Final expense insurance can save your loved ones a lot of money and stress at the time of your death. With the high cost of funerals, the last thing anyone wants to think about after they lose a loved one is paying for and planning final arrangements. Final expense insurance can help ease that burden by paying for many of the costs associated with funerals. In this article, you’ll learn how final expense insurance is different from traditional life insurance, who can buy it and how much you should buy.
Final Expenses Insurance vs. Life Insurance
Unlike the high face value most regular life insurance policies contain, final expense insurance is written with a much lower face value and is intended solely to take care of the cost of a person’s final arrangements. A regular life insurance policy ranges from $250,000 to $1,000,000, while a final expense policy is typically purchased for $5,000 to $50,000.
Universal Life Insurance
Universal life insurance is one of the two main varieties of permanent life insurance.
Unlike term life insurance, a universal policy can be maintained indefinitely.
What’s the difference between universal life insurance and whole life insurance (the other variety of permanent insurance)? Whole life insurance is characterized by its uncompromising guarantees; universal life insurance is characterized by its flexibility, transparency, and affordability.
Universal life insurance is an instance of cash value life insurance. “Cash value” is an interest-bearing account of real money. It’s primary role is equity for your policy—at any time, the policy owner can cash in his/her policy and walk away with its cash value.
The death benefit, premiums, and cash value are perpetually adjustable in the hands of the policyholder. In capable hands, that makes universal life insurance a more useful investment vehicle.
Term life insurance is the most affordable and simplest type of life insurance. Term life insurance is temporary, meaning that a policy of term life insurance provides coverage for only a certain number of years. (You can choose 10, 15, 20, 30 years depending on the life insurance company.) Any life insurance policy that is not a term policy is permanent life insurance.
Who should get Term Life Insurance?
Term life insurance is not just for bread winners. If you have children at home, carry debts, or own a business, term life insurance may be a good (and inexpensive) asset to maintain.
It is commonly purchased for the following reasons:
Pay for child care
Fund higher education
Cover debts or liabilities (e.g. mortgage, funeral costs)
Fund a buy-sell agreement for a business
Protect against the loss of a key employee
Replace an income stream