Term Life Insurance

Term life insurance lasts for a specified number of years and then ends. You choose the term when you take out the policy, with common terms being 10, 20, or 30 years. The best-term life insurance policies balance affordability with long-term financial strength.

• Decreasing Term Life Insurance: This is renewable term life insurance where the coverage decreases over the life of the policy at a predetermined rate.
• Convertible Term Life Insurance: This allows policyholders to convert a term policy to permanent insurance.
• Renewable Term Life Insurance: This is a yearly renewable term life policy that provides a quote for the year the policy is purchased. Premiums increase annually and it is usually the least expensive term insurance initially.

Term life insurance is attractive to young people with children because parents can obtain large amounts of coverage at reasonably low costs. Upon the death of a parent, a significant benefit can replace lost income.

These policies are also well-suited for people who temporarily need specific amounts of life insurance. For example, the policyholder may calculate that by the time the policy expires, their survivors will no longer need extra financial protection or will have accumulated enough liquid assets to self-insure.

Term life insurance is for a predetermined period, typically between 10 and 30 years. Term policies may be renewed after they end, with premiums recalculated based on the holder’s age, life expectancy, and health. By contrast, whole life insurance covers the entire life of the holder. Unlike a term life policy, whole life insurance includes a savings component, where the cash value of the contract accumulates for the holder. The holder can withdraw or borrow against the savings portion of their policy, where it can serve as a source of equity.

Whole Life Insurance

Whole life insurance, also known as traditional life insurance, provides permanent death benefit coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate. Interest accrues at a fixed rate and on a tax-deferred basis.

Whole life insurance policies are one type of permanent life insurance. Universal life, indexed universal life, and variable universal life are others. Whole life insurance is the original life insurance policy, but it does not equal permanent life insurance as there are many types of permanent life insurance.

Universal life insurance and whole life insurance are both permanent life insurance types that offer guaranteed death benefits for the life of the insured. However, a universal life policy allows the policyholder to adjust the death benefit as well as the premiums. As one might expect, higher death benefits require higher premiums. Universal life policyholders can also use their accumulated cash value to pay premiums, provided the balance is sufficient to cover the minimum due. Whole life insurance, alternatively, does not allow for changes to the death benefit or premiums, which are set upon issue.

Universal Life Insurance

Universal life (UL) insurance is permanent life insurance (lasting the lifetime of the insured) that has an investment savings element and low premiums similar to those of term life insurance. Most UL insurance policies contain a flexible-premium option. However, some require a single premium (single lump-sum payment) or fixed premiums (scheduled fixed payments).

Unlike term life, UL insurance policies can accumulate interest-bearing funds like a savings account. Additionally, policyholders can adjust their premiums and death benefits. Those paying extra toward their premium receive interest on that excess.

If you want to build tax-deferred savings and don’t expect to tap into the funds for a long time, universal life may be a suitable option. The cash value option that’s part of a universal life policy may be available for you to withdraw or borrow against in an emergency.

It’s a good idea to talk with your insurance provider to better understand your life insurance options. They can help you review your personal situation and long-term goals to choose a policy that’s a good fit for you and your family.

What is Final Expense Insurance?

Final expense insurance is a type of whole life insurance designed to cover end-of-life expenses such as funeral costs, medical bills, and other final expenses. It is typically targeted toward seniors and provides a small death benefit that can help ease the financial burden on family members after death.

Why Do You Need Final Expense Insurance?

Final expense insurance ensures that your family is not burdened with the costs associated with your funeral, burial, and any other end-of-life expenses. These costs can quickly add up, and final expense insurance provides peace of mind knowing these expenses will be covered.

Key Benefits of Final Expense Insurance

• Affordable Premiums: Final expense policies typically have lower premiums compared to traditional life insurance because they offer smaller death benefits.
• Guaranteed Coverage: As long as premiums are paid, coverage is guaranteed. There is no need for a medical exam in most cases.
• Easy Application Process: The application process is typically straightforward and does not require extensive health screenings.
• Quick Payouts: Final expense insurance benefits are typically paid out quickly, ensuring that funeral costs and other expenses are handled promptly.

How Does Final Expense Insurance Work?

Final expense insurance works by providing a predetermined death benefit that is paid to a beneficiary upon your passing. This money can be used to cover funeral costs, medical bills, or other outstanding expenses. Most policies are whole life insurance, meaning they last for your entire lifetime as long as you continue to pay the premiums.

Who Should Consider Final Expense Insurance?

Final expense insurance is a good option for individuals who:

• Are older adults who want to ensure their loved ones aren’t burdened by end-of-life expenses
• Do not have enough savings to cover funeral or burial costs
• Have health issues that make it difficult to qualify for traditional life insurance policies
• Want a simple and affordable life insurance policy

Types of Final Expense Insurance

• Standard Final Expense Insurance: A traditional whole life insurance policy with a small death benefit (usually between $2,000 and $50,000) that covers funeral and burial costs.
• Guaranteed Issue Final Expense Insurance: A policy that guarantees approval, regardless of health history, although it often comes with higher premiums and may have a waiting period before full benefits are paid out.
• Pre-Need Funeral Insurance: A type of policy that specifically covers pre-arranged funeral expenses with a funeral home.

How Much Does Final Expense Insurance Cost?

The cost of final expense insurance depends on various factors, such as your age, health, and the amount of coverage you choose. Generally, premiums range from $20 to $100 per month, with the coverage amount typically between $2,000 and $50,000.

What is Not Covered by Final Expense Insurance?

While final expense insurance is designed to cover end-of-life expenses, there are a few things that may not be covered, such as:

• Outstanding debts or loans (unless specifically included in the policy)
• Living expenses or other ongoing costs for family members
• Expenses not related to funeral or burial costs

How to Choose the Right Final Expense Insurance Policy

When selecting a final expense insurance policy, consider the following:

• The amount of coverage needed to fully cover funeral, burial, and other end-of-life costs
• The premium costs and whether they fit within your budget
• The financial stability of the insurance provider
• Whether the policy has a waiting period for full benefits to be paid

Common Final Expense Insurance Providers

Some well-known insurance providers offering final expense insurance include:

• Mutual of Omaha
• Lincoln Heritage
• Globe Life
• AIG
• Gerber Life

Conclusion

Final expense insurance offers a practical and affordable way to ensure that your loved ones are not left with the financial burden of funeral and burial expenses. By choosing the right policy, you can have peace of mind knowing that you have taken steps to protect your family during a difficult time.