The Need for Final Expense Insurance
None of us likes to think about the fact that one day our life will end, but we should plan for that time and consider those we love and will leave behind. Who will be left to take care of our final arrangements and all the expenses associated with them? We wouldn’t want to think that our family would have to come out of pocket for our last expenses, but it is a sad reality that many don’t have enough in savings or insurance to prevent this from happening.
What is Final Expense Insurance?
Final Expense Insurance is simply a policy with a small face amount, just enough to cover burial expenses and any remaining household or medical bills. Unlike Term Insurance, which is purchased only for a limited term and eventually terminates, Final Expense Insurance is generally a Whole-Life policy which doesn’t expire as long as the premiums continue to be paid. With most Whole-Life policies, the premium doesn’t increase, the face amount doesn’t decrease, and the policy builds cash value. Some Whole-Life policies may also include a Living Benefits Rider which can pay a portion of the face value if the insured is diagnosed with a terminal illness that is expected to result in death within 24 months.
How Much Insurance Should I Buy?
The average “in-ground” burial currently runs between $8,500 and $10,000 but can be much more depending on the level of services chosen. Even a cremation with a simple service can cost between $2,500 and $5,000. In addition, final household or medical bills may increase the need for an insurance policy to cover these last expenses.
Final Expense Insurance is available in amounts from $1,000 to $50,000. The amount of coverage selected should be enough to cover one’s anticipated burial expenses but should not be so high that the premium is impossible to be maintained. The only good insurance policy is the one that is in place when it is needed.
What Type of Insurance Do You Have?
Frequently, as we work with clients, we find the insurance they have in place doesn’t give them the coverage they think they have. Many have found themselves with the following types of policies:
Accidental Death Insurance – This type of policy only pays in the event of a death which is certified by a doctor to have been caused by an accident. Any death by natural causes would not be paid under this type of policy.
Term Insurance – Several companies offer Term Insurance for final needs but unless you can predict the age you will be when you die, purchasing this type of insurance is a gamble. These companies offer clients at younger ages low premiums to snare the business but as the insured ages, the premiums rise until they’re usually unsustainable and many let the policies lapse simply because of the expense. In addition, coverage is only offered to a pre-determined age, often the age of 80. If you happen to live past this age, you will find yourself without insurance and all the premiums paid will be for nothing.
Guaranteed Insurance (Also known as Graded or Modified) – This type of insurance is offered without asking any medical questions and is guaranteed – but there’s a catch. The insurance takes two to three years to kick in, depending on the policy. Should you die within the first two to three years by natural causes, your heirs would only receive a return of the premiums you paid plus a small amount of interest. Only if you die by accident, would you be covered from day one.
Should I Have a Policy Review?
Your policy should be reviewed by an independent broker so that you can be assured that you have the type of coverage you think you have and to be sure you are completely insured. Don’t leave it to your heirs to discover that your death was uninsured in spite of the fact that you thought you had these expenses completely cared for. The time is now to be sure you’re covered so there are no unfortunate future surprises.
What’s the Difference between a Captive Agent and an Independent Broker and Why Does it Matter?
In the insurance business, there are captive agents and there are independent brokers. A captive agent works for one company and may represent only that company’s insurance plans. On the other hand, an independent broker can offer the plans from many different companies.
There’s a saying that “If you’re a carpenter and only have a hammer, everything looks like a nail.” This is the situation captive agents find themselves in. No matter what the client’s age, medical condition, or other differentiating factors, that agent only has one plan to fit that client into. An independent broker, however, is able to shop across a spectrum of offerings from different companies to find a plan that offers the best coverage at the lowest price. Sometimes, you need more than a hammer for a particular job; you may need a drill, or a screw driver. Independent brokers have many tools in their tool-belt so they can assist a wide range of needs among their client base.
Senior Partners Group is an independent broker associated with all the top carriers in the industry so that we can always help our clients obtain the best coverage at the lowest price. Allow us to do a free policy review for you to be sure you’re fully covered by your current plan or let us shop the market to find you a plan that offers you the value you need.