Final expense life insurance is available in both term and whole life policies and is intended to cover funeral costs, medical bills and any other debts left when an insured dies. The death benefit is usually between $10,000 and $50,000 to cover all final expenses. Most people who purchase final expense life insurance are over 50 or suffering from a life-threatening illness.
No Medical Exam Life Insurance
The average applicant for final expense life insurance might not be eligible for other types of life insurance due to age or a medical condition. Final expense insurance does not require applicants to undergo a medical exam, similar to no exam life insurance.
The lack of medical screening reduces the company’s underwriting costs, and policies are generally issued without undergoing the standard underwriting process. Some applications will ask medical questions or refer to your medical history, but most guaranteed issue life insurance policies have no medical questions, physical exam, or lab test results on the application.
Guaranteed Issue Life Insurance
Although applicants for guaranteed issue life insurance may not have to undergo an exam, some companies require you to answer medical questions during the preliminary screening process. Once the application is completed, the applicant is guaranteed to be issued a policy for the requested death benefit amount.
Some individuals will be refused an application during the screening process, so while the policy is guaranteed, the opportunity to apply for the coverage may be denied for reasons stated by the insurance company. Regardless, no medical exam life insurance is one of the best policies for the elderly, those with preexisting medical conditions, or applicants just looking for an alternative to final expense life insurance.
Graded Benefit Life Insurance
Some guaranteed issue life insurance policies have graded benefits. This means that the full amount of the death benefit will not be paid within a specific period, usually two years from the date of policy issuance, which is called maturation.
If the insured person dies within that period, the family is entitled to a refund of premiums paid into the policy, and in the case of whole life insurance, any interest earned on the policy.
Simplified Issue Life Insurance
Simplified issue and guaranteed issue life insurance are very similar. While no medical exam is required for simplified issue life insurance, the applications do have medical questions regarding your health record and history. There is no underwriting involved in guaranteed issue or graded benefit life insurance policies, but simplified issue life insurance does undergo an underwriting process which assigns applicants to a health class.
Simplified issue life insurance is often more affordable than guaranteed acceptance or graded benefits coverage, but may not guarantee that a policy will be issued.
Who Buys Final Expense Life Insurance?
Anyone can buy final expense insurance, but it is most often purchased by retirees who have no dependent children and by those with chronic, debilitating, and terminal illnesses that will probably result in their premature death. These applicants may be unable to get life insurance due to their pre-existing condition, or the cost may be prohibitive.
Guaranteed life insurance has a relatively low death benefit amount, which makes it cheaper than other types of life policies.
How Much Final Expense Insurance Is Needed?
The average cost of a funeral in the United States is about $10,000, and that does not include any expenses associated with burials, medical bills, or other final expenses. Those who suffer from prolonged illnesses may leave medical expenses behind that can amount to a huge liability for family members, surviving spouses, or children. There are also usually a few normal bills, like the final utility, phone or credit card bills. Young families can even consider survivorship life insurance.
The final expense life insurance policy usually has a minimum policy limit of $10,000, but many applicants opt for higher limits to ensure their survivors are not left with expenses or to leave a small inheritance.
Prepaid Funerals Still Leave Final Expenses
In recent years, the pre-planned, prepaid funeral has become popular. Many seniors make and pay for their arrangements well in advance of their death. There are still extraneous expenses involved, like flowers or a reception following the service, that are not covered by the funeral expense payment.
However, early planning will not pay final medical, utility or other credit card bills that are left behind. Even those with prepaid funeral plans should consider final expense life insurance to cover these additional bills.
Term Life Insurance Policies
Term life insurance has the cheapest life insurance rates, and is in effect for a specific amount of time, usually between 5 and 30 years. If an insured policyholder has a 30-year, final expense term life policy and he/she outlives the term of the policy, he/she is left without life insurance coverage and may not be able to renew their policy again.
The lower premiums make term life insurance affordable for most families, and applicants who buy this kind of coverage will not outlive the policy term. The alternative is whole life insurance, which is not as cheap, but offers additional features and builds cash value.
Whole Life Insurance For Final Expenses
Whole life insurance is permanent and has a cash value which accrues over time. Premiums may be paid as a single sum, over a limited period or monthly, quarterly, or annually. Single payment life insurance is paid up and permanent on the date of inception while limited term requires regular, scheduled payments over a period of time like 10 or 20 years, after which, the policy is paid off and permanent.
The cash value in whole life insurance is invested and may be used as collateral for a loan, down payment for a house, college tuition payments for children, or withdrawn from the policy. There are many different types of whole life insurance, and the only way to find which type of life insurance is best for you is to get life insurance quotes and compare coverage from insurance companies.
Life Insurance Quotes
Final expense life insurance is a gift to family members that are left behind. Final expense policies cover bills and funeral expenses survivors would otherwise have to pay. Life insurance benefits are non-taxable may be used to cover probate costs, estate taxes or simply to leave a small inheritance to children or grandchildren.
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