Final Expense Insurance

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Planning and saving are two familiar functions most people have done all their lives.  So like most people you probably have planned for a new house, a new car, a college education for your children, a vacation or even a wedding. And saving money to make those plans become realities is most likely the way you went about making them happen.  It should therefore not come as a surprise to you that you may need to do a little more planning and saving for what is not only a possibility it is actually an “eventuality”; it is not a matter of if the end-of-life event will occur but when it will occur. 

 

The death of a loved one may leave a family with unexpected expenses:

•   Medical Bills

•   Funeral Expenses

•   Probate and Legal Fees

•   Mortgage or other Unpaid Bills

 

Planning and saving for this “eventuality” is of utmost importance to a family because when it happens the costs could be unmanageable.  The stress associated with coping with the activities in the first few days following the passing of a love one, coupled with the emotional roller coaster you will no doubt be on could be quite overwhelming.  If not properly controlled, life could be miserable during that time.  But if proper pre-planning is done way before the day comes, when it comes, though you may not be ready for it emotionally, you will be ready for it in all other ways.

 

Having a Final Expense Plan can improve your life! There are several ways in which it does this:

 

·    Funeral costs continues to rise and in today’s (2017) market it can be well over $9,000 depending on what is involved.  Social Security only pays $255 towards the cost of  a funeral.  The additional cost will have to be borne by family members unless there is a Final Expense Plan to pick up the excess expenses.

·    A Final Expense Plan brings a sense of comfort to people knowing that if they were to pass away, their families would not be burdened with the expenses that could be associated with their passing. Other assets and savings will not need to be touched.

·    A Final Expense Plan benefits are protected from creditors such as nursing homes, hospitals, attorneys, etc.

·    A Final Expense Plan gives one peace of mind in that it allows one to establish a protected fund for purpose it was intended. The death benefits proceeds of the plan used for funeral expenses will avoid probate costs and delay.

·    A Final Expense Plan can be excluded from your assets in the event you need Long Term Care from Medicaid, of Social Security’s Supplemental Security Income (SSI).

·    Taxes are treated quite favorable in A Final Expense Plans.  Benefits paid are income tax-free. IRC Section 101(a).

·    Final Expense Plans are available to everyone from age 45 to 99. If you are a US citizen or permanent legal resident you may purchase a Final Expense Plan. With most companies, the application process is simple and easy.  For many plans from many companies No medical exam is required and there are no health questions to answer. Furthermore, with these plans your acceptance–regardless of your health– is guaranteed.

·    A Final Expense Plans as insurance is a permanent form of coverage, therefore the death benefit coverage itself cannot be canceled by the insurance company as long as the policy’s premiums are paid. The premium is usually guaranteed not to increase as the insured increases in age, or the benefits decreased if the insured develops adverse health conditions.

 

With these features and benefits, a Final Expense Plan should be one the foremost financial instrument a family should have in list of assets.  The need for a Final Expense Plan should be well accepted by all family members.  Careful planning should be done in selecting the right Final Expense Plan to meet the family’s needs and the savings and financing elements to purchase this plan should be firmly in place. 

 

Where Would the Money Come From to Buy this Plan?  Chances are, you may already have it.  It may be in your “rainy day” fund, your Certificate of Deposit, or a money market account at the bank.  If these are funds you hardly touch, or you have reserved for  Final Expenses or as a legacy for your children or grandchildren, then transferring some money from those sources to fund a single-payment insurance plan will increase the value to you or your beneficiaries. Not only will the insurance provides you coverage from the first day of issue, but it will also increase in value every day until it is needed.  If you don’t have the money readily available now, you can purchase a policy with a convenient, level payment plan.

 

Guidelines to Purchasing a Final Expense Plan

 

In purchasing your Final Expense Plan, consider these guidelines suggested by the National Association of Insurance Commissioners (NAIC):

 

·    Find a policy that meets your needs and fits your budget. Choose the combination of policy premium and benefits that emphasizes protection in case of early death, or benefits in case of long life, or a combination of both.  Be sure that you can handle premium payments starting with the initial premium. If the premium increases later and you still need insurance, make sure you can still afford it. 

