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Final Expense Insurance and the Boomer Generation Dilemma

“What do you mean he didn’t have any life insurance? Who’s going to pay for his funeral and all the expenses that go with it? What are we supposed to do, take up a collection?”

Having a family member or someone else close to you die with no life insurance to cover all the costs of their final wishes can no doubt be stressful, and can cause hardship and often resentment amongst family members. All too often a loved one’s wishes for their final arrangements are compromised because there is no life insurance, or there simply isn’t enough money to carry out those wishes. Today, total costs for funeral expenses and final arrangements can be as high as $12,000 or more depending on Individual choices and desires.

Speaking as a “Boomer” myself, my experience and observations have shown me that many of my peers and clients have struggled with this dilemma and are faced with the realization that they are not prepared to have their final wishes handled the way they desire. Many of these individuals and families have been protected in the past, but may have lost their coverage due to job changes, cut-backs in company benefit plans or due to policy lapses during weak economic times. Some were forced out of necessity to “cash-out” permanent life policies that had accumulated cash values within the policy only to have them eventually lapse. Many have just never gotten around to replacing their coverage. So, what is a solution for this dilemma?

What’s a Final Expense Policy?

A Final Expense policy is simply a life insurance policy generally designed to help families handle all the expenses they will be responsible for in handling their loved one’s wishes when they die. They are generally permanent policies that do not expire as opposed to Term insurance plans that are temporary and expire at a specific age or length of time. Most companies offer these plans to individuals in the 50-85 age bracket. The death benefit is paid directly to the beneficiary the insured selects, tax free. Policy face amounts can range anywhere from $1000 to $40,000 or more depending on the life insurance carrier. Rates are usually based on age, gender, whether you use tobacco or not, and your health history. With funeral costs averaging $10,000 or higher, it’s important that families are aware of what their loved one’s wishes are regarding final arrangements so they can select the correct death benefit.

Buyer Beware—Are all Final Expense Policies the same?

Most companies that write this type of life insurance coverage offer some form of permanent plan that will be guaranteed renewable for your lifetime---you can’t out live it. Generally, this is a whole life policy as opposed to a form of term insurance which has a life span of its’ own. The last thing you need to find out is that you have just “out-lived” your term insurance and may not be eligible for a new policy.

There are companies offering policies with no health questions asked and no medical exams or blood and urine testing required. You may have seen TV commercials or received offers in the mail advertising these plans. Be careful, these guaranteed issue (you can’t be turned down) plans are usually more costly because the insurer is accepting risks with no questions asked and must charge a higher rate to everyone in order cover their risks. You may be better off purchasing a policy where you are being asked about your health history. Some companies will offer you plan options based on your answers to health history questions. Three possible plan solutions could be:

  1. A standard Whole Life Policy with a level death benefit from the first day of coverage
  2. A Graded Policy which may pay a reduced death benefit during the first few years of coverage then increasing to the full amount after that time has elapsed.
  3. A Modified Whole Life Policy that would pay a death benefit of only the amount of premiums paid on the policy plus compounded interest during the first few years of coverage then the full amount after that time has elapsed.

Most plans would pay the full face amount of the policy if death during the early years was due to an accident. Consider your options in making these important decisions regarding your final expense life insurance.

As Seniors/Boomers we do have choices regarding how we want to protect our loved ones and ourselves when it comes to handling our final expense wishes. I think our generation has adopted an attitude that we are not going anywhere any time soon. So much for wishful thinking! Take the time to plan for it before it’s too late and our loved ones are burdened with the responsibility.

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