Final expense planning in 3 steps

For many people, the topic of final expense planning is a difficult one to discuss. It can be hard to think that we will all die one day and even harder to plan for what happens after we're gone. However, it's important to remember that death is inevitable, and planning can make things easier for our loved ones. This blog post will discuss three steps you can take to help with final expense planning. Stay tuned!

Final expense planning in 3 steps
John Ramsey

Key Takeaways

  • After you make a list of your expenses and have set yourself up with the appropriate budget, it's time to speak with an agent.
  • Screen agents by reviews, questions, and comments.
  • It is essential to compare policies and companies before making a decision.

Table of Content

The Benefits of Final Expense Life Insurance

First, before we go over the list, we wanted to touch-based on the importance of having a final expense life insurance policy. Final expense insurance is a type of life insurance designed to help cover the costs associated with your death, such as funeral expenses, outstanding debts, and other expenses. It can be an invaluable tool in helping your loved ones cover the costs of your passing, and we highly recommend considering it as part of your final expense planning.

Now, let's get into the list.

1. Make a list of expenses.

The first step in final expense planning is to list all the expenses you anticipate having after you die. This might include funeral costs, medical bills, outstanding debts, and other final costs your loved ones will need to pay. It's essential to be as thorough as possible when making this list, as it will help you and your loved ones plan for the future. Here are some expenses to think about:

Find out how much funerals will cost according to the National Funeral Directors Association Member 2021 General Price List Study.

• Funeral costs: This can include the price of a casket, funeral service, memorial service, and a headstone or grave marker.

• The funeral cost will need to be reviewed and updated every year. According to the National Funeral Directors Association, the funeral median cost has increased every year.

• Medical bills: If you have any outstanding medical bills, your loved ones will need to pay them off. Make sure to include any medical bills you anticipate having in the future, such as long-term care costs.

• Outstanding debts: This can include credit card debt, mortgages, car loans, and other debts. It's essential to have all of your debts, as your loved ones will need to pay them off after you pass.

• Other expenses: There are often other final expenses that need to be paid, such as utility bills, taxes, etc. Ensure to list all the costs you can think of so your loved ones are prepared.

Make a budget

Once you have a list of all the expenses you anticipate having, it's time to make a budget. This will help you and your loved ones plan for how much money will be needed to cover all of the costs associated with your death. When making your budget, include all of the expenses from your list and any other costs you can think of.

You may also use a life insurance calculator to help estimate your end-of-life expenses. This can be a helpful tool in determining how much life insurance you'll need to cover all of your costs.

2. Talk to an agent to get started.

The second step in final expense planning is to contact an insurance agent. They can help you understand your options, explain how final expense insurance work, and find the right policy for your needs. Getting an agent is vital in the final expense planning process.

Check reviews

When looking for an insurance agent, it's essential to check reviews. This will help ensure you're working with a reputable agent who can help you find the right policy. Many websites offer reviews of insurance agents, such as Google and Trustpilot.

Ask friends and family.

Another great way to find an insurance agent is to ask your friends and family. They may have worked with an agent in the past and can provide you with a recommendation.

Here are some questions you may ask when deciding which agent to pick

How many companies are you contracted with? The more companies an agent has to offer, the better. This prevents the agent from trying to fit a square peg in a round hole.

What experience do you have with final expense life insurance? You want to make sure the agent you're working with is experienced in final expense life insurