Michael R. Carithers Jr is a leading benefits coordinator for Senior Life Services, where he consults clients on various types of financial products including insurance products. Mr. Carithers reports that final expense insurance, and what are considered to be “final expenses” both remain a mystery to many seniors and in the article below he gives a rundown of everything you need to know about this kind of coverage.
Final expense insurance is a form of life insurance designed to cover the costs of a funeral and other burial expenses. It is a
simplified issue policy, which means that it is a policy for people who don't want to go through a medical exam. Michael R. Carithers Jr reports that this type of coverage is available in both term and permanent policies and typically pays out between $1,000 and $50,000
.
In this article, Michael R. Carithers Jr explores some of the basics you need to know to understand final expense insurance, including the history behind it, as well as the different types and uses of final expense insurance.
What is Final Expense Insurance
Michael R. Carithers Jr explains that final expense is a type of life insurance policy that helps pay for a policyholder’s funeral and burial costs. It is a relatively small, simple policy that is designed to provide peace of mind for those who are worried about the high cost of funerals.
These policies typically have a face value of $5,000 to $10,000, and they are available to people of all ages. Michael R. Carithers Jr says the premiums for final expense insurance are usually very affordable, and the policies can be purchased without having to undergo a medical exam.
Possessing this kind of coverage can be very helpful for policyholders who want to ensure that their loved ones are not left with the burden of funeral and burial costs. However, Michael R. Carithers Jr notes that they are typically do not pay out enough to cover other living expenses after the policyholder dies.
How Does Final Expense Insurance Compare to Term Life Insurance?
To put it simply, final expense insurance is only designed to provide a death benefit to help cover the costs of a funeral or other burial expenses. Term life insurance, on the other hand, is a form of life insurance that provides a death benefit to the policyholder's beneficiaries according to Michael R. Carithers Jr.
Term life insurance policies are available in a variety of terms—typically 10, 20, or 30 years—during which time the policyholder must pay a monthly premium. With final expense insurance, though, the premiums are typically less expensive but lack a cash value.
When Did this Type of Coverage Originate?
Michael R. Carithers Jr says that although less well-known than term life insurance, final expense coverage has been around for centuries, and have been used to help cover the costs of funerals and burials for many years. That being said, the popularity of final expense policies has increased in recent years, as more and more people have become interested in obtaining this type of coverage.
There are a few reasons for its increasing popularity says Michael R. Carithers Jr. First, as Baby Boomers continue to age, they are reaching a point where they need to consider this type of coverage. Additionally, the cost of funerals and other end-of-life expenses has been rising steadily, making it harder for families to cover these costs without insurance.
Thankfully, final expense insurance policies provide enough financial benefit to cover these costs and most policies have a no-lapse guarantee, meaning that the policy will continue to be in force even if the policyholder stops making payments.
How Large is the Industry?
According to the latest data from the Life Insurers Council, the final expense insurance industry currently accounts for
roughly half a billion dollars’ worth of revenue every year. This signals a major shift for the industry as it’s achieved record-breaking growth rates of around 10% annually. However, Michael R. Carithers Jr notes that the COVID-19 pandemic hit the industry pretty hard.
As the pandemic hit its peak in 2020, fewer senior citizens were looking to invest in final expense insurance. One reason for this shift is that as the pandemic peaked, there were more reports of fatalities in older age groups.
In response, some seniors may have been less likely to purchase a policy that would provide a payout in the event of their death. Additionally, as the pandemic progressed, it became increasingly difficult for insurance companies to find qualified agents to sell final expense policies reports Michael R. Carithers Jr. This may have also contributed to the decline in sales.
However, now that the pandemic is normalizing, the industry is
expected to see continued growth over the next few years. Although it will take time to rival the term-life insurance industry, it’s quickly become a powerhouse in the insurance world as Baby Boomers continue to age.
Final Thoughts
Michael R. Carithers Jr reports that the final expense insurance has become increasingly popular in recent years. Policies are designed to help cover final expenses, such as funeral and burial costs, and typically have low monthly premiums. Depending on the policy, final expense insurance can provide a death benefit of up to $50,000. Overall, they are a great way to ensure that your loved ones are free from the burden of paying funeral expenses.
