Final expense insurance (also known as funeral insurance or burial insurance) is a type of life insurance policy, designed to cover the various costs associated with end-of-life arrangements. With this coverage, a lump-sum payment will be made to your loved ones after your death, alleviating their financial burdens (e.g. funeral, burial, cremation bills) during an already stressful time.
This coverage is a type of whole life policy as it remains active until the day you pass (provided you continue to pay your premiums). However, unlike conventional whole life insurance, the face value of these plans tends to be much lower (e.g. up to $35,000). And because of the lower coverage amount, these plans also end up being much more affordable.
Final expense and funeral policies can be a good option if you don't qualify for other forms of life insurance (or you can't afford it). Insurers generally still offer this type of coverage if you're older or have poor health – you likely won't even need a medical exam. The simplified underwriting process makes it a practical solution for high-risk individuals who still want to protect their loved ones' futures financially in some way.
To learn more about final expense and funeral insurance (and determine whether it's the right product for you), be sure to consult with a licensed broker in Canada.
Level benefit final expense insurance
Graded benefit final expense insurance
Guaranteed issue final expense insurance
While the death benefit from a final expense insurance policy can be used for anything the beneficiaries wish, it is most commonly used for immediate end-of-life expenses – this can include the following examples.
Funeral & memorial
Expenses related to the funeral or memorial service can include the funeral home use, as well as staffing and coordination expenses.
Transportation of the deceased's body may require the use of special vehicles. And family members may also need to travel for the funeral.
Burial & cremation
Burial fees can include the casket, burial plot, and grave opening and closing while creamtion fees can include the creamtory service, plus the urn.
Headstone & marker
Purchasing a custom headstone or grave marker to mark the site of burial can be an expensive end-of-life expense.
This can include expenses associated with dressing, cosmetology, and other body preparation services for the deceased.
There may be fees required to obtain necessary documentation, such as death certificates and permits.
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Like all other life insurance products, there is no one-size-fits-all price for final expense coverage. Instead, insurers look at your individualized factors (e.g. age, health) while weighing in your policy type and coverage amount. For reference, however, a healthy 40-year-old, non-smoking male can expect to pay about $25 per month for a medically underwritten policy. A female counterpart, on the other hand, can expect to pay about $20.
The cost of funeral insurance can vary greatly, depending on several factors – generally speaking, the more risk you and your policy bring, the more you'll need to pay. Here, we cover a few main ones so you can better understand the quoting process.
The older you are at the time your policy is issued, the more expensive your final expense coverage will be. This is also the case for all other life insurance products.
Insurers may account for the statistical risk factors related to gender. Since women live longer on average, they tend to pay less for coverage.
While you may be able to skip the medical exam, insurers still ask questions about your health. And the healthiest individuals pay the cheapest rates.
If you smoke (or use any form of tobacco), you'll be subject to higher funeral insurance rates –for obvious reasons related to your health risk.
The type of final expense insurance you choose can influence your premium – for example, guaranteed plans cost more because of the added risk.
While these policies tend to have low face values, choosing one on the higher end will increase your rate. Added protection comes at an extra cost.
Affordability – These polices are generally cheaper than other life insurance plans due to the low coverage values.
Simple underwriting – Many final expense insurance plans have a simplified underwriting process, omitting the need for a medical exam. This can make it easier for those with poor health to qualify.
Guaranteed coverage – Some final expense and funeral insurance policies also have guaranteed acceptance, meaning you'll be able to qualify, despite old age and poor health.
Quick payout – Since these policies are designed to cover end-of-life expenses, such as the funeral, they generally also pay out quicker than other life insurance plans.
Limited coverage – Because these policies are only designed to cover end-of-life expenses (and they're much easier to qualify for), they come with far lower face values. The coverage amount may not be sufficient if you want to secure your loved ones' financial futures long-term.
Lack of investments – While traditional permanent life insurance plans tend to have an investment component (with cash value you can access during your lifetime), funeral insurance plans usually don't.
Waiting period – Many final expense and funeral insurance plans have a waiting period. This is a set time frame, starting from when your policy is first issued, in which the death benefit won't be paid out at all (or won't be paid out in full) if you pass away.
While final expense insurance can be a good option for some, a regular life insurance policy may be more suitable for certain needs. Below, we cover a few reasons you may choose to go for a conventional policy instead.
If you have financial dependents, you'll likely need more coverage to assist your loved ones with various expenses (mortgage, credit card).
Your loved ones may need to replace your income after your passing – and a funeral policy won't be enough to fund their lifestyle for years to come.
Long-term financial plan
You may want to contribute to the financial legacy of your loved ones, providing stability beyond immediate expenses.
If you co-own a business, a whole life policy (with a high enough face value) can fund a buy-sell agreement, simplifying the transfer of assets.
Whole life and universal life plans come with investment accounts that accumulate in cash value – which can be accessed during your lifetime.
If your health is good (and you're young), you may be find better rates with conventional policies – plus, it can be a good idea to lock it in early.
When is final expense insurance the better option?
If you don't qualify for other types of life insurance (due to age or health factors) or you're simply looking for a more affordable option to cover immediate death-related costs, final expense insurance could be just what you need.
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End-of-life arrangements can include other forms of estate planning, aside from simply purchasing a funeral insurance policy. Here are some other considerations you may want in order to note to ease the transition for your loved ones as best as possible.
Will and trusts
A will is a document that clearly specifies how you want your assets distributed upon passing. A trust, on the other hand, provides legal arrangement for the transfer of your assets.
Aside from your life insurance coverage, you may also need to name beneficiaries for assets that aren't noted in your will (e.g. retirement account). Make sure to review this regularly.
Power of attorney
Naming a power of attorney means you're designating someone to help make important decisions while you're unable to do so – due to illness or incapacity.
Business succession planning
If you own a business, you'll want to plan out the continuation of operations or the transfer of shares upon your death. And if it's co-owned, it's a good idea to look into a buy-sell agreement.
Appointing a healthcare directive means you're asking someone to make healthcare decisions for you if you're unable to do so – this can include decisions for life-sustaining treatment or organ donation.
Funeral and burial wishes
You may want to document your end-of-life wishes to ease the decisions for your loved ones. For example, do you want your body to be buried or cremated? Is there a specific location you'd like to be buried at?
If you're no longer able to take care of your children, a guardianship designation can ensure they're being cared for by someone you trust while they're still minors.
While there is no inheritance tax in Canada, your beneficiaries may still be taxed on other assets, such as capital gains. To limit end-od-life taxation, be sure to work with a licensed professional.
Does life insurance cover funeral costs?
Yes, a regular life insurance policy can be used to cover anything the beneficiaries wish, including the cost of a funeral. The same goes for a final expense or funeral insurance policy – which are generally designed specifically for immediate end-of-life expenses.
Is final expense insurance worth it?
Whether final expense insurance is worth it for you depends on your specific needs as a policyholder. If you're looking for an affordable option with a more limited death benefit (that's merely there to cover immediate end-of-life expenses), it may be the right product for you. It can also be a good option if you don't qualify for other forms of life insurance coverage due to health issues or old age.
However, if you do qualify for other options, and you'd like additional protection for your beneficiaries, you may want to look into regular life insurance instead. Or in a best-case scenario, you may already have enough savings to secure your loved ones' financial future without the need for any life insurance product.
Is final expense insurance whole life insurance?
Yes, final expense insurance is typically issued as a form of whole life insurance. This is because the coverage should last you an entire lifetime (as opposed to a set period of time, like with term life insurance) – it does not expire, as long as you continue making your premium payments.