Final expense insurance, also referred to in some capacities as burial insurance, is designed to help families cover expenses resulting from the death of a loved one.
Funeral costs alone can be as high as $25,000 or possibly more, and unanticipated charges such as medical costs that are not covered by health insurance, as well as federal and state taxes and/or other bills in the deceased name can add up, taking a toll on families during what is already an extremely difficult and emotionally taxing time.
By choosing to purchase final expense insurance, you can spare your family much of these expenses, and, in addition, this type of policy also allows you to specify the details of your funeral and burial, including the type of service and casket that you prefer.
If this sounds morbid, consider the alternative: your grieving family scrambling to make important financial and emotional decisions during a difficult time made more difficult by a total lack of preplanning.
According to the national funeral directors association, consumer interest in preplanning of funerals has been rising steadily for the past 30 years, but it is only recently, perhaps as so many baby boomers find themselves approaching retirement age, that the industry has centered on the pre funding of these types of ceremonies.
How were funerals and related expenses funded in the past? Traditionally, funerals were funded with trusts, which were especially complicated to arrange, but do carry tax liabilities and can become complicated if the purchaser of a trust decides to move out of state.
To combat these problems, some consumers created what was termed final life expense insurance policies, i.e. supplementary policies beyond their basic life insurance policies with small coverage limits, sometimes known as face amounts typically of about $10,000 designed to cover the costs of funerals.
The american association of retired persons AARP reports that funerals and burials rank high among the most expensive purchases that older Americans make. For an adult funeral, the average cost is from $4,000 to $5,000, which does not include any funeral service extras or miscellaneous expenses.
In ground funerals can cost an additional $2,500 or more, depending on the state in which the burial takes place, and other factors.
What all of this means is that the traditional $10,000 amount reserved in trust for burial and funeral expenses may simply not be enough, and paying for a typical funeral may necessitate taking funds from the deceased’s life insurance policy. Unfortunately, this is becoming an all too frequent trend.
Final expense insurance policies are individualized, which means that typically anything can be included in them, unless your policy is capped at a specific dollar amount, the highest of which, are typically $25,000.
The types of services and products that you can select will vary by policy, as well as by state, but generally, you can expect to be able to pre purchase and pre pay for the following: cremation, casket or urn, grave marker, flowers, plot, hearses and other funeral vehicles, embalming this is not legally required unless there will be a public viewing, but many people opt for it, in any case burial marker or grave liner, and digging and filling of the grave.
What factors should I consider when purchasing final expense insurance? Your state’s laws and regulations concerning final expense, burial, preneed insurance. The wishes, concerns, and recommendations of your family, your financial planner, and your attorney. The amount of death benefits that you will actually receive from the policy. The verification of the funeral director, agent, or company.
Any free look laws that your state may have in place, which allows you to review your policy before committing. A written list from your funeral home of choice, detailing the types of products and services offered, as well as their costs.
Whether or not the funeral home that you choose elects to give a price guarantee. If the funeral home doesn’t, then your funeral costs will likely be higher than the amount that you pre pay for.
Bringing a trusted family member or friend along to help you shop for the casket and other related products.
Whether or not the funeral arrangements that you make can be moved to any funeral home at any time.
Whether your state requires that the money you prepay to funeral directors be made available to you at any time.
The location of the grave site should be spelled out by section, row and plot number. The policy should specify what type of outer burial container you have purchased e.g., grave liner vs. a vault, and what it is made of.
The policy should specify what kind of marker you have purchased, including size, material, and style, preferably with a sketch. Whether opening, closing, marker installation costs, etc are included. Keep in mind that the costs of digging and filling a grave are not typically included in the cost of the plot.
Whether there are extra fees included if you elect to buy a marker from a monument dealer instead of from the cemetery, as well as if you elect to buy a casket from your own supplier.
Find out what happens if the cemetery ownership changes hands. Know what recourse you have if the cemetery runs out of money and defaults on your arrangement. Ask what happens if your chosen cemetery runs out of burial space.
Survey your desired cemetery to see how well the upkeep is, particularly after a snowstorm.
Look at the contingencies plan if the items you have selected will no longer available at the time of the funeral. Make sure you receive your funeral policy in a timely manner.
Make sure you receive at least one statement each year detailing the status of your account.
Know what happens if you decide to cancel your policy.
How can I obtain final expense insurance? Your insurance broker can help you decide which type of final expense insurance policy is right for your budget and personal preferences. The good news is that most people aged 40 to 85 can afford these types of policies, and the premiums, which generally depend on your age, but are based on other factors as well, are typically low.
As with all financial decisions, be sure to also seek the advice of your certified financial planner before choosing a final expense insurance plan.
