Nobody likes thinking about funeral costs, but here’s the reality: the average funeral in America costs between $7,000 and $12,000. Add in burial expenses, and you’re looking at total costs of $15,000 to $20,000 – money that comes due when families are least prepared to handle it emotionally or financially.

Final expense insurance offers a straightforward solution, but like any insurance product, it’s not right for everyone. Let’s dive into when it makes sense and when you might want to consider alternatives.

What Final Expense Insurance Actually Covers

Final expense insurance, also called burial insurance or funeral insurance, is whole life insurance designed specifically to cover end-of-life costs. Unlike traditional life insurance that might provide hundreds of thousands in coverage, these policies typically offer $5,000 to $25,000 in benefits.

The money can cover funeral services, burial or cremation costs, outstanding medical bills, or any other expenses your family faces. Your beneficiaries receive the payout and can use it however they need – there’s no requirement to spend it on funeral-related expenses.

Most policies build small amounts of cash value over time, though this isn’t usually the main selling point. The real appeal is guaranteed acceptance and immediate peace of mind for families worried about leaving behind financial burdens.

The Numbers That Matter

Premium Costs by Age

A 60-year-old woman might pay $30 to $50 monthly for $10,000 in coverage, while a 70-year-old could pay $50 to $80 for the same amount. Men typically pay slightly more due to shorter life expectancy. These premiums never increase, and coverage remains active as long as you pay them.

Over 20 years, that 60-year-old pays $7,200 to $12,000 in premiums for $10,000 in coverage – reasonable math if she passes away during that timeframe. But if she lives to 90, she’ll have paid $10,800 to $18,000 for the same $10,000 benefit.

Comparing Costs to Alternatives

Setting aside $50 monthly in a high-yield savings account earning 4% annually would grow to approximately $12,000 over 15 years. That’s enough to cover most funeral expenses without paying insurance premiums. However, this strategy requires discipline and doesn’t provide immediate coverage if something happens early.

A $10,000 term life insurance policy might cost a healthy 60-year-old just $15 monthly, but it expires after the term ends. Final expense insurance continues for life, making it more suitable for permanent coverage needs.

When Final Expense Insurance Makes Sense

Limited Savings and Income

If you’re living paycheck to paycheck or have minimal savings, final expense insurance ensures your family won’t face financial hardship during an already difficult time. Even small monthly payments can prevent a $10,000 financial crisis for your loved ones.

Consider Ruth, who works part-time at 68 and has $2,000 in savings. She pays $65 monthly for $12,000 in final expense coverage through Mutual of Omaha. This gives her family immediate access to funds without depleting her modest savings or creating debt.

Health Issues That Prevent Traditional Coverage

Many final expense policies offer guaranteed acceptance or simplified underwriting. If you have diabetes, heart disease, or other conditions that make traditional life insurance expensive or unavailable, these policies provide accessible coverage.

Companies like Colonial Penn and Globe Life specialize in coverage for people with health challenges. While premiums are higher than traditional life insurance, they’re often the only option for comprehensive coverage.

When You Might Skip It

Substantial Savings or Assets

If you have $25,000 or more in easily accessible savings, final expense insurance might not be necessary. Your family can handle end-of-life costs without insurance payouts, and you can invest those premium dollars elsewhere.

Existing Life Insurance Coverage

If you already have term or whole life insurance that exceeds your final expense needs, additional coverage might be redundant. Review your current policies to ensure they’ll still be active when needed and provide adequate benefits.

Young and Healthy

If you’re in your 40s or 50s with good health, traditional term life insurance often provides better value. You can secure larger coverage amounts for lower premiums and reassess your needs as you age.

Shopping Smart for Coverage

Compare Multiple Carriers

Premium costs vary significantly between companies. AARP Life Insurance offers competitive rates for members, while Gerber Life provides guaranteed acceptance policies. Get quotes from at least three companies before deciding.

Understand Waiting Periods

Some policies include two-year waiting periods where only premiums are refunded if you die from natural causes. Accidental death is usually covered immediately. Read the fine print to understand when full benefits become available.

Consider Graded Benefits

Graded benefit policies start with lower payouts that increase over time. For example, a policy might pay 25% of benefits in year one, 50% in year two, and full benefits afterward. These often cost less but provide limited early protection.

Alternative Strategies

Prepaid Funeral Plans

Funeral homes offer prepaid plans that lock in current prices for future services. You pay today’s rates and receive guaranteed services regardless of future price increases. However, these plans aren’t portable if you move, and funeral homes sometimes go out of business.

Dedicated Savings Account

Opening a separate savings account specifically for final expenses gives you control over the money while it grows. High-yield accounts at banks like Marcus by Goldman Sachs or Ally Bank currently offer around 4% interest, helping your savings grow faster than insurance cash value.

Whole Life Insurance

Traditional whole life insurance provides final expense coverage plus additional benefits for surviving family members. While premiums are higher, the coverage amounts are typically much larger, and cash value growth is often better than final expense policies.

Making the Right Choice

Final expense insurance works best for people with limited savings, health issues that prevent traditional coverage, or those who want guaranteed protection without investment risk. It’s not the most cost-effective option if you’re healthy and have other financial resources.

Before buying, calculate how much you’d pay in premiums over your expected lifetime versus the policy benefit. If the math doesn’t work in your favor, consider alternatives like dedicated savings or traditional life insurance.

Your goal is ensuring your family doesn’t face financial hardship during an emotional time. Whether that’s through insurance, savings, or prepaid plans depends on your specific situation and financial priorities.

Key Takeaways

• Final expense insurance provides $5,000 to $25,000 in coverage specifically for end-of-life costs

• Premiums never increase, but total payments over time might exceed the death benefit

• Best suited for people with limited savings or health issues preventing traditional coverage

• Guaranteed acceptance policies often include waiting periods for full benefits

• Consider alternatives like dedicated savings accounts or traditional life insurance based on your financial situation