What is Final Expense Insurance: Plan Now ‘Cause We’re All The Walking Dead
What is final expense insurance? Do you know? If you don’t you should! Because having a final expense policy in place saves your family a lot of money and stress.
There are two guarantees in life: taxes and death so let’s face it, we’re all really just the walking dead 😉
Did you know the average funeral cost is in the neighbourhood of $8,000 – $10,000? And no, that doesn’t include the cost of a plot or grave marker.
Sure you can save a few bucks by skipping the brass band, single malt whiskey, and cigars – but you still have to shell out for the basics.
Don’t be a Zombie! Find out why you should deal with your final expenses TODAY!
What is Final Expense Insurance?
Don't Let Your Family Get Eaten Alive by Debt
Debt’ll do it to you every single time.
Now imagine this! Your kids embark on their careers and start families.
You’re close to retirement. The term insurance you maintain (kudos to you for protecting your income and lifestyle while the kids were still in college) just expired.
Man, life is good – you got them through the tough stages ALIVE, now they’re self-sufficient.
Phew! Now it’s time to enjoy life, travel, etc.
BOOM! The train you’re taking to Montreal derailed and guess what? You aren’t so lucky.
“Pre-planning funeral and pre-paying for services is always a good idea. This will relieve the burden for family members and loved ones during a difficult time and leave no questions when it comes to your final wishes.”
Don't Be a Zombie Your Family Will Thank You
Well if you walk through life like a Zombie you didn’t think about setting up a funeral insurance policy or making any other arrangements to take care of your burial costs.
Sure it went through your mind, but you know…
…I’m youngish and HEALTHY!
Hmmm I’ve heard it all before. The thing is none of that really matters now.
Life Changes for Your Family When You Die!
So those kids that were set for a golden future now have a funeral to plan and pay for.
All of the effort to put them through college and help them get off to a good start only to have them weighed down emotionally and financially. Bet that was NEVER your idea.
Nobody wants to leave their children or family worse off because of their untimely demise.
If only you set up that final expense policy things would be very different…
What is Final Expense Insurance?
Life Insurance to Cover Funeral Costs
Zombies have no idea what funeral insurance is!
People who are forward-thinking like to plan ahead. They don’t want to burden their families with unpaid funeral costs.
A life insurance burial policy is the most straightforward and simple option out there if you want to make sure your final expenses are covered.
In a nutshell, a final expense policy is permanent life insurance that you purchase to cover end of life debts. Most of the time it’s whole life no exam insurance. Which means:
- Monthly premiums are guaranteed to never increase
- Your policy never expires
- Coverage cannot decrease
- The policy is non-cancellable except for non-payment
- No physical or medical exams are required to apply
- Death Benefit (cash) is paid out tax-free to your beneficiaries
Let’s take a look at the broad strokes of final expense insurance. Zombies can skip this section.
What is Final Expense Life Insurance? - The Basics
Final expense insurance is a life insurance policy. It pays out cash to your survivors, tax-free, to cover your immediate burial costs when you go to join that big band in the sky.
Let’s clear up something right now. There are a few terms that agents use for end-of-life planning including final expense insurance, burial insurance, funeral insurance, cremation insurance…
…which has created some confusion over the years. So what’s the difference between these terms? THERE IS NO DIFFERENCE, they are all the same thing.
Final Expense Insurance = Funeral Insurance = Burial Insurance = Cremation Insurance
As I mentioned, all funeral insurance is permanent insurance because It has to last your entire life, to pay out a death benefit to your beneficiaries. Final expense life insurance comes in 3 different wrappers:
- Whole life no exam (most common)
- Guaranteed Universal life, and
- Term-to-100 (this is permanent insurance despite it’s name).
Note: Term insurance shouldn’t be used for final expenses because it’s temporary. It usually expires at age 80 or 85. If you survive past that age, you will not be covered until the day you die. So, this is one of those situations where permanent insurance is the only solution.
It can be confusing as there are a lot of options. As I mentioned before, a good independent agent like Policy Architects answers all of your questions to help you find you the best “wrapper” at the best possible price. Call us today at 1.888.501.9583.
How Does Final Expense Life Insurance Work?
Now that we got the “what is final expense insurance” question out of the way, we can dig a bit deeper.
When you pass away, your life insurance burial policy guarantees that the insurance company cuts a tax-free cheque directly to your beneficiaries.
This gives them the money to pay for your funeral costs.
