Most people are aware of whole and term life insurance, but when it comes to final expense life insurance—not so much. For some, it can be a helpful financial tool that can fit in to your overall plan for when you pass away. Read on to find out exactly what it is and how it can benefit your situation.
What it is
Final expense life insurance is similar to a regular life insurance in that it has a payout to your family or estate when you die. Because the funds are to be used specifically for funeral expenses (cremation or burial), the cash payout is smaller, around $5,000-$10,000, as opposed to a whole or term life insurance policy that has a payout of typically $250,000 or up to a million dollars or more. As a result of a smaller payout, the life insurance cost for this policy is affordable and lower in monthly premiums. Also, some choose to have the payout go directly to the funeral home of their choice with any leftover funds distributed to their heirs or estate.
How it works
As long as you are between the age of 50 and 80 years old, you will have no exam and an easy qualification process to obtain this policy. Your low monthly premium will never change throughout your lifetime but the policy will cease if you stop making the payments at any time. Unlike whole life insurance, there is no investment component so you cannot cash in this policy if you were to come upon financial difficulties. Your family may have to pay taxes on this payout so check with your tax representative for more information. Also, because women live longer than men, if you are a male, you can expect to pay 25 percent more in premiums.
What it can be used for
While the lump cash payout for this insurance plan is intended to be used to pay for funeral costs, as the name states, it is really for final life expenses in general. This can include not only the funeral home expenses such as the cemetery plot or cremation costs, but also the minister, hearse, legal fees, medical bills and any other remaining expenses such as credit card balances, mortgage bills and a remaining car loan. So consider these expenses when deciding on the coverage amount of final expense life insurance you wish to purchase. Contact a reputable online insurance company like TrueBlue Life Insurance for questions you may have regarding this type of life insurance program.