Final expense policies are small life insurance policies in which the death benefit is often used for funeral expenses. The most common types of final expense insurance are guaranteed and simplified issue.
Life insurance terms you should know
Beneficiaries: The people you name on your life insurance policy to receive the lump sum of money — also known as the death benefit — when you die.
Cash value: The portion of a permanent life insurance policy’s monetary value that grows tax-deferred over the life of the policy.
Death benefit: The amount of money the life insurance company will pay your beneficiaries when you die.
Face amount: The dollar amount, or death benefit, your beneficiaries receive if you die while your life insurance policy is active.
Insured: The person who is covered by the insurance policy.
Policy: The legal document that includes the terms and conditions of your life insurance contract.
Policyholder: The person who owns an insurance policy. Usually, this is the same person as the insured.
Permanent life insurance: A type of life insurance that lasts for the rest of your life and usually includes a cash value account.
Premium: The amount you pay your insurance company to keep your coverage active. Premiums are typically paid monthly or annually.
Riders: Add-ons to a life insurance policy that provide more robust coverage, sometimes for an extra cost.
Term life insurance: A life insurance policy that lasts for a set number of years before it expires. If you die before the term is up, your beneficiaries receive a death benefit.
Underwriting: The process where an insurance company evaluates the risk of insuring you and determines your final rate.
Guaranteed issue life insurance doesn’t require a medical exam or a thorough medical questionnaire. Simplified issue insurance also allows you to skip the medical exam, though it does require a medical questionnaire. It's more affordable than guaranteed issue.
If you have enough assets to pay for your final expenses without burdening your beneficiaries, you likely don’t need a final expense policy.
How does final expense insurance work?
Final expense insurance is also known as burial insurance because people often use it to cover end-of-life costs, like funeral or medical bills. A type of permanent life insurance, final expense insurance has small coverage amounts, typically up to $25,000 or $40,000.
These policies are best for people who may not otherwise qualify for traditional term life or whole life insurance. Both offer lifelong coverage and minimal cash value growth. Two of the most common types of final expense insurance include:
Guaranteed issue life insurance doesn’t require medical questions or a medical exam for approval. Most companies offer guaranteed approval for guaranteed issue plans.
Simplified issue life insurance requires you to answer questions about your health, but doesn’t require a medical exam. You could be denied if you have a critical illness or reside in an assisted living facility.
Some guaranteed issue policies come with graded death benefits. This means your policy won’t pay out the full death benefit if you die within the first two years of coverage.
Instead, your beneficiaries receive a payment equal to 110% of the premiums you’ve paid into the policy.
Simplified issue vs. guaranteed issue life insurance: Quick comparison
Simplified issue insurance | Guaranteed issue insurance | |
|---|---|---|
Term length | Life | Life |
Coverage amounts | $2,000 to $40,000 | $2,000 to $25,000 |
Sample premiums | $104.60/month | $186.07/month |
Age requirements | 45 to 85 years | 45 to 85 years |
Underwriting requirements | Application and medical questionnaire | Application for coverage |
Cash value | No | No |
Best for | Individuals in moderate health who need limited coverage or don’t qualify for traditional policies | Individuals with serious health concerns who may not qualify for simplified issue or traditional life insurance |
Methodology: Based on policies offered by Corebridge Financial and Mutual of Omaha through Policygenius in June 2024. Sample rates are for a 60-year-old male non-smoker buying a $25,000 simplified issue and $25,000 guaranteed issue life insurance policy. Individual rates will vary as specific circumstances will affect each customer’s rate.