There are no conditions or restrictions on how the money is used. This can be a good thing or a bad one – depending on your beneficiaries 😉
…and if there is any money left over after all the immediate burial costs have been paid, your loved ones decide how to spend it.
Did I mention that the money is paid out to your loved ones Tax-Free?
How Much Does a Funeral REALLY Cost?
This is one of the most important questions to answer when setting up your final expense policy!
Unfortunately, it can cost a LOT! I hate to be the bearer of bad news.
…and if you want some music, booze and a couple of cigars, well you are talking a pretty penny ladies and gentleman.
According to various sources, the average funeral cost in Canada is around $10,000. I’ve heard of people spending up to $25,000 and even more.
Conversely, I’ve heard of consumers getting basic cremations for as little as $2,000 or less. The average cost of a cremation with service and extras (obituary notice, viewing, flowers, etc), probably runs in the neighbourhood of $4,500.
Regardless of whether you choose burial or cremation, chances are, you’re not dying today. So the question is, 10, 20 or 25 years from now, how much will these same funeral goods and services cost?
Make Room for Inflation
A financially savvy person knows that a $10,000 funeral today will cost ’em about $14,859 twenty years from now (based on an average inflation rate of 2%). So it would be prudent to get a final expense policy for at least $15,000 to make sure your family is covered.
Hey, you can’t lose. The worst-case scenario? Your loved ones have some money left over after the immediate burial costs are paid. This is a good problem to have.
65% of Canadians choose Cremation over a traditional burial ceremony? The good news is, if this is the way you wanna go, it's about40% cheaper than the time-honoured funeral ceremony.
Other Factors Affecting the Cost of a Funeral:
Do you have children, grandchildren or siblings who live on the other side of the country?
Would you like to help pay for their travel expenses when they attend your memorial?
Factor that into your funeral planning budget too. Don’t forget that there may be other outside costs that should be considered, this is just one example.
What About the Canada Pension Death Benefit?
If you’ve been paying into the Canada Pension Plan (CPP) for the prerequisite number of years, you may be eligible to receive the CPP Death Benefit up to a maximum of $2500.
Personally, I look at this as icing on the cake. Assuming you qualify, your survivors have to fill out an application and wait for payment from service Canada. Processing can take anywhere from 4 to 12 weeks.
If you’re on a fixed income – many of us are – it’s good to know that there’s some money there from the government. You can take that into consideration when deciding on a coverage amount for your final expense policy. Let’s say you purchase a $5,000 whole life no exam policy through Plan Protection Canada. That means your total coverage, including the CPP death benefit, will be $7,500.
The question is, do you really want your loved ones to front the funeral home money to pay for your burial and then wait to be reimbursed by the Government?
Just keep in mind, the CPP death benefit is 100% taxable income and will only cover a small percentage of the funeral costs.
PSSST - I've got a little tax info for ya'
Is the CPP death benefit taxable?
Yes, the CPP Death Benefit is taxable income and the tax must be paid by the person who receives the money whether it's the estate or an individual.
*THE GOOD NEWS: All final expense life insurance proceeds are paid out tax-free and free of probate as long as your named beneficiaries are alive.
Final Expense Insurance Rates & More
I mentioned above that funerals can cost a pretty penny.
Yes, adequate coverage is important, but If you’re on a fixed income and money’s tight, I would never recommend purchasing a policy you can’t afford. It’s important if you do purchase a plan that the money is there when your loved ones need it the most.
“Better to have a small amount of coverage at the right price than too much coverage at the wrong price.” Confucius
Did you know you can get a final expense policy for as little as $5,000 in coverage?! (One carrier offers coverage amounts down to $1,000)
Plus, If you happen to qualify for the CPP death benefit amount ($2500) as well, that’s $7500 of total coverage!
So let’s take a look at some rates now.
Final Expense Insurance Rates
Below are real final expense insurance rates from Canada Protection Plan, one of the top no medical life insurance companies in Canada. Other carriers who sell burial insurance include American Income Life, Assurant Life, Assumption Life, Industrial Alliance, Foresters, Empire Life, Wawanesa Life and more.
These final expense quotes are for someone who is a non smoker. If you’ve smoked any tobacco products, including vaping, in the last 12 months, expect to pay up to 40% more.
