Common Misconceptions About Final Expense Insurance

Most people often don't prioritize saving for funeral costs and end-of-life expenses. That’s because the topic of death is uncomfortable to discuss for most of us. As a result, we avoid it as much as possible.

However, we shouldn’t overlook the need for end-of-life planning. One of the most popular ways to pay for funeral costs is with a final expense policy. Due to a lack of awareness and complex terms, there are many misconceptions surrounding final expense insurance. 

In this blog post, we will address the prevalent misconceptions about final expense insurance that you need to be aware of.

“Final expense insurance is only for the elderly.”

While final expense insurance benefits seniors the most, it is also available to younger age groups. Some insurance providers set a minimum age of 45 and maximum age of 85 to qualify for a final expense policy. The earlier you apply for coverage, the more likely you’ll benefit from lower premium rates.

Whether you should purchase final expense insurance early on is a personal choice. Consider consulting with an insurance agent to gain insight and make an informed decision about your end-of-life plans.

“I have enough savings to cover funeral expenses.”

With the increasing funeral costs year after year, your savings might not be enough to cover funeral and memorial services. Having final expense insurance helps ensure that your savings won’t deplete in case of unexpected circumstances. It provides you with an additional layer of protection and peace of mind. 

With a final expense policy, your surviving family will have immediate access to funds without going into debt or taking away from your savings.

“Final expense insurance is only for funeral costs.”

While final expense insurance is designed to cover end-of-life expenses, it has other features and benefits. Aside from funeral costs, you can use the death benefit for anything, such as medical bills and outstanding debts. Your beneficiaries have the option to spend the lump sum on estate taxes or probate fees. 

However, keep in mind that the death benefit from final expense insurance is smaller compared to other types of insurance policies. The average payout ranges from $5,000 to $50,000. Always review your policy terms to learn more about the coverage details and specific death benefits.

“It is only for individuals with health conditions.”

No, it’s not true that final expense insurance is exclusively for people with illnesses. Due to its simplified underwriting, final expense insurance is a good choice for people who can't get other policies due to their pre-existing conditions. 

Applicants with health issues may still qualify because a medical exam isn’t a requirement. When you apply for final expense insurance, you will only need to answer some health questions. That’s why individuals with poor health can still secure a policy. You may consult with an insurance professional to help you explore your options, especially if you have a health condition.

“Final expense insurance is not tax-free.”

The death benefit from the final expense insurance is typically not taxable. This means that the payout is not subject to income tax, and your beneficiaries can use the money with no restrictions. 

After filing a claim, the insurance company will review the information and initiate the benefit payout. The beneficiaries will receive the lump-sum payment within a few days or weeks. This tax-free payment can be used to cover any end-of-life expenses.

“You can only buy final expense insurance through funeral homes.”

Funeral homes offer traditional funeral plans like cremation, memorial service, and pre-need funeral packages. These types of funeral packages do not include a death benefit. 

On the other hand, final expense policies are more customized and flexible. You can obtain final expense insurance directly from insurance companies, independent agents and brokers, and employer-sponsored programs. In addition, final expense policies are not dependent on funeral homes, which means you don’t need to worry in case they go out of business.

Conclusion

These are just some misconceptions people have about final expense insurance. Hopefully, this blog post has helped clear up any confusion about final expense policies. Here at Local Retirement Group, we advise our clients to conduct thorough research when it comes to different kinds of insurance. Our team can provide guidance as you explore the different insurance options for you. 

If you would like to learn more about our company and services, give us a call today.