Guide to Final Expense & Burial Insurance

Thanks to advances in medicine and healthier eating habits, we’re now living longer lives than ever before—but death is most obviously guaranteed for all of us. Unfortunately, the cost of dying isn’t entirely cheap.

Data from the National Funeral Directors Association shows that the national median cost of a funeral in 2019 was $7,640. If you include a vault, the median cost rises to $9,135 and it doesn’t take into account monument costs, cemetery costs or miscellaneous cash charges—which could easily tack several thousands onto your bill.

Since the bill for an individual’s final expenses is unavoidable, many people opt to purchase a life insurance policy. While some choose policies with larger death benefits, a variation of life insurance—final expense insurance—may be ideal for anyone looking for a small death benefit to cover their final expenses when they pass.

MoneyWizard’s guide to final expense insurance can point you in the right direction. We’ll help you understand what final expense insurance is, mention what it covers, teach you how it works, and highlight how much you can expect to pay for it.

What is Final Expense Insurance?

Final expense insurance is a life insurance policy with a specific purpose—it’s designed to pay for any expenses and costs associated with your final disposition, including any funeral or celebratory services. This policy can also be referred to as funeral insurance or burial insurance and is generally offered in a lower amount than a standard life insurance policy.

Final expense insurance never expires—it remains in force as long as you’re paying your premiums either monthly or annually. And since it’s technically limited in scope and typically has a lower coverage benefit, funeral insurance is generally more affordable and coverage costs less than other variations of life insurance.

In most cases, your final expense insurance policy will pay a tax-free death benefit to your chosen beneficiary and a deductible isn’t applicable to life insurance claims.

What Does Final Expense Insurance Cover?

You’d be surprised to learn about the expenses that come as a result of a death. A funeral often brings family and friends together to pay their last respects—and we want the send off to be a loving tribute. This means that costs can rise as we pay for various upgrades, like a unique casket or the special flowers the deceased loved. A final expense policy is intended to cover—you guessed it—your final expenses including:

• Funeral home services. Often, there’s a viewing, which most of us associate with funeral homes—but that isn’t all they do. In most cases, a funeral home will also care for the remains, get the necessary permits, obtain copies of the death certificate, arrange transportation, and coordinate the funeral service.
• Embalming. Some may choose embalming while others prefer cold storage to preserve the remains until the final send off. Either of these services may cost several hundred dollars—which your final expense insurance policy covers.
• Burial or cremation. You’d hope to escape burial costs by option for a cremation, but that won’t save you much either. The National Funeral Directors Association figures put the cost of a funeral with cremation at $5,150, which isn’t cheap either.
• Burial plot. Sometimes referred to as a funeral plot, a burial plot can be a costly funeral expense—eating into several thousand dollars. Luckily, final expense insurance can help with the bill.
• Floral arrangements. The cost of wreaths and flowers can soar quickly. It shouldn’t come as a surprise if you spend several hundred dollars on special flowers and other arrangements—but your burial insurance should have this covered.
• Outstanding medical, credit card, or legal bills. Families and beneficiaries can also use the proceeds of final expense insurance payout to clear any outstanding medical, legal, or credit card bills.

Owing to its lower coverage amount, final expense insurance isn’t intended to leave additional funds to your beneficiaries beyond the costs associated with your send off. However, the beneficiaries may use any remaining money to offset any outstanding debt or legal bills. If you’d like to leave behind a more substantial amount, look for a whole life policy that holds more significant value.

Being a whole life insurance policy, final expense insurance should carry a cash value—it lets you withdraw or borrow from the value while you’re still alive and need help with other life expenses. 

Remember, it’s possible to assign a funeral insurance policy directly to a funeral home, though your heirs may also pay in cash for services awaiting reimbursement from the burial insurance policy. If your beneficiaries use the policy to pay the funeral home directly, they should request an itemized bill of everything they’re requesting—it’s within their rights under the Federal Trade Commission’s Funeral Rule.

That said, many families don’t have the financial muscle to get the best options of each service—but the mid-range choices could also add up quickly when it’s time to pay our last respect. Final expense insurance can offset funeral expenses either in part or in full, depending on the coverage amount.

Who Needs Final Expense Insurance?

Deciding whether you need final expense insurance is partly simple math—but you must also take into account how much you’ve saved and whether that money should be channeled toward something else. For starters, funeral coverage may be expensive for what you receive, so you’ll want to check whether you’re eligible for low-priced term life insurance coverage—it can provide similar benefits.

If you can’t obtain term life insurance and are worried your heirs won’t have enough money to cover your funeral costs, burial insurance can be an excellent option—especially if you can purchase a policy with no waiting period.

A final expense life insurance policy isn’t right for everyone, but here’s are some indications that you may need it.

