Term Life Insurance

Term life insurance lasts for a specified number of years and then ends. You choose the term when you take out the policy, with common terms being 10, 20, or 30 years. The best-term life insurance policies balance affordability with long-term financial strength.

Types of Term Life Insurance:

• Decreasing Term Life Insurance: This is renewable term life insurance where the coverage decreases over the life of the policy at a predetermined rate.
• Convertible Term Life Insurance: This allows policyholders to convert a term policy to permanent insurance.
• Renewable Term Life Insurance: This is a yearly renewable term life policy that provides a quote for the year the policy is purchased. Premiums increase annually and it is usually the least expensive term insurance initially.

Term life insurance is attractive to young people with children because parents can obtain large amounts of coverage at reasonably low costs. Upon the death of a parent, a significant benefit can replace lost income.

These policies are also well-suited for people who temporarily need specific amounts of life insurance. For example, the policyholder may calculate that by the time the policy expires, their survivors will no longer need extra financial protection or will have accumulated enough liquid assets to self-insure.

Term life insurance is for a predetermined period, typically between 10 and 30 years. Term policies may be renewed after they end, with premiums recalculated based on the holder’s age, life expectancy, and health. By contrast, whole life insurance covers the entire life of the holder. Unlike a term life policy, whole life insurance includes a savings component, where the cash value of the contract accumulates for the holder. The holder can withdraw or borrow against the savings portion of their policy, where it can serve as a source of equity.

Whole Life Insurance

Whole life insurance, also known as traditional life insurance, provides permanent death benefit coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate. Interest accrues at a fixed rate and on a tax-deferred basis.

Whole life insurance policies are one type of permanent life insurance. Universal life, indexed universal life, and variable universal life are others. Whole life insurance is the original life insurance policy, but it does not equal permanent life insurance as there are many types of permanent life insurance.

Universal life insurance and whole life insurance are both permanent life insurance types that offer guaranteed death benefits for the life of the insured. However, a universal life policy allows the policyholder to adjust the death benefit as well as the premiums. As one might expect, higher death benefits require higher premiums. Universal life policyholders can also use their accumulated cash value to pay premiums, provided the balance is sufficient to cover the minimum due. Whole life insurance, alternatively, does not allow for changes to the death benefit or premiums, which are set upon issue.

Universal Life Insurance

Universal life (UL) insurance is permanent life insurance (lasting the lifetime of the insured) that has an investment savings element and low premiums similar to those of term life insurance. Most UL insurance policies contain a flexible-premium option. However, some require a single premium (single lump-sum payment) or fixed premiums (scheduled fixed payments).

Unlike term life, UL insurance policies can accumulate interest-bearing funds like a savings account. Additionally, policyholders can adjust their premiums and death benefits. Those paying extra toward their premium receive interest on that excess.

If you want to build tax-deferred savings and don’t expect to tap into the funds for a long time, universal life may be a suitable option. The cash value option that’s part of a universal life policy may be available for you to withdraw or borrow against in an emergency.

It’s a good idea to talk with your insurance provider to better understand your life insurance options. They can help you review your personal situation and long-term goals to choose a policy that’s a good fit for you and your family.

Final Expense Insurance

Final expense insurance is a type of whole life insurance policy specifically designed to cover the costs associated with a person’s end-of-life arrangements. Often referred to as burial insurance or funeral insurance, this policy provides a small death benefit to help pay for expenses such as funerals, memorial services, cremation, medical bills, and even unpaid debts like credit cards or personal loans.

While traditional life insurance policies may provide large coverage amounts to replace income, final expense insurance is typically meant to offer a smaller, more affordable option that addresses immediate financial needs after a loved one passes away. These policies are popular among seniors and those looking to avoid leaving a financial burden on their families.

Key Benefits of Final Expense Insurance

• Affordable Premiums: Designed to be budget-friendly, even for people on fixed incomes.
• Easy Qualification: Many policies do not require a medical exam—just simple health questions.
• Lifetime Coverage: As long as premiums are paid, the policy remains in effect for your entire life.
• Fixed Benefits: The death benefit amount does not decrease over time.
• Quick Payout: Funds are typically paid out quickly to help cover urgent expenses.

What Final Expense Insurance Typically Covers

Final expense insurance is meant to provide peace of mind by covering the following:

• Funeral home fees and services
• Burial plot or cremation costs
• Headstone and casket
• Transportation and obituary services
• Unpaid medical bills
• Outstanding personal or credit card debt
• Legal or administrative fees associated with estate handling

Who Should Consider Final Expense Insurance?

Final expense insurance is ideal for individuals who:

• Are over the age of 50
• Do not already have a life insurance policy
• Want to ensure their family is not burdened by funeral or medical costs
• Have limited savings or fixed retirement income
• Want a simple, hassle-free insurance plan

How Much Coverage Do You Need?

The amount of coverage needed depends on the type of arrangements you prefer and any debts you want to be covered. The average funeral in the United States can cost between $7,000 and $12,000. You may also want to account for medical bills, final utility payments, and small personal debts. Most final expense policies offer coverage amounts between $2,000 and $25,000.

How to Apply for Final Expense Insurance

1. Research: Start by researching different insurance companies and comparing policy options.
2. Get Quotes: Request free quotes to see what your premium might be based on your age and health.
3. Speak with an Agent: A licensed insurance agent can help guide you through available options and answer your questions.
4. Choose a Policy: Select the plan that best fits your budget and coverage needs.
5. Apply: Complete the application, which usually involves a short questionnaire but no medical exam.

Final Thoughts

Final expense insurance provides a simple, affordable way to protect your loved ones from the financial stress of paying for your funeral and related costs. With minimal requirements and fast approval times, it’s a practical option for those seeking peace of mind in their later years.

Taking the time to plan ahead can make a significant difference for your family. By securing a final expense policy, you ensure that they can focus on remembering and honoring your life without the added burden of financial worries.