Final expense insurance—aka guaranteed issue life insurance—is technically a type of whole life insurance. However, it is much easier to qualify for than other types of whole life insurance, and will tend to pay out an amount between about $2,000-$50,000 depending on the specific plan. The idea behind this type of policy is to help the beneficiaries of the plan, pay for the end of life expenses of the policyholder. This money can be used for whatever the beneficiary needs, which might include the policyholder’s bills incurred as a result of end of life health care, palliative care, funeral costs, legal fees, etc. Final expense life insurance can be a great way to set aside some money to make it easier for your loved ones to manage end of life responsibilities upon your passing.

Benefits of Final Expense Insurance

Final expense insurance is easier to qualify for than whole life insurance, but like whole life insurance, it guarantees a non-taxable payout after death. This makes final expense insurance attractive for someone who wants to help their loved ones with the costs of services like end-of-life care or a funeral. 

Final expense insurance is usually either a guaranteed issue insurance or a simplified issue insurance. These plans typically involve certainty that your beneficiaries will receive a payout upon your death. This makes them an attractive option for someone who wants to be sure there will be a payout.

Final expense insurance also doesn’t require a medical exam, so people who don’t qualify for other types of life insurance can still get this type of plan. Offering some coverage with this type of plan is an alternate way to protect your loved ones if you can’t get a term life or whole life plan.

Drawbacks and Considerations of Final Expense Insurance

When thinking about purchasing final expense insurance, there are a few important considerations to make sure it’s worth it. One is to consider whether it’s more worthwhile than another type of life insurance policy. For example, a health-conscious person who is likely to live a long time may end up paying more over time toward a final expense insurance policy than he or she would have into a term or whole life insurance policy. As a person in good health, taking the medical exam for a different type of policy often results in a better deal.

Another consideration is to make sure saving money for your own end-of-life care and/or funeral can’t be done on your own more cheaply. Sometimes saving your money independently for these types of costs comes out to a better deal. Talking to an insurance agent can help you see what your options are.

Finally, make sure you won’t allow your final expense policy to lapse, because if you do there will be no payout to your loved ones after your death. People often lapse on these types of policies so having a plan to make sure to make regular payments on time to make sure you benefit from this type of plan.

Should I Get Final Expense Insurance?

Final expense insurance is one way to cover the costs associated with the end of life for your family and loved ones. Whether to get it depends greatly on your individual desires and circumstances, but in general, it’s best for people who are looking for a smaller guaranteed lump payout at the time of death.

It may also be a good alternative for people who can’t qualify for other types of life insurance plans because of medical conditions. Talking to a qualified insurance agent or financial adviser can help clarify whether final expense insurance or another type of life insurance is better for your needs.

Disclaimer: Products may not be available in all states and product features may vary by state. Insurance death proceeds are generally received income tax-free under IRS Section 101(a) provided the benefit is paid to the beneficiary in a lump sum. Health IQ licensed insurance agents not authorized to give legal, tax or accounting advice. For advice concerning your individual circumstances, consult a professional attorney, tax advisor or accountant.Disclaimer: Products may not be available in all states and product features may vary by state. Insurance death proceeds are generally received income tax-free under IRS Section 101(a) provided the benefit is paid to the beneficiary in a lump sum. Health IQ licensed insurance agents not authorized to give legal, tax or accounting advice. For advice concerning your individual circumstances, consult a professional attorney, tax advisor or accountant.