Final expense insurance is one of those topics most people want to avoid. Yep. The thing is death is unavoidable. In fact, I’m making it one of my goals to normalize this topic – because it’s so important.
Sure we all want to live to a ripe old age and peacefully pass away on our 100th birthday, but it doesn’t always work out that way. There are two things in life that are inescapable and that’s death and taxes. So why is this such an uncomfortable topic?
We plan for education, home purchases, children and retirement but the majority of us want to avoid the “death thing” altogether. That would be fine EXCEPT the mess you leave behind is left for your loved ones to clean up after you’re gone.
Rest assured, your debt won’t disappear when you pass away. Taxes have to be paid and your funeral WILL take place. So let’s see how final expense insurance can help you alleviate this burden and give your family some peace of mind.
Why Should You Take My Advice?
My name is James Heidebrecht, the Founder of Policy Architects. I got into this business hoping to change the way people look at life insurance. It’s one of those misunderstood products out there and I created this blog to clear up the misconceptions.
Sadly over the years, my wife and I have known way too many people who failed to plan...leaving their families in very difficult situations. This simply doesn’t have to happen. Life insurance is so incredibly affordable and provides a safety net for your family just in case. Although we all like to think death won’t happen to us any time soon – it can and does.
So why leave things up in the air when you can do something about it? As an independent life insurance agent, I’ve seen way too many families who have done virtually NO estate planning. Nada. Zip. Zilch. No will, no savings for final expenses and lots of financial disarray.
Clients often come to my office with very little understanding of what will happen if they pass away suddenly. They are also very surprised by reality when we go through a needs analysis. Ouch!
This is why I want o write this article. Inaction devastates families and I want to help prevent that.
So let’s get back to business!
Traditional Term & Permanent Life Insurance
As you can see I think life insurance is important. Did you know there are many different ways you can protect yourself? This is the reason you need a great independent life insurance agent to guide you through the process. If you’re reading my blog you know that there are two general types of life insurance.
- Term Life Insurance: This is temporary protection that’s typically used to protect your family from loss of income and issues created by debts. In a nutshell, you select a face value (amount of money you need to cover the financial losses incurred by your death) and coverage period (terms that usually come in 10, 20 and 30-year increments). Then you take a physical and underwriters review your health and life circumstances. After all this, the underwriters issue a rating that determines your monthly premiums. Basically, your rating is their assessment of the risk the chosen company takes on to insure you.
- Permanent Life Insurance: This is permanent coverage. So if you want protection until the day you die a permanent policy is for you. Typically this coverage includes a cash accumulation feature. Permanent policies are complex and come in many different shapes and sizes that include Whole Life, Universal Life, and other product variations. I highly recommend calling Policy Architects if you want permanent coverage because there’s a lot more to it than meets the eye and it’s pricey because there’s a guaranteed payout.
So Where Does Final Expense Insurance Fit In?
Hmmmm I bet you’re wondering where Final Expense Insurance fits into this equation? Well, it’s permanent coverage. To be frank I feel like final expense insurance deserves it’s own category altogether. This is because it fills a VERY specific niche and despite the fact that it’s a permanent product it’s very affordable.
For the most part, we recommend term life insurance at Policy Architects. This is because it’s super affordable and protects families during their most vulnerable periods.
Because of the cost, permanent products are typically reserved for those who have an estate, business interests or children with special needs. Which means there’s a smaller pool of people that suit this purchase.
That being said Final Expense Insurance is the exception to the rule!
Why Is Final Expense Insurance The Exception to the Rule?
Final Expense Insurance is one of those products that works a charm for those that need it. So let’s take a look at why you would consider using a product like this.
As I mentioned above Final Expense Insurance is a permanent product but it’s far more affordable and flexible because the values are typically much smaller.
There are basically two different types of Final Expense Insurance policies.
Medically Underwritten Life Insurance: This coverage is only suitable for consumers who are in good health. So if you are elderly with a whole host of medical issues this is probably NOT the best route for you. Typical coverage is usually $10,000 and up and depending on the product. Most traditional insurance companies have minimum coverage amounts of $25,000 but some carriers including Industrial Alliance and Wawanesa Life offer medically underwritten coverage at the lower amounts.
Generally speaking, medically underwritten policies are more desirable because the underwriting is based on a blood and urine test (The Gold Standard) and such they come with better options and guarantees. If however, you’re looking for a smaller face amount (ie. $5000) to cover a cremation, you may find the next type of final expense insurance a better fit
No Medical Exam Life Insurance: This is the route I recommend for 90% of my final expense clients. Typically when we start thinking about buying a life insurance burial policy, we’re in our 60’s and 70’s. Many of us have developed health or medical issues which will result in a rating or decline of coverage should we go the traditional route. These issues may include high blood pressure, high cholesterol, diabetes, a history of heart problems and stroke, etc. No medical coverage is a great option to cover the cost of a funeral for the following reasons:
- Coverage can be put in place quickly
- Coverage amounts from as low as $5000 up to $350,000
- No physical or medical exams are required as part of the application
- Rates are very affordable even when compared to standard-issue policies
- No medical products are guaranteed
- No one can be denied coverage
Final Expense Insurance How Much Do You Need?