NOTE: You may or may not qualify for these final expense insurance rates. Your health determines your premiums – which could be more or less than these quotes.
|Age & Gender||$10,000||$20,000|
|50 Year Old Male||$22.64 per month||$39.89 per month|
|50 Year Old Female||$20.06 per month||$34.72 per month|
|55 Year Old Male||$25.71 per month||$46.03 per month|
|55 Year Old Female||$23.77 per month||$42.14 per month|
|60 Year Old Male|
$34.40 per month
|$63.40 per month|
|60 Year Old Female||$29.98 per month||$54.56 per month|
|65 Year Old Male||$46.67 per month||$87.95 per month|
|65 Year Old Female||$38.32 per month||$71.24 per month|
|70 Year Old Male||$63.98 per month||$122.56 per month|
|70 Year Old Female||$47.33 per month||$89.26 per month|
|75 Year Old Male||$92.12 per month||$178.85 per month|
|75 Year Old Female||$66.69 per month||$127.98 per month|
|80 Year Old Male||$123.36 per month||$241.33 per month|
|80 Year Old Female||$91.34 per month||$177.28 per month|
NOTE* With most carriers including Canada Protection Plan, the insured cannot be over the age of 80 on the date the application is submitted. That means if you’re 80 years and 7 months, they’ll consider you to be and 81 year old as your closest to that birthday.
Final Expense Policy Payment Options
Most people think you have to make monthly payments for your final expense policy but this isn’t the only way to do it.
Here are some of the payment options you have:
- Most carriers give you the option of paying monthly or annually. If you decide to pay annually, you’ll save 8% on your premiums. This is the equivalent of approximately one month’s premium.
- You can pay monthly until the age of 100 or your death, whichever comes first
- There’s also an option to pay the entire policy in 20 years. This may be something to consider if you like the certainty of knowing that you’re paid up and don’t want to ever risk having the policy lapse because you missed a couple of payments.
- There are funeral insurance policies that have graded premiums meaning your premiums increase every 5 years over the life of the plan. At Policy Architects, we ONLY recommend policies that have guaranteed level monthly premiums. Graded premiums are to be avoided at all costs simply because they can get out of hand when you are most vulnerable.
What is Final Expense Life Insurance?
Do I Need a Medical Exam?
Nope...Most Funeral Insurance Policies Do NOT Require A Medical Exam
Probably 95% of all final expense plans purchased are no medical life insurance policies. That means NO needles, NO fluids and NO physical tests! All that is required is answering a bunch of health and lifestyle questions.
There are two reasons for this:
- Most seniors who apply for these types of plans have mild to moderate health issues. It’s very common when we get to be in our 60’s and 70’s to have things like high blood pressure, high cholesterol and even well-managed diabetes. The combination of age and health issues make it less likely for traditional carriers to underwrite at affordable rates.
- Also, the majority of funeral insurance policies are sold with smaller face amounts: $5000 – $15,000. Most traditional carriers will not issue a full medically underwritten policy for less than $25,000 or $50,000. So, there’s an entire industry built around servicing this group of consumers – seniors looking for small, whole life no exam policies to cover final expenses.
So, If you’re looking for coverage amounts of $10,000 or less, a simplified issue life insurance policy is really your best bet. Not to mention, a lot of my clients like the fact that you can buy no exam funeral insurance over the phone in a matter of minutes.
Hey if you’re in a hurry, or older and worried about your health, it’s really great to know you can get coverage in place fast with little to no hassle.
Which brings me to this…
Fully Underwritten Final Expense Life Insurance
…did you know you can buy a fully underwritten final expense policy as well?
The decision is yours. If you’re healthy, with no insurability issues and looking for slightly larger coverage amounts (ie $25,000) this option may be worth exploring. These traditional medically underwritten policies are only slightly cheaper than their non-medical counterparts. However, they tend to have much better guarantees in terms of cash values and reduced, paid-up insurance amounts.
Having said that, if you are relatively healthy and want to take funeral insurance off your “to-do” list I suggest speaking to the agents at Policy Architects. We can help you figure out which option is best for you. Call us today at 1.888.501.9583 OR Schedule a Call when it’s convenient for you.
No Medical Final Expense vs. Fully Underwritten Example:
Healthy 70 year old Male
For this example let’s use a 70 year old male, non-smoker. He wants a $20,000 final expense policy to cover funeral costs so his family isn’t left holding the bag when he dies.
