By Beth Donner, CRPC
Experiencing the loss of a loved one is undoubtedly one of the most difficult experiences we face in life, and although most don’t like to talk about end-of-life issues, planning can prove beneficial. Final expense insurance is life insurance typically used to pay funeral expenses; end-of-life healthcare costs, include nursing home costs not covered by Medicare; and any other form of accumulated debt.
According to the National Funeral Directors Association, the average cost of a funeral in the U.S. in 2014 was approximately $8,500 and when the cost of a cemetery plot is added in, costs can easily reach $10,000-$15,000 or more. For this reason, funeral expenses can have a significant financial impact on the loved ones left behind.
Many people use final expense insurance as a way to ensure their funeral is arranged and paid for in advance, so the burden isn’t left to their families or beneficiaries. Pre-planning for such inevitable costs can therefore be considered a most appreciated and prudent act.
Thinking about funerals leaves most people feeling a little uneasy, but many find that pre-planning a funeral can still offer great emotional and financial security, not only for themselves but particularly for family members. With pre-planning complete and purchase of final expense coverage in place, families find comfort in knowing that the funeral reflects what their loved ones wish to be carried out and that they will not be left with a financial burden. It gives tremendous peace of mind to loved ones when they know they don’t have to make such important decisions at a highly emotional time.
It’s important to note that age and health status may not affect approval of the final expense coverage but the policy may need to be in place for two years before any benefits pay out if the applicant is in poor health at the time of application. For this reason better coverage will be available to those who plan before they are critically ill, but coverage can still be available on a guaranteed basis regardless of a significant medical diagnosis. Most final expense policies can be issued up to the age of 80-85, depending on the insurance company, and are issued most commonly in the amounts of $2,000 to $75,000. Social Security will pay a lump sum final expense of $255, but this small dollar amount offers little relief toward burial expenses.
Final expense life insurance helps protect loved ones from having to pay substantial out-of-pocket costs and literally can save families from having to sell precious assets to come up with the necessary funds when the inevitable occurs. Without a final expense life insurance policy, most families have a hard time coming up with needed funds quickly. Regardless of health status it’s usually in the insured’s financial best interest to purchase a final expense policy as opposed to paying full price for funeral expenses.
Donner is a Chartered Retirement Planning Counselor and can be reached at Beth@DiversifiedPlanning.com or 919-601-0501.