Final Expense Insurance
Final expense insurance, also known as "burial" insurance, is often a vital part of estate planning.
This type of insurance is a life insurance policy that you buy directly from an insurance company.
You can select anyone as your any beneficiary, and that person (who is typically a family member)
would then be responsible, upon your death, for making a claim on the policy. The insurance company
then pays the policy benefit amount to the beneficiary who, in turn, uses that money to carry out
your final arrangements. (Important note: The beneficiary is legally free to use the policy proceeds
any way he or she wants, so be very sure that the beneficiary you choose is someone you can trust to
carry out your final arrangements the way you would want.)
Additionally, if your final expenses cost less than the benefit amount of your policy, your beneficiary
is entitled to keep whatever sum remains after paying all your final arrangement bills. (As an example,
if you have a final expense policy for $10,000 and your total final expenses cost only $6,000, your
beneficiary is entitled to keep the $4,000 that went unspent.) This is possibly something to keep in mind
as you determine how much final expense insurance to buy (and as you determine the proportionate distribution of your estate.)
Final expense insurance policies are low face value (usually $5,000 to $50,000) term or whole life policies.
(A "term life" policy covers you for a specific time period or until a certain age, then expires. A "whole
life" policy covers you for the rest of your life.) Also, these policies are generally easy to obtain.
Most are either "simplified issue" policies or “guaranteed issue” policies. For a simplified issue policy,
the insurer asks you several medical questions but doesn’t require you to take a medical exam. A "guaranteed
issue" policy, as the name implies, is a “no questions asked” policy that is issued to anyone who applies.
In a few cases, insurers may issue what’s called a “graded death benefit” policy to people with serious health
problems. Under this type of policy, your coverage increases as time passes and your beneficiaries receive
only a fraction of the face value if you die before the passage of a certain period of time.
This Web site is intended for general information purposes only. It does not nor is it intended to constitute legal, tax or investment advice. Alliance America is not a lawyer, registered investment advisor or investment advisor representative, and is not engaged in the practice of law or the business of investment advice.