If he goes with a traditional carrier like Empire Life with full underwriting, which means a phone interview & vitals, a burial policy (Solution 100) costs him:
- $117.63 per month
With a No Medical insurer like Canada Protection Plan (CPP), he pays:
- $122.56 per month
That’s just $4.93 more per month for similar funeral cover insurance
*NOTE These coverages are similar but not identical. The Empire Life policy has much higher guaranteed cash and paid up insurance values than the Canada Protection Plan Policy.
Prepaid Funeral Plans vs Final Expense Insurance
If You're Financially Savvy, a Pre-Paid Funeral Plan May Not Be Your Best Option.
This is a subject that deserves an entire post but for the sake of making sure we touch all the bases, I’m going to go through it briefly.
There’s more than enough evidence to categorically say purchasing a final expense policy is a superior strategy to pre-paying your funeral costs, hands-down!
Here are some great reasons to make another choice for your funeral plans:
- You can’t move your prepaid funeral plan…and if on the off chance you can, there are fees and paperwork. What happens if you move?
- It’s very difficult to make changes to your prepaid plan – who wants the hassle?
- Prepaid burials don’t guarantee coverage for future funeral costs. Services outside of the funeral home’s control may go up which may mean you’ll pay more.
- The Funeral Home gets to hold onto your money. What if something comes up like an emergency? It’s also a bad place for growth. Why not invest somewhere with returns?
- The Funeral Home is your beneficiary if you buy a life insurance burial policy through them. Hmmm.
“The provincial government has received as many as 85 inquiries…there could be up to 50 instances where money for a prearranged funeral was improperly handled”,
The bottom line is it’s awesome to pre-plan your funeral but unnecessary to pre-pay. A final expense policy gives you the ultimate flexibility because it pays out cold hard cash which means your family has options when it comes to executing your end of life wishes.
Final Expense & Assurant Life Of Canada
You can’t write a post about final expense life insurance without mentioning Assurant Life of Canada (Canada Purple Shield). This final expense pioneer is the largest provider of preneed funeral insurance in North America.
Chances are if you or someone you know has made a pre-paid arrangement with your local funeral home, it is underwritten by Assurant Life of Canada. They’ve been in business for decades, are financially solid and offer the best “set and forget” solution in the marketplace. Sounds good, doesn’t it? It’s important to know that Assurant Life of Canada also has the most costly final expense insurance rates in the marketplace.
If you want to read one of the most in-depth, fair and balanced reports about the Canadian Preneed Insurance Industry, check out my Assurant Life of Canada review here.
When It Comes to a Final Expense Policy
Age Ain't Nothin' But a Number
Even if you’re a senior and googling what is final expense life insurance you’re NOT out of luck!
In Canada, you can get a final expense policy up to the age of 85, but the most common age range for applicants is between 50 – 80,
Did you know that even as a non-resident, you can qualify to purchase funeral insurance?
As long as you’re one of the following:
- landed immigrant
- foreign worker
- nanny or student
- holder of a super visa
You’re eligible to buy final expense insurance. Even if you’ve only been in the country for a short period of time, as long as you’re under the age of 75 and have a permanent Canadian address, you’re eligible for Guaranteed Issue burial insurance.
Note: If you have a super visa, a funeral insurance policy can ensure that your immediate burial costs don't become the responsibility of your children or grandchildren while you're visiting in Canada.
Financial Whizzes GoFund Themselves
Zombies Think Go Fund Me is a Funeral Plan....
YIKES! Now this is scary.
If you truly don't have the money I guess Go Fund Me may provide an emergency solution. The thing is you are relying on the generosity of others - and that may or may not come to fruition.
The only way to assure your funeral WON'T be a drain on your family is to PLAN. Here are a few good suggestions!
3 Ways to Pay for Your Funeral Expenses
Yep, you can self-fund your funeral. To be perfectly frank this is probably the most financially intelligent approach to final expenses.
…but there’s a catch.
You need to be good with money. This means planning ahead for your retirement with a financial advisor to invest your income wisely.
If you’ve been responsible then chances are your estate is large enough to easily handle those pesky funeral costs. In that case, cheers to you!
Buy A Final Expense Policy
Another Rockstar move!
There are a few ways to purchase funeral insurance:
- If you have a health condition and/or value speed & convenience, secure a no medical exam policy. This is also the most popular way for 95% of seniors, most of whom have some of these issues. Not to mention, they’re looking for smaller coverage amounts not available with traditional insurers.
- If you’re reasonably healthy, want the best final expense insurance rate possible and don’t mind doing a medical, apply to a traditional carrier with standard underwriting.
- Do you currently have a term life insurance policy that’s in force? If so, it may be possible for you to convert a small amount of your current term insurance (ie. $25,000) into permanent insurance without providing any medical evidence. All that may be required is some paperwork.
Again, this is a situation where having a good independent life insurance agent worth his or her salt, is invaluable. Call Policy Architects today 1.888.501.9583 or schedule a call at your convenience.
Leave it for Your Family to Pay
Why would anyone do that you ask?
It’s an awful thing to burden your family with, especially at a time of loss & stress.
…But It happens all the time.
No one really wants to talk about death but let’s be honest here for a moment. Make no bones about it – choosing NOT to sort it out your end of life arrangements is choosing to let your family and loved ones sort the mess out later.
Don’t kid yourself, not dealing with it is a choice. It sounds harsh but it’s the truth.
“Your death should be a time of celebrating your life – not a time for your loved ones to crowdfund asking for donations toward the final expenses that you failed to properly plan toward.” MJ Harris, HuffPost, GoFundMe is Not Life Insurance
Is There a Downside to a Final Expense Policy?
There are absolutely some cons! This is true for EVERYTHING under the sun.
Hey, there may be more financially expedient ways to make funeral plans.
BUT….and this is a big but…many, many, many of us don’t take the initiative. Purchasing a funeral insurance policy sets you on the right path because you can set it and forget it.
Which is valuable to a LOT of us.
Final Expense Insurance is NOT a savings plan
Some critics say that paying into a funeral insurance plan long term can add up to much more than the original face amount. That can be true depending on your health, age and the carrier you go with.
It’s also important to remember that a final expense policy is not a savings plan. It’s permanent life insurance – usually whole life – that covers you from day one and pays out the entire death benefit regardless of how many payments you’ve made at the time of your passing.
Obviously, the best ways to pay for a funeral is to have the cash on hand when that day comes. However, that isn’t always possible for many people. Did you know some consumers have the money to pay upfront but still decide to take out a funeral insurance policy anyways? Why? Well, because they can see the value in paying a small monthly amount to have someone else share the risk.
Final Expense Insurance and Your Estate
Not to mention, a final expense policy pays out quickly. Even if you have lots of cash, the average time it takes to settle an estate is 9-18 months. A burial insurance policy pays out directly to your beneficiaries. It bypasses your estate and probate. They can use the money to pay immediate funeral costs and any cash leftover stays with them. Remember, you don’t claim insurance proceeds as taxable income because all life insurance benefits payout tax-free.
For 95% of us who have more modest needs, a final expense policy works really well and is quite affordable! So I think the pros far outweigh the cons.
A Final Expense Policy Helps You Have a Monster Mash
Not a Zombie bash...
Ok so death ain’t all that appealing but that doesn’t mean you can’t do it with style.
HEY, it’s your final hurrah.
So if you want to pull out all the stops, final expense life insurance should be on your radar, my friends!
Just think about it! You could throw a party to beat all others – where people celebrate your life and all you’ve contributed.
…BUT parties are expensive. If you want to provide some food, wine, and fun it’s gonna cost ya a pretty penny.
Only a Zombie leaves it to the kids to plan!
You've made it through Final Expense 101.
Making sure your end of life expenses don’t become a burden to your loved ones is a GREAT move.
Why You Need Policy Architects
For The Best Final Expense Quotes
Hey guys, just because we’re all the walking dead doesn’t mean we can’t have some serious fun!
Why does funeral insurance have to be sad?
In my mind, final expense planning is ALL about love. What’s more important than your spouse, kids, and grandkids? Aren’t they the whole reason we work ourselves into the ground?
Instead of looking at life insurance as an honorous obligation, why not see it as a way to keep the promises you make – whether you are here or not.
Hey, I put my money where my mouth is. I have a substantial life insurance policy that will comfortably cover my immediate burial costs and all my family’s needs should something happen to me.
A Final Expense Policy Helps Your Family Cope with the Financial Burden of Death
The premiums pale in comparison to the comfort I feel knowing that there's money to take care of business...
Not the mention the fact that my kids can afford to go to university - no matter what happens. I know this article provides a lot of insight into the question," what is final expense insurance?".
We work with the best life insurance companies in Canada. That means we will find you the most affordable final expense plan on the market today!