costs.
People with health conditions who can’t qualify for traditional coverage often find final expense insurance accessible. I’ve helped individuals with diabetes, heart conditions, COPD, and other chronic illnesses secure coverage when they’d been declined elsewhere.
Those who want to avoid burdening their children represent another significant group. I once worked with a woman buying a final expense policy who told me she stretched five dollars to feed herself for two days. Money was that tight. But she still wanted coverage because she didn’t want her children burdened with funeral costs. That’s the kind of determination I see in people who understand why this matters.
Individuals with modest assets also benefit from final expense coverage. If someone has savings or assets worth $20,000-$50,000, using insurance to cover burial costs preserves those assets for family members rather than depleting them for final expenses.
Types of Final Expense Policies
Not all final expense policies are created equal. I work with three main types, each serving different needs and situations.
Simplified issue policies require basic health questions but no medical exam. These typically offer the best rates for people who can qualify health-wise. Coverage usually takes effect immediately for accidental death, with natural death covered after a brief waiting period – often 30 days to 2 years depending on age and health.
Guaranteed acceptance policies require no health questions whatsoever. Anyone within the age limits (usually 45-85) can qualify regardless of health conditions. However, these policies come with graded death benefits – if you die from natural causes within the first 2-3 years, beneficiaries typically receive only the premiums paid plus interest, not the full death benefit.
Modified benefit policies fall somewhere in between. They may ask a few basic health questions but are more lenient than simplified issue policies. The death benefit might be modified for the first 2-3 years, paying a percentage of the full benefit that increases each year.
Understanding the Costs and Benefits
One thing I always explain to clients is that final expense insurance costs more per dollar of coverage than term life insurance. This isn’t because insurance companies are trying to take advantage of seniors – it’s due to the realities of insuring older individuals with simplified underwriting.
The premiums on final expense policies typically range from $30-$200 per month depending on age, gender, health, and coverage amount. A healthy 65-year-old might pay $50 monthly for $10,000 in coverage, while a 75-year-old with health issues might pay $100 monthly for the same amount.
However, these policies offer benefits that justify the higher cost for the right person. The coverage is permanent and can’t be cancelled as long as premiums are paid. The policies build cash value that can be borrowed against if needed. Most importantly, they provide peace of mind that final expenses won’t burden family members.
I’ve also seen the value these policies provide when families need them most. The quick claim processing means funeral directors get paid promptly, and families don’t have to scramble for funds during an already difficult time.
Common Misconceptions About Final Expense Insurance
Over the years, I’ve encountered several misconceptions about final expense insurance that prevent people from making informed decisions.
Many people believe they’re too healthy to need final expense insurance and should get term life instead. While term life insurance offers more coverage per dollar for healthy individuals, it’s not an either-or decision. Some of my clients have both – term insurance for income replacement and final expense coverage specifically for end-of-life costs.
Another misconception is that final expense insurance is only for people who can’t qualify for other coverage. While it’s true that these policies serve people with health issues, many healthy seniors choose final expense coverage because it meets their specific needs without the complexity of larger policies.
I’ve also heard people say that final expense insurance is “too expensive” compared to just saving money. While saving for final expenses makes sense in theory, I’ve seen too many families where other expenses, emergencies, or economic downturns depleted those savings when they were needed most.
Making the Right Decision for Your Situation
When I sit down with someone considering final expense coverage, we look at several factors to determine if it makes sense for their specific situation.
First, we consider their current coverage. If someone already has adequate life insurance through work or personal policies, additional final expense coverage might not be necessary. However, many people overestimate their existing coverage or don’t realize it might end when they retire.
We also look at their family situation. If adult children are financially well-off and don’t mind covering final expenses, insurance might not be critical. But if the children are struggling financially or live far away, having coverage in place removes a significant burden.
Health status plays a major role in the decision. Someone with serious health conditions might find final expense insurance their only option for any life insurance coverage. Others might qualify for traditional coverage but prefer the simplicity of final expense insurance.
Finally, we consider their overall financial picture. Final expense insurance works best as part of a broader financial plan, not as the only financial protection someone has.
The key is having an honest conversation about goals, health, finances, and family dynamics. I’ve helped hundreds of people who were told “no” by other agents or carriers find the coverage they needed. Sometimes that’s final expense insurance, and sometimes it’s a different solution entirely.
Final expense insurance isn’t right for everyone, but for those it serves, it provides valuable peace of mind and financial protection. The most important thing is understanding your options and making an informed decision based on your specific circumstances.
- Final expense insurance provides $5,000-$25,000 in permanent life insurance coverage specifically designed for end-of-life costs
- These policies feature simplified underwriting with basic health questions or guaranteed acceptance options, making them accessible to seniors and those with health issues
- Premiums are higher per dollar of coverage compared to term life insurance, but the policies build cash value and provide permanent protection
- Three main types exist: simplified issue (basic health questions), guaranteed acceptance (no health questions but graded benefits), and modified benefit policies
- Final expense insurance works best for seniors with limited traditional life insurance options, people with health conditions, and those wanting to avoid burdening family members with burial costs
- The decision should be based on your current coverage, family situation, health status, and overall financial picture rather than age alone
If you’re considering final expense insurance or have questions about whether it’s right for your situation, I’m here to help. With over a decade as an independent agent, I can walk you through your options and help you find coverage that fits your needs and budget. Contact Heritage Life Solutions today to discuss your final expense insurance options and get personalized guidance based on your specific circumstances.
