Final Expense Insurance: How Much Can Clients Expect It to Cover?

“Do I need this?” We’ve likely all heard this before while discussing a beneficial product with clients.

The cost of living keeps getting more and more expensive, and sometimes, clients need to make tough decisions on which expenses stay, which go, and what’s a worthwhile addition. One purchase we feel is definitely essential is final expense insurance, because it can affordably cover a lot of inevitable costs.

Listen to this article:

As an insurance agent, you probably feel the same, and it’s your job to offer this coverage to clients and express how beneficial it can be. During your final expense sales pitch, your client might want to know just how much a final expense plan can cover. This post can be your guide and set you up to answer this question with confidence.

Final Expense Insurance Recap

New to final expense coverage? Essentially, it’s a whole life insurance policy that’s purpose is to cover funeral, cremation, burial, and other expenses after the insured’s death.

Since final expense insurance is a whole life policy, it builds tax-deferred cash value over time. This cash value can be borrowed from while the insured is alive, but it’s important to note that doing so can affect the death benefit of the policy.

Death benefits are generally guaranteed for final expense insurance as long as the premiums are paid. However, if the policyholder passes away during a policy’s set waiting period, the beneficiaries normally have their premiums returned to them. For guaranteed issue final expense policies, the average waiting period before benefits will be paid is two to three years. For modified or graded final expense policies, 100 percent of the benefit is paid typically after the third year of policy ownership.

Death benefits are generally guaranteed for final expense insurance as long as the premiums are paid.

Premium amounts for a final expense policy depend on age, sex, health, tobacco use, coverage amount, and insurance carrier. On average, a final expense policy can cost between $40 to $80 per month. Guaranteed issue, graded, or modified final expenses plans are a good fit for those who have health conditions that prevent them from qualifying for a standard policy.

What Does Final Expense Insurance Cover?

We’ve touched on selling final expense insurance here on our blog, but one thing we haven’t really explored is just how much a final expense policy can cover. In short, this will depend on factors like the amount of the policy purchased, if the policy is borrowed from while the insured is alive, the end-of-life plans, and the amount of expense a person leaves behind.

Final expense policies are designed to cover:

End-of-life expenses (e.g., inpatient care, medical services and supplies, hospice, transfer and preparation of remains)

Funeral arrangements (e.g., cremation/burial, urn/casket, vault, facilities, services)

Any outstanding medical, legal, or credit card bills

These policies often have a face value anywhere from $5,000 to $25,000, but death benefits can be as high as $100,000.

Average Funeral Expenses

The real cost of a funeral varies by state, with the highest state’s cost sitting at more than $14,000. The average cost of a funeral is typically between $7,000 and $9,000. How much a funeral costs also depends on how the insured has chosen to be buried. A funeral with cremation typically costs less, while burial in a vault will most likely raise the cost.

The average cost of a funeral is between typically $7,000 and $9,000.

Final Expense Coverage Put into Perspective

We’d like to introduce you to Ruth and Oscar. Both have just purchased a final expense policy, and we’re going to review the average expenses they could leave behind to see how much their policy can cover. Keep in mind, the estimated costs referenced will likely increase over time as the cost-of-living increases. This makes coverage like final expense insurance that much more important!

Ruth is 67, from Harrisburg, Pennsylvania, and a non-smoker. She has a $10,000 preferred final expense policy from a competitive carrier and pays a premium of roughly $41 a month. She lives comfortably on her Social Security and supplemental income from a part-time job and does not plan on borrowing from her policy’s cash value during her lifetime. Since Ruth lives in Pennsylvania, her family can expect to pay around $7,895 for her funeral. She’s currently in very good health, but it’s been calculated that Pennsylvania’s average end-of-life cost is $13,967.

Ruth’s average projected costs total $21,862. With the coverage of her $10,000 guaranteed death benefit (keeping in mind that her preferred policy makes her eligible for 100 percent of her benefit the day her coverage begins), her family would be left with more than $11,000 to cover. While that’s still a significant amount, her final expense policy would be able to cover almost half of her total funeral and end-of-life expenses!

Oscar is 70, from Baltimore, Maryland, and a smoker. He has a $10,000 guaranteed issue final expense policy from a competitive carrier and pays a premium of roughly $99 a month. He lives comfortably on his Social Security and does not plan on borrowing from his policy’s cash value during his lifetime. Since he lives in Maryland, his family can expect to pay around $10,069 for his funeral. Oscar has multiple health issues, and he could run into further health complications due to smoking down the road. It’s been calculated that Maryland’s average end-of-life cost is $17,812.

Oscar’s average projected costs total $27,881. With the coverage of his $10,000 guaranteed death benefit (keeping in mind that he meets his policy’s waiting period), his family would be left with more than $17,000 left to cover. Is this a hefty amount? Yes. But at least his final expense policy was able to cover more than a third of the expense!

Maybe if you were Ruth and Oscar’s agent, you could find them final expense policies that can better serve their needs and budgets!

Let’s also introduce you to Max. He’s purchased a final expense policy with a larger face value.

Max is 66, from Houston, Texas, and a non-smoker. He has a $35,000 preferred final expense policy from a competitive carrier and pays a premium of roughly $211 a month. He lives comfortably on his Social Security and does not plan on borrowing from his policy’s cash value during his lifetime. Final expense coverage is a must for Max, so he and his insurance agent review his budget and work to make the monthly final expense premium amount doable along with his other expenses. Since Max lives in Texas, his family can expect to pay around $7,103 for his funeral. He’s currently in good health, but it’s been calculated that Texas’ average end-of-life cost is $12,566.

Max’s average projected costs total $19,669. With the coverage of his $35,000 guaranteed death benefit (remembering his preferred policy makes him eligible for 100 percent of his benefit the day his coverage begins) his beneficiary would be left owing nothing and a payout of $15,331. This is Max’s intention, as he wants to leave his daughter with a little money in addition to covering his expenses after death.

No one has a crystal ball to predict the future and the amount of coverage they will need for after-death expenses. But peace of mind is priceless and that’s part of what you’re offering with a final expense policy. Your clients can rest easier knowing they are securing a portion of funds to cover some large, unavoidable expenses after they’re gone.

If you’re not partnered with Ritter yet, sign up for free to gain access to our Medicare Quote Engine on the Ritter Platform to quote final expense policies and compare up to three plans!