Is Final Expense Insurance Worth It?

Quick Answer

Final expense insurance may be the right choice if you’re hunting for a policy that covers end-of-life costs, typically comes with a low premium and usually doesn’t require a medical exam.

Mature couple checking documents for life insurance.

Final expense insurance can be a good way to pay for your end-of-life costs if you don't have traditional life insurance—particularly if you can't qualify for a regular life insurance policy.

With final expense insurance, your survivors may be less weighed down by expenses such as your funeral, which might cost $8,000 to $10,000. And you'll be spared the higher premiums and medical exams that typically accompany a life insurance policy.

What Is Final Expense Insurance?

Final expense insurance is a type of whole life insurance. It covers things like funeral expenses, medical bills, credit card bills, mortgage payments and car loan payments after the policyholder dies. You may see this type of coverage promoted as burial or funeral insurance.

If you can't qualify for traditional life insurance and low premiums due to age or medical conditions, final expense insurance might be a good option to help ensure your survivors aren't burdened by your end-of-life costs.

Financial expense insurance is typically geared toward people 50 to 85 years old, although some insurers offer coverage to people above and below this age range.

How Does Final Expense Insurance Work?

Final expense insurance is a type of permanent life insurance with coverage focused on the cost of your funeral, final medical bills and other end-of-life expenses. Regarding funeral expenses, the money from a final expense policy can go toward death-related costs such as the casket, burial or cremation, but there's no restriction on how the policy's death benefit can be spent.

According to final expense insurance provider Lincoln Heritage Life Insurance Company, the monthly premium for final expense insurance is roughly $30 to $70. For someone who's younger and in good health, the premium might be lower. But for someone who's older and in poor health, the premium might be higher.

The amount of the tax-free death benefit is guaranteed, as long as premium payments are up to date. And the premium will never increase. A final expense policy also builds cash value, which you should be able to borrow against.

The application process for final expense insurance is much simpler than the one for traditional life insurance. You typically provide personal information, including your age, and answer a few health questions. A medical exam generally isn't required.

Once you're approved, your coverage may take effect right away. Some insurers even promise that you won't be asked any health questions and that your application won't be denied. This type of coverage is known as "guaranteed issue."

Pros of Final Expense Insurance

Some of the pros of financial expense insurance are:

  • Fixed premium: The premiums for final expense insurance never go up.
  • No medical exam: Typically, applicants don't need to undergo a medical exam to qualify for final expense insurance. But they might be required to answer some questions about their health. This type of coverage is known as a "simplified issue."
  • Affordability: Final expense insurance often costs less than other types of life insurance. Why? Because the death benefit for final expense insurance generally is small.

Cons of Final Expense Insurance

Some of the cons of final expense insurance are:

  • Waiting period: In some cases, a final expense insurance policy comes with a waiting period. This means a set amount of time must go by before the death benefit is paid. But if there's no waiting period, beneficiaries might receive a payout within 24 to 48 hours after their claim is filed and approved.
  • Smaller payout: The death benefit for a final expense insurance policy might be much smaller than the death benefit for other kinds of life insurance. A typical payout might be anywhere from $5,000 to $20,000. Unfortunately, the small death benefit might not cover all of the policyholder's end-of-life expenses.
  • Potentially higher premium: Depending on your age and health, a final expense insurance policy might cost more than other types of life insurance. In fact, the premium cost might even outweigh the death benefit.

The Bottom Line

Final expense insurance can be a good alternative to traditional life insurance. This is particularly true for people seeking end-of-life coverage that generally charges a low premium and doesn't require a medical exam. However, the death benefit for financial expense insurance is fairly small, and beneficiaries may face a waiting period that delays the policy payout.