One of the reasons Final Expense Life Insurance is so awesome is because it’s so affordable! Not to mention the fact that it’s available to people who are older and have medical issues. If you’re looking for Final Expense Insurance chances are it’s because you want to cover funeral costs.
How much you need completely depends on what your goals are. Some people want a no holds barred burial with all the bells and whistles. If you plan to leave the world this way it’s gonna cost a pretty penny. A big shindig will set you back at least $15 – 20K – maybe, even more, depending on what you want! Yes, it’s hard to believe but the cost of a funeral plot, grave marker, food, entertainment, and the venue really adds up.
If this is out of your ballpark cremation is far more affordable and you can probably get away with spending about $5K for the whole shebang if you keep it very basic.
As you can see these costs can really set your family back.
This is where Final Expense Insurance can help.
You're Not Dying Today
This is a planning step many people miss…
The average cost of a funeral in Canada today is about $8,000 – $10,000 but it can be as high as $25,000. For a cremation with a service, you’re looking at anywhere between $4,000 – $6,000.
Now, that’s today but you’re not dying today! In 10, 20 years from now, those prices could easily double. So if you want a burial that’s $8-10K, chances are 15 years from now, it’s going to cost close to $15k. So plan accordingly.
Nah! I Have a Prepaid Burial Plan with My Local Funeral Home...You Better Think Again!
Sure that sounds good…in theory. The thing is your funeral may take place YEARS in the future. What happens if the family business down the street folds? Do you really want to be tied to a funeral parlor? The truth is, life changes and so do our plans. Final Expense Insurance provides portability and flexibility that is not available with a funeral plan.
If you want security that the funds will be available to your loved ones when the time comes I highly suggest avoiding this path.
Unless you’re living on borrowed time, most experts suggest avoiding this approach and opting for another prepaid funeral arrangement. If you’re in good or reasonable health, you might outlive the funeral home, which could go out of business. Or perhaps the funeral home management will change, and the funeral home will no longer be a place that you think your family will be happy working with. Or maybe you’ll want to move to another part of the country, where the climate is warmer and your kids have moved. Experts say there are too many risks with prepaying a funeral home. US News
Final Expense Insurance, Debts & Taxes
If you checked out the coverage options above you may have noted that there is a broad range of coverage amounts available. You can get $5,000 of overage to $300,000! For the most part, Final Expense Policies are $5,000 – $25,000. That’s not to say it caps out there.
Some of my clients want to take care of debt and any estate taxes so they choose higher coverage amounts. You may even want to leave a small nest egg to show your love. The best thing you can do to determine what works for your estate planning needs is to contact an independent life insurance agent like those at Policy Architects. We perform a needs analysis to make sure your policy achieves all your goals – affordably!
How Your Health & Age Impact Your Coverage
I work with a lot of people who are looking for Final Expense Insurance and one of the biggest issues I run into is people waiting until they have serious medical issues before they call me. It’s one of the toughest parts of my job. Unfortunately, I’ve had to tell way too many clients that their only option is guaranteed issue and it’s the most expensive coverage. Not to mention, it comes with a 2 year waiting period. This means you’re covered for accidental death from day 1 of your policy but nor for death by natural causes until you reach the 2 year mark. If you pass away within the 2 year waiting period of non-accidental means, the death benefit will equal a repayment of your premiums plus interest, to your loved ones.
This is not the sort of conversation I like to have. The key to getting comprehensive AND affordable life insurance is planning…
I get it. I get it. A serious medical scare makes us all sit up and take note. The thing is by the time you start to look at all of this stuff you’re now considered high risk and will pay top dollar for ANY coverage that is if you qualify. This means you’ll pay a bomb for protection AND you may not even get the coverage you need to achieve your goals.
Don’t be one of those calls. Speak to Policy Architects today and we will go through all your options.
I also want to stress that most of us are healthier than we think. When I say serious medical issues I mean a brush with cancer or a heart attack. Conditions like high blood pressure, elevated cholesterol and diabetes type 2 aren’t in the same category. This is another reason to work with an independent life insurance agent.
We know the ins and outs of the underwriting processes of the top life insurance companies in Canada. We will help you find the best fit! All insurance carriers are NOT created equal.
Get coverage in place while you’re young and healthy enough to qualify for the protection you’re looking for.
Call Policy Architects for Your Final Expense Insurance Needs!
What this all comes down to is people die. It’s unavoidable. Did you know in some cultures death is celebrated? In our world, we concentrate on the void left, while others emphasize the celebration of life. My wife and I have decided to embrace the process and plan for the future by taking a realistic look at what it takes for our family to move forward if and when an early death happens.
The reality of burial is costly so we are planning so our kiddos don’t have to foot that bill when we make our final exit. No matter how you look at it death is a huge change for families. Leaving your loved ones with a $5000 – $15,000 funeral bill can be financially and devastating and at a time when they’re dealing with the emotional distress that goes along with losing a family member.Why not make it as easy as possible by taking a long hard look at the impact of your decisions on those you love.
If you haven’t done estate planning pick up a phone and start today. Debts, mortgages, and burials can really set your heirs back and tie up your estate. A little thought can go a long way – I would say it’s one of the biggest gifts you can give your family.