 

·    Decide how much insurance you need. Don’t buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy. Don’t drop one policy and buy another without a thorough study of the new policy and the one you have now. Replacing your insurance may be costly.

 

·    Make informed decisions when you buy a policy. Don’t sign an insurance application until you review it carefully to be sure all the answers are complete and accurate.

 

There are basically 3 types Final Expense Plans:

 

·    Life Insurance 

·    Funeral Planning Trust

·    Estate Planning Trust

 

 

Life Insurance

 

Final Expense Life Insurance falls into two categories:

·    Burial Insurance

·    Pre-need Insurance

Both term life and cash value life insurance; whole life, universal life and variable life, can be used for Final Expenses.  However, the most popular type of insurance used for this purpose is whole life insurance.  The most popular type of Final Expense Plan is the Burial Insurance plan using a whole life insurance.

 

Burial Insurance (Final Expense Plan)

There are two types of whole life insurance used for the burial insurance type of Final Expense plan:

Level Death Benefit

Graded Death Benefit

 

A policy with a level death benefit is saying your beneficiaries are entitled to the full death benefit payment from the day the death benefit becomes payable under the terms of the policy. 

A policy with a graded death benefit is saying that your beneficiaries will not be entitled to the full death benefit if death occurs before the policy has been in effect for a set period of time as determined by the insurance company and set in the policy terms at the time of purchase. Instead, your beneficiaries will be entitled to a reduced or partial death benefit.  While there are a few different types of payouts of this kind that the insurance companies employ, the most popular types take on the following appearances:

1.   Return Of Premium + Interest

      If death occurs in the first year of the policy life, the amount death benefit paid to the beneficiaries may consist of the premiums paid to date plus 12% interest on the premiums paid.  If death occurs in the second year of the policy life, the amount death benefit paid to the beneficiaries may consist of the premiums paid to date plus 12% or 24% interest (depending on the insurance company) on the premiums paid.  If death occurs in the third year or beyond full death benefit is then paid to the beneficiaries.

 

      Death from an Accident:  With some companies, the full death benefit is paid for death occurring from an accident at anytime the policy is in effect (i.e., all premiums are paid).

 

Burial Insurance (Final Expense Plan) con’d

2.   Partial Payments

      If death occurs in the first year of the policy life, the death benefit paid to the beneficiaries may consist of 30% or 40% of the full death benefit.  If death occurs in the second year of the policy life, the death benefit paid to the beneficiaries may consist of 70% of the full death benefit.  If death occurs in the third year or beyond full death benefit is then paid to the beneficiaries.

 

Preneed Funeral Insurance (Final Expense Plan)

Consumers who want to hedge against inflation and the rising cost of funerals often select the Preneed Funeral Insurance plan to cover funeral expenses by locking into today’s prices for services and hardware needed in the future.  The plan covers the costs of predetermined expenses such as the funeral home service or church service, the casket and other hardware, the burial or cemetery service and transportation of the remains.  Premium payments are made over time as with other types of insurance policies but for a set period of time.  Once the policy is paid in full, it remains in effect for the life of the insured.

 

Unlike Burial Insurance plans that some times pay graded death benefit, Preneed Funeral Insurance plans only pay full death benefit.  The death benefit is due in full from the day the death benefit becomes payable under the terms of the policy, and is paid to the funeral service provider instead of the beneficiaries.  At  death, Preneed life insurance proceeds are often made payable immediately to an assignee (funeral service provider) to cover costs with little delay as possible.

 

 

 

Funeral Expense Trust

 

Protecting your assets at any age is very important, but it becomes even more important if you are confined to a Nursing Home and need to qualify for Medicaid to provide Medical Assistance.  This may require you removing assets from your estate that would otherwise be included in the assets you need to spend down to qualify for Medicaid and Supplemental Security Income (SSI).

 

A Funeral Expense Trust offers unparallel protection for your final expense dollars, it can be issued to persons from any age up to age 99. If you are a US citizen or permanent legal resident you are permitted to setup a Funeral Expense Trust. The trust is funded by you purchasing a Final Expense Insurance policy, whether as a single-premium or level premium plan, and irrevocably assigning the policy, transferring ownership and all rights permanently to the Funeral Expense Trust. The trust can also be funded with cash up to $15,000 in most states, but it will require less money if you use an insurance policy.

 

Consider these benefits of having a Funeral Expense Trust:

·    The assets used to fund the trust can immediately be removed from your countable assets used to qualify you for Medicaid the day you fund the trust.

·    There is NO fee for the trust 

·    Funds are protected from creditors, such as nursing homes, hospitals, lawyers, credit card companies, etc. 

·    The death benefits proceeds of the plan used for funeral expenses will avoid probate costs and delay.

·    Funds are paid directly to the funeral home with the excess going to the estate, usually within 48 hours of the claim being filed by the funeral home

·    Taxes are treated quite favorable in A Final Expense Plans.  Benefits paid are income tax-free. IRC Section 101(a).

 

Estate Planning Trust

 

You may not be confined to a Nursing Home or need to qualify for Medicaid to provide Medical Assistance, but protecting your assets at any age is still very important.  One difficulty your love ones could face at your death is a lack of cash to pay for funeral expenses.  One type of estate planning trust that could provide the immediately needed cash is an Irrevocable Life Insurance Trust (ILIT).  The primary purpose of an ILIT is to prevent the proceeds of your life insurance policies from being included in your taxable estate after death for estate tax purposes—meaning your heirs won’t have to pay estate or inheritance taxes on the life insurance death benefits that are paid after your death.  

 

An Irrevocable Life Insurance Trust (ILIT) can be setup for persons from any age up to age 99. If you are a US citizen or permanent legal resident you are permitted to setup an ILIT Estate Planning Trust. You can fund your Estate Planning Trust by purchasing a Final Expense Insurance policy, whether as a single-premium or level premium plan, and irrevocably assigning the policy, transferring ownership and all rights permanently to the trust.

Consider these benefits of having a ILIT Estate Planning Trust:

·    Policy proceeds are paid to the trust; the trust then pays for funeral

costs. Any remaining funds are paid directly to your beneficiaries.

 

·    Funds are protected from creditors, such as nursing homes, hospitals, lawyers, credit card companies, etc. 

·    The death benefits proceeds of the plan used for funeral expenses will avoid probate costs and delay.

·    Death benefit continues to grow income tax-free.

COMPANY

NAME

PHONE NUMBER

WEBSITE

TYPE OF PLANs

Gerber Life Insurance Company

1-800-428-4947

Get A Quote

Guaranteed Whole Life

Graded ROP Whole Life

American Amicable Life (AAG)

1-800-669-9030

Get A Quote

Guaranteed Whole Life

Graded ROP Whole Life

National Guardian Life Insurance Company

1-800-988-0826

Get A Quote

Single Pay Whole Life

Limited Pay Whole Life

Graded ROP Whole Life

Funeral Expense Trust

Estate Planning Trust

Standard Life and Accident Insurance Company

1-888-290-1085

Get A Quote

Simplified Issue Whole Life

Graded ROP Whole Life

United of Omaha Life Insurance Company

1-800-775-6000

Get A Quote

Simplified Issue Whole Life

Graded ROP Whole Life

Royal Neighbors of America Life Insurance Company

1-800-770-4561

Get A Quote

Simplified Issue Whole Life

Graded Benefit Whole Life

Lafayette Life Insurance Company

1-800-443-8793

Get A Quote

Simplified Issue Whole Life

Graded ROP Whole Life

Aetna—American Continental Insurance Company

1-800-264-4000

Get A Quote

Simplified Issue Whole Life

Graded Benefit Whole Life

Graded ROP Whole Life

Foresters Financial

1-800-423-4026

Get A Quote

Simplified Issue Whole Life

Graded Benefit Whole Life

Graded ROP Whole Life