• You’re a senior citizen. While the age at which we become senior citizens has always been a subject of debate and a moving target, most of our life’s considerations start to change around the age of 50. Final expense insurance is usually offered in low amounts and without a qualifying medical exam, so it’s a great option for seniors who no longer require life insurance for income replacement.

Since a funeral insurance policy can remain in force up the age of 100 or beyond, this type of insurance can be a perfect fit for older adults—it gives them the much-needed peace of mind knowing they have coverage their heirs can count on. Remember to do some comparison shopping from at least three carriers before settling on one.

• You’re looking for affordable coverage. Final expense insurance can be affordable, and your premiums generally won’t increase over time. While the face value (full death benefit) is usually smaller than that of a traditional life insurance policy, so are the insurance premiums. So, you won’t be paying so much for coverage after all.
• You have pre-existing conditions. Many insurance carriers can issue a final expense insurance policy without requiring you to undergo a medical examination. If you have pre-existing conditions like diabetes or other health issues, final expense insurance can be easy to qualify, and your policy won’t be stopped as long as you pay your premiums on time.
• If you don’t have much in savings. A burial insurance policy can make lots of sense if currently have little in savings or are worried you may not have much saved in your golden years.  

How Does Final Expense Insurance Work?

Funeral insurance is supposed to cover the actual cost of your death, which mainly includes the cost of your funeral and cremation or burial. However, families can also use it to pay for costs you hadn’t envisioned ahead of time—like living expenses you incurred in your final days, the cost of liquidating your possessions, obituaries in the newspaper, and outstanding credit card or medical bills.

With final expense insurance, you simply choose the amount of coverage and determine who’ll be your beneficiary upon your death. Your beneficiary should reach out to the insurance provider as soon as possible following your death to commence the claims process.

Burial insurance typically comes in two policy types:

• Simplified issue insurance. With this policy, your insurance provider assesses your health based on a series of health questions—a medical exam isn’t required. Some factors could lead to denial of a policy, including being a smoker, pre-existing health conditions, and risky activities.
• Guaranteed issue insurance. A guaranteed issue policy offers near-certain application approval—you won’t take a qualifying medical exam or answer any medical questions. Most providers provide coverage irrespective of your health status, except in rare cases where the insurer may ask knockout questions. Since this type of policy places more risk to the insurer, you’ll likely pay more.

How Much Does Final Expense Insurance Cost?

Progressive states that burial and funeral insurance policies typically range in the value from $5,000 to $35,000, and you can expect premiums to start around $20 per month. As a rule of thumb, most life insurance companies will use gender and age as underwriting criteria in calculating premiums. The amount of coverage and death benefit your policy offers may also drive your monthly premium.

An advantage of final expense insurance when compared to other variations of life insurance is that the underwriting is less intensive. It’s highly unlikely that you’ll need to obtain a physical or request detailed medical records as would be the case with larger life insurance policies.

Frequently Asked Questions

How much does a basic funeral cost?

The average cost of a funeral ranges between $7,000 and $10,000, which includes the basic services fee you must pay to a funeral provider. The fee includes services generally common to all funerals, including funeral planning, acquiring copies of death certificates and the necessary permits, preparing notices, and coordinating the arrangements with the crematory, cemetery, or other third party.

The basic funeral services fee doesn’t include any optional services or merchandise like embalming, transporting the remains, memorial or ceremony service, a casket, and cremation.

You may also pay cash advances—the fees a funeral home charges for any goods and services it gets from outside vendors on your behalf, think pallbearers, flowers, obituary notices, and officiating clergy.

Your funeral provider should provide an itemized statement of the total cost of funeral goods and services you’ve selected when making the arrangements.

What are end of life expenses?

While end of life expenses are generally associated with funeral arrangements, they may also include the costs incurred in your final days before you die. These may include the costs of nursing home care, in-home care, assisted living care, hospital stays, doctor visits, and medical bills. There’s also a chance that your heirs will inherit other end of life expenses like the cost of paying off an existing mortgage, credit card bill, probating a will, or liquidating your assets.  

Ensure your coverage won’t leave your loved ones with the financial burden of costs you may not think of ahead of time.

What alternatives are there to final expense insurance?

We understand that covering end-of-life expenses can be your biggest concern, but final expense insurance isn’t your only option. Here are other alternatives you’ll want to consider:

• Term life insurance. If you’re still young and healthy, term life insurance may be a great option—it provides high coverage levels at affordable prices. While term life insurance doesn’t last a lifetime (like permanent life insurance), it can provide income replacement in your absence.
• Pre-need funeral trust. A pre-need funeral trust allocates money to be used specifically for your burial costs—you simply pay money into a trust that accrues interest, which is taxable. Remember, a pre-need funeral trust is non-revocable—you won’t be able to change it.

Pre-need insurance. This policy is essentially a contract directly with a funeral service provider—the money goes directly to them instead of your beneficiaries. The agreement will also include specific services and products you choose through the funeral provider. Be sure to read the contract carefully since some final expenses may not be covered.