What Is Final Expense Insurance?

Final expense insurance is the euphemistic term for a type of whole life insurance that has a relatively low death benefit—generally between $5,000 and $25,000. This kind of policy, which may also be called “burial insurance” or “funeral insurance,” is intended to cover the costs of the insured individual’s funeral. Final expense insurance is generally easier to qualify for and more affordable than other types of life insurance.

Here’s what you need to know about final expense insurance so you can decide if it’s right for your needs.

What Is Final Expense Insurance?

The median cost for a funeral, including a viewing and burial, was $7,848 in 2021, according to the National Funeral Directors Association. This calculated median does not include all the expenses associated with a burial, such as the cost of a burial plot, travel costs (if the deceased needs to be moved to a different location), food and drink costs for a funeral reception, and more. In short, your final expenses may be far greater than you or your family anticipate.

Final expense insurance can provide your family with the necessary funds to pay for your funeral. This type of whole life insurance promises a death benefit no matter when you die, as long as you are up to date on premium payments. However, though final expense insurance is marketed for burial expenses, your beneficiaries can use the benefit for any financial needs they have, including paying for medical debt accumulated during your final illness or any other financial obligation.

Because final expense insurance offers a relatively low death benefit, the premiums tend to be inexpensive, even for policyholders who are between the ages of 50 and 85—the demographic that burial insurance is most often marketed toward. Most policyholders can expect to pay as little as $25 per month for a woman in her fifties, up to as much as $190 a month for a man in his eighties for a $10,000 policy. Premiums can vary depending on age and gender.

Final Expense Insurance vs. Pre-Need Insurance

Final expense insurance is similar to another product known as “pre-need insurance” or a “prepaid funeral plan,” but it’s important to understand the differences. While a final expense policy allows you to choose any beneficiary you like, and the death benefit may be used for whatever the beneficiary chooses, pre-need insurance typically names the funeral home that will handle your burial as your beneficiary, and therefore the benefit can only be used for your funeral expenses. 

Pre-need insurance is often marketed as a way to “lock-in” funeral expenses at the time of purchase, since many of these policies guarantee specific costs for services and products, such as a casket, even if prices rise with inflation in the years before your death.

Since both final expense insurance and pre-need insurance may be referred to as funeral insurance, it’s important to understand the differences between them. If you’re considering buying pre-need insurance, make sure you understand your rights and the requirements for this type of funeral insurance. The NFDA provides a funeral pre-planning bill of rights for consumers, as well as a checklist of important stipulations that every pre-need policy should include. 

How Does Final Expense Insurance Work?

To sign up for a final expense policy, you will need to answer a few health-related questions. Unlike when buying traditional term or whole life insurance, you will not need to undergo a medical exam, nor will you need to give the insurer access to your medical records. That said, if you have serious or multiple health issues, you may not qualify for this kind of policy. 

Some insurers offer policies with a modified benefit or a graded death benefit, rather than a level benefit, to those who cannot pass the health screening questions. These policies typically have a waiting period of two to three years until the full death benefit will be paid. If the insured dies within that time, beneficiaries would receive a return of premium or only a portion of the death benefit.

Signing up for a final expense insurance policy may mean that you will be paying premiums for the rest of your life. Though the premiums tend to be affordable, the ongoing premium expense is something you should factor into your decision. In addition, like many other types of life insurance, missing a single premium payment could terminate your policy. 

Considering the ongoing nature of premium payments and the likelihood that you may be ill or otherwise incapacitated at some point during your final days, it’s important to ensure you can continue to pay your premiums through tough times. However, since final expense insurance is a type of whole life insurance, you may also be able to access the cash value of your policy via a loan or cash surrender. 

Do I Need Final Expense Insurance?

People who already have a whole life insurance policy in place may not need a final expense policy if the whole life policy is large enough to cover all your insurable needs, including burial costs. However, if you do not carry life insurance—either because your term life policy has lapsed or because you cannot qualify for a traditional policy—you may find that final expense insurance will meet your needs, especially if you don’t want to burden your family with paying for your funeral.