What is Final Expense Insurance?

Article originally published October 19th, 2020. Updated December 20th, 2022.

Final expense insurance is a small whole life insurance policy that pays for funeral costs and other end-of-life expenses. It’s also frequently referred to as “burial insurance” or “funeral insurance.” Ultimately, the net result will be a tax-free cash payment to a beneficiary(s). Most insurance companies aim to pay claims within a few days since they know the funds will likely be used for a funeral. Your beneficiaries can use the money with no restrictions. For example, the money can be used for credit card debts, medical bills, or anything else–not just funeral expenses. Plus, any remaining money left over is theirs to keep.

Most life insurance companies make these plans available to seniors aged 50 to 85. They typically offer between $5,000 and $50,000 in coverage. No medical exam is necessary, and the health requirements are very lenient. You can still get a policy even if you have serious health issues. Some plans actually guarantee approval regardless of your health history. It’s important to note that if you buy a plan with guaranteed approval with no health questions, there will be a 2-3 year waiting period before benefits become active. To get a plan that covers you right away for natural or accidental death, you must answer health questions and be approved by the insurance company.

How much does it cost?

Final expense insurance premiums are typically low because the face value isn’t very large. Overall, the average cost of a final expense policy is between $50-$100 per month for a $10K-$15K coverage amount. Rates will vary depending on your age, gender, health, tobacco usage, state of residence, coverage amount, and which insurance company you purchase your policy from.

For example, a non-smoking 65-year-old woman in generally good health will pay roughly $40 per month for a $10,000 policy. However, a man with the same profile would pay about $53 per month.

How do you buy a policy?

There are a few different ways to purchase a policy. Dozens of insurance companies offer this type of insurance, and they all have different application processes.

You either work with a licensed agent who assists you with the application or buy directly from the insurance company online, via telephone or by mail. Working with an agent gives you the advantage of having a professional who can answer your questions and make recommendations. However, if you value your privacy and prefer simplicity, then buy a plan online or through the mail.

No matter how you apply, you can find an affordable life insurance policy for final expenses since there are so many companies to choose from.

Who are the best companies to consider?

The market for final expense insurance is vast. There are dozens of insurance companies to choose from. Below are some highly-rated companies to consider. This information is as of 12/07/2022. Visit the company websites for current policy information.

1) Mutual of Omaha

Mutual of Omaha is one of the oldest life insurance companies in the USA. They offer two different final expense plans to anyone between the ages of 45 and 85. The first plan is called “Living Promise” and is only sold through agents. You can purchase up to $40,000 in coverage on this plan. It does have underwriting, so your qualification depends on your health. If you’re approved, this plan has no waiting period. The second plan they offer is a guaranteed issue policy, so you cannot be denied. You can buy up to $25,000 in coverage with their guaranteed acceptance plan. Since this plan has no health questions, it includes a two-year waiting period before you’re covered for natural causes of death.

2) AAA

Most people associate AAA with their roadside service, but they also offer life insurance. AAA is likely the best option if you want or need a guaranteed acceptance policy (no health questions). Their prices are amongst the lowest relative to other providers. Also, they will refund all premiums plus 30% interest for non-accidental death during the first two years. Most other companies with a waiting period only grant 10% interest. Finally, they will pay out double the death benefit if you die from an accident. You can buy their coverage online, via mail, or by telephone.

3) Aetna

Most people associate Aetna with health insurance, since that is the most common type of insurance they sell. However, they offer final expense insurance as well. What is most unique about Aetna is they will insure applicants as old as 89. Very few life insurance companies will go beyond 80 or 85. The amount of coverage you can buy from Aetna varies based on your age. It is important to note their plans have underwriting, so you must qualify for their coverage. That’s the main downside with Aetna. They have no guaranteed acceptance option. Depending on your health, you may or may not qualify.

Should you buy final expense coverage?

For some people, a final expense policy makes all the sense in the world, and for others, it does not.

A final expense plan is typically suitable for any individual with no means to pay for their funeral costs. For example, you have no savings or real property that can be sold to pay for burial costs. If you’re in that situation and don’t want to leave a financial burden on your family, then a final expense policy is a fantastic option worth pursuing.

At the same time, if you currently have cash, a retirement account, or some other assets that can be quickly liquidated to pay for your funeral, you probably don’t need a policy. You may prefer one, but you don’t necessarily need it.

If you have the cash, it would probably be better to put it into a funeral trust or a POD account, so it’s securely locked away for when that day comes.

At the end of the day, preplanning is an act of love. No matter how you financially prepare for your funeral, your family will appreciate it more than words can express.

What you do now ensures they aren’t forced to make tough decisions while riding an emotional rollercoaster.