Final expense life insurance is popular with seniors because of its affordable price, smaller benefit amounts, and emphasis on covering funeral costs.
Traditional life insurance policies such as term insurance are primarily intended to replace any income lost when a loved one dies. These policies are most important to families during the earlier years when we’re working, paying a mortgage, making car payments, and raising our kids.
Once we’ve retired, paid off the mortgage, and the kids are out of the house, traditional life insurance policies aren’t needed as much. What we do need is a way to pay for any expenses we leave behind when we pass.
According to the National Funeral Directors Association, the median cost of a funeral can be over $9,000. With no way to pay for these expenses, surviving loved ones often experience a financial burden during a time of intense grief.
Many of us have experienced the death of a loved one and remember how stressful it was to juggle our grief, the funeral planning, and the financial obligations we had. The thought of our spouse or children going through the same experience is unbearable.
The average final expense policy costs between $30-$70 a month and depends on your age, sex, health, coverage amount, and the life insurance company you choose. If you have significant health conditions or are over the age of 70, your premium will probably be higher and may cost between $70-$120 a month (though it may be less). Younger applicants who are in good health may qualify for rates in the $20-$50 range. Remember, a cheaper rate usually means fewer features and benefits for surviving loved ones. A few extra dollars a month could make a big difference in the support your family receives when you’re gone.
In 2017, the median cost of an adult funeral with viewing and burial was $8,755 (including a vault). Funeral and cremation expenses can cost families thousands of dollars, often within days of their loved one passing. Casket prices alone can be $2,000 or more depending on the material and style used. Simply opening and closing the grave can cost families anywhere from $300 – $1,000 depending on the funeral home. Final expense insurance – often referred to as burial insurance or funeral insurance – is designed to cover these costs
The current state of the healthcare industry has led to higher prescription costs, expensive medical procedures, and health insurance that doesn’t always cover consumer needs.
Of the 2.85 million people who died in the U.S. in 2019, more than eighty percent were on Medicare before they passed. A disproportionate share of Medicare spending occurs in the last year of life, covering costs related to chronic conditions, inpatient hospitalizations, and hospice care.
But government programs like Medicare and Medicaid only cover about two-thirds of healthcare spending by the elderly, according to the National Bureau of Economic Research. The report, which is based on data collected through the Medicare Current Beneficiary Survey between 1996 and 2010, found that healthcare spending for people aged 65 and over was approximately $18,424 per person, per year.
Take the time to understand funeral costs in your area. You can request a general price list from any funeral home in your neighborhood to get an idea of how much your final arrangements could cost your loved ones.
If they don’t already, make sure the person who will be in charge of your affairs has copies of all important documents. Share your final wishes with them too (what flowers you might want, what passages you want to be read, songs you want to be played, etc.). Documenting these ahead of time will save your loved ones a lot of stress and will prevent them from trying to guess what you wanted.
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