In a recent episode of "Talking Retirement," host Ken Connolly welcomed Medicare and Life Insurance broker Jo Gallo to discuss an important but often overlooked topic: Final Expense Insurance. This type of life insurance serves a critical purpose in retirement planning that many seniors may not fully understand.
What Is Final Expense Insurance?
Final expense insurance is a type of whole life insurance specifically designed to cover end-of-life expenses, particularly funeral costs. As Gallo explains, "It's named appropriately, but it's a little hard to say, final expense, funeral expense, it's going to happen to us all. What you have to look at is that it's a whole life insurance policy, which means it's not going to go away."
Unlike term life insurance, which expires after a specific period, final expense insurance provides permanent coverage as long as premiums are paid. The policy provides a lump sum payment to beneficiaries that can be used to cover funeral costs and other end-of-life expenses.
The Rising Cost of Funerals
One of the most compelling reasons to consider final expense insurance is the dramatically increasing cost of funerals. As Gallo points out, "It's not like the two guys that went out and dug a hole. You bought the casket, you went in it, so on. Boom, it cost you maybe four or $5,000. Now, it's a business like anything else in the United States."
Today's funeral expenses can be substantial:
Traditional burials typically range from $6,000 to $20,000, according to data from Funeralocity
Even cremation costs have increased significantly, with Gallo noting, "It used to be a $2,500 cost. I watched it go to $4,000, and now I have customers that tell me they just paid $8,000 and $9,000 for cremation"
These costs can create a significant financial burden for families already dealing with grief.
Benefits Beyond Funeral Costs
While covering funeral expenses is the primary purpose of final expense insurance, the benefits extend beyond just paying for a service and burial. The policy can also provide:
Funds to settle outstanding medical bills
Money to help clean out a home or prepare it for sale
A financial cushion for loved ones during a difficult time
"The nice thing about having a final expense, funeral expense, whole life, whatever you want to call it, is that it's going to give you a lump sum of cash so that the funeral director will wait for it," Gallo explains. Most insurance companies pay claims within 7-14 days once they receive a death certificate.
Preventing Family Conflicts
One often overlooked benefit of final expense insurance is how it can prevent disagreements among family members during an already stressful time. As Connolly notes, "Even the best families could end up fighting over paying for it. Or it could lead to, 'Well, I paid for the funeral. Therefore, I get more money out of the estate.'"
Final expense insurance creates clarity by setting aside dedicated funds for funeral costs, removing potential sources of conflict. Gallo emphasizes this point: "Take all the ambiguity out of it. Do it ahead of time. Get the house in order so that you don't have to... leave this wonderful world... knowing there's peace of mind because you didn't leave an expense to be bickered or argued over."
Understanding Policy Options
When shopping for final expense insurance, it's important to understand the different options available:
Fully Underwritten vs. Guaranteed Issue
Many policies advertised on television offer "guaranteed acceptance" but come with significant limitations. As Gallo explains, these policies typically have a "two-year waiting period" during which the full death benefit isn't payable.
"A two-year waiting period to pay for something that's not gonna give you (the full benefit) if something happens in the first two years—not so great," says Gallo. Instead, she recommends fully underwritten policies whenever possible: "We always talk our customers into going for a full underwriting policy... with a fully underwritten policy, the insurance company that's providing the policy learns about you, your health and so on. Therefore, instead of waiting for two years for the policy to become valid and to get full payment, you (can) get it on day one."
Cost Considerations
The cost of final expense insurance varies based on age, health, and coverage amount. For example:
A 65-year-old in good health might pay between $59-$80 monthly for $15,000 of coverage
The price increases with age, making it advantageous to purchase earlier rather than later
Planning Ahead
Perhaps the most important aspect of final expense insurance is the peace of mind it provides—both for the policyholder and their loved ones. As Gallo shares from personal experience: "Because (my late wife) had a life insurance policy, she had a final expense policy... and everything was paid for. Made my life a whole lot easier."
Connolly emphasizes that early planning is crucial: "The earlier you do it, the better it becomes. If you wait till your mid-70s, early 80s, you might be shocked at how expensive it becomes."
Conclusion
Final expense insurance represents an important element of retirement planning. By addressing funeral costs and other end-of-life expenses in advance, seniors can protect their families from financial stress during an already difficult time while ensuring their final wishes are respected and carried out.
For those interested in learning more about final expense insurance options, consulting with a knowledgeable insurance professional can help identify the most appropriate coverage based on individual needs and circumstances.
To learn more about your final expense insurance options, visit NJ Life and Health at www.njlifeandhealth.com or call their Toms River, NJ office at 848-226-6897.
Jo Gallo is a licensed life and health insurance broker and writer for The Berkeley Reporter, Corner Cafe and Moments.
Ken Connolly is a licensed life and health insurance broker and host of the "Talking Retirement" podcast.
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