HOW MUCH FINAL EXPENSE INSURANCE DO I NEED?
Final expense insurance offers level benefits and level premiums. And, it's usually much cheaper than whole or term life insurance. Don't risk paying more for coverage you don't need, though. Read this article to learn how much final expense insurance coverage you should have.
Life insurance is an excellent solution to pay for your final expenses. It can also be a bit tricky to determine how much coverage you need. Fitting your insurance needs into a budget often feels like a balancing act.
You’ve got to consider not only the cost of a funeral and burial, but any left-over debts and other final wishes.
Final expense insurance is a form of insurance specifically intended to cover end-of-life costs. Many seniors and those over the age of 50 turn to final expense insurance for its level benefit and premium, similar to whole life insurance.
Policy benefits range between $2,000 and $40,000 and provide policyholders an affordable means of covering their final expenses. It’s a great solution to pay for your funeral and last wishes if you don’t already have life insurance—or you feel your current policy isn’t adequate.
Of course, just because you know you need insurance doesn’t answer the question of how much? Determining the proper final expense coverage will help you find a policy to suit your needs and your budget.
Read on for tips to help you determine exactly how much final expense insurance you need.
WHY YOU DON'T WANT TO SKIP OUT ON PLANNING YOUR FINAL EXPENSES
It’s important to have a final plan in place, regardless of the solutions you use to achieve it. Planning for your funeral isn’t all about costs. It’s about something much more important: your family and loved ones. Final planning is one last gift to those we leave behind after we pass.
There’s three good reasons to plan your funeral and final expenses:
Reason 1: You Free Your Loved Ones of Responsibility and Stress
Death is never pleasant. In its wake is heartbreak and a time for your friends and family to mourn and grieve your passing. The last thing that should be on their minds is worrying about how to pay your final bills.
Putting a plan in place will answer all your loved ones’ questions and concerns about your last wishes. You can specify the sort of service you’d like or a preferred cemetery. Would you like a traditional, somber affair or a more lively celebration of life?
Your plan will also bring to light everything that needs to be paid for. You’ll have something of an itemized list to refer to when calculating how much money you’ll need in order to pay for your final expenses.
Reason 2: Your Insurance Money Goes Where You Want It To
Your planning will likely answer a few questions about your final wishes, such as:
- Traditional funeral or celebration of life?
- Burial or cremation?
- What type of post-funeral reception would you like?
- Do you prefer a certain type of casket or urn?
- Would you like to leave anyone a gift of the money?
- How will your surviving loved ones pay leftover bills and debts?
After answering these questions, you can specify where you’d like your money to go. For example, if your final expenses come to $10,000 and you have $25,000 of final expense insurance, you can assign $10,000 toward remaining debts and leave $5,000 as a gift to a grandchild.
Reason 3: Choose Your Beneficiary and Review Your Plan With Them
A beneficiary is the person (or persons) who will receive the payout—the death benefit—of your insurance policy upon your passing. This money is tax- and probate-free and generally available soon after proof of your death has been submitted.
It’s important to designate a person you trust as your beneficiary to carry out your final wishes and use the money according to your planning.
Sit down with your beneficiary to explain your final wishes and review your finances. Specify your final requests and where you’d like any excess money to go (such as a gift or donation to charity).
HOW TO FIGURE OUT YOUR END-OF-LIFE EXPENSES
With your plans in place, the next step is to figure out all the nitty-gritty details, like cost.
It’s important to make every penny count, especially when your final expenses will be paid for by an insurance policy. You must also keep in mind the rising cost of funerals when planning for how best to alleviate this financial burden from your loved ones.
According to the National Funeral Directors Association, the median cost of a funeral and burial was $8,755 in 2017. If you were to go the cremation route, the median cost would be $6,260.
Any costs not paid for by your insurance would have to be paid for by your loved ones or estate (which may be tied up in the lengthy probate process).
And that’s before taking your existing debts and bills into account. This is especially important if you’ll be leaving a loved one behind, such as a spouse, who will have less income as a result of your passing.
According to 2016 data, the average American leaves behind $61,554 of debt. If home loans aren’t a factor, that number drops to $12,875 of debt (phew!—kinda). That debt is spread across credit cards, car and personal loans, mortgages, and student loans.
If your budget allows, you’ll want to cover not only the cost of a funeral, burial or cremation, and reception, but any remaining debts, too. Every little bit helps and will be appreciated by your surviving loved ones.
So, How Will You Pay For Your Final Expenses?
Many who purchase final expense insurance may also have a term or whole life policy. While this existing coverage is great for final expenses, the death benefit is often intended to bridge the “coverage gap.” The coverage gap is how much life insurance is actually needed to replace your family’s lost income due to your death.
And if you’ve had an insurance policy for a long enough time, you might find it doesn’t provide much coverage at all. This is especially true if you’ve had a policy since you were a child. Final expenses are likely much more expensive now than when you first purchased insurance.
You should evaluate the death benefit and intent of any existing insurance policies you own. Ask yourself:
- What is the policy’s face value?
- What is the purpose of the policy? Is it intended to be a gift, to cover your lost income, or to pay off debts, like a mortgage?
- Could it adequately cover your final expenses and still follow through with your intent?
Without life insurance coverage, your loved ones will be on the hook for paying your final expenses. Social Security benefits aren’t much of a help, either. In fact, the Social Security lump sum death benefit is only $255—far less than even the cost of cremation.
Final expense insurance is a great tool for insulating your loved ones from paying for your final expenses. You can use it in combination with existing policies or on its own to help honor your final wishes—and give your friends and family peace-of-mind.
The death benefit of final expense insurance is more than enough to cover any of your last wishes. Moreover, final expense insurance is affordable enough for almost any budget.
Let’s talk about how you can compare prices for final expense insurance to find a policy that best suits your needs.
TAKING THE NEXT STEP
Once you know how much your desired final wishes will cost and what you need to afford them, the next step is to get your quote online. All you need is a few minutes, your personal information, and an idea of who to designate as your beneficiary.
Then, apply for final expense insurance online or over the phone. There are policies available no matter your health. You can even buy a policy without needing to see a doctor!
In only a few minutes, you’ll have affordable final expense coverage that meets your needs. You’ll be able to relax knowing your loved ones won’t be left scrambling to pay for your funeral after you pass. Instead, they’ll be able to focus solely on remembering you and your commitment to their well-being.