The Truth About Final Expense Insurance Plans
By Jeff R. Wilhelm, JD
You can tell the difference between a professional insurance advisor and a mere insurance salesman by the way they deal with the emotional issue of how to protect a client’s family and loved ones from the cost of final expenses such as funeral home costs and burial expenses. An insurance salesman will be quick to sell you an insurance policy called a final expense plan that is supposedly designed specially for the purpose of paying for final expenses. In reality, a final expense plan is nothing more than a whole life insurance plan with limited medical underwriting. As such, it is easy to get but expensive for what you get. A professional insurance advisor on the other hand will slow the process down and evaluate whether you even have an insurance need when it comes to covering final expenses. If you do, he/she will then recommend a plan or strategy that includes the most cost effective product possible that will ensure that your family and loved ones will have the funds to pay your final expenses when the time comes.
Having a plan in place to cover your final expenses upon death is a good idea. No one wants to burden their family with costs in the neighborhood of $15,000 today or $25,000 ten years from now taking into account inflation. The only question is what is the best way to ensure that the money is there when your family or loved ones need it?
The first thing to consider is that if you have $25,000 in liquid assets that you do not otherwise plan to spend or your dependents do not need then you do not need final expense insurance. It would be a waste of a minimum of $4,080 and a much as $72,900, considering the cost of insurance over your life-time from age 65 to age 90.
The typical final expense plan or burial plan offered by insurance salesmen is nothing more than an expensive whole life insurance policy with limited underwriting. Despite what the likes of AARP might endorse as a good investment for you, there is rarely a good reason to buy that type of final expense plan. They are just too expensive. Typical monthly rates for a $25,000 final expense plan are:
The truth is, you can save a lot if you are fairly healthy by going the extra effort to obtain a fully underwritten universal life insurance policy with an A+ rated company. Competitive monthly rates for a $25,000 policy with guaranteed rates to age 100 are:
You can save even more money if you are extremely disciplined and are willing to apply for a fully underwritten 10-year term life insurance policy. This approach will give you all the protection you need during the first 10 years of the policy. Further you can save the $25,000 you will need for final expenses before the term life policy ever expires in 10 years. Here are some competitively priced monthly term life rates for a $50,000* policy:
If you follow the time proven truth of “buying term and saving the difference” you will have your final expenses covered from day one for the first 10 years with the term life insurance policy. You will need to set aside and save $179 per month over that period of time to accumulate $25,000. By doing that, you will not only have set aside $25,000 but you will have saved more than $13,000 over the life-time cost of a universal life insurance policy which over the life of that policy (to age 90) will cost about $16,800 for a female starting at age 65 and $19,920 for a male starting at age 70. Further, you will reap the benefit of earning interest on the $25,000 that you saved over your remaining life-time anywhere from $4,000 to $25,000. In total, by getting term life and saving the difference, your family will have anywhere from $29,000 to $50,000 in hand when you die and with no need to wait for an insurance company to issue a check.
*The reason for a $50,000 benefit instead of $25,000 is because the more competitively priced A+ rated companies do not offer policies less than $50,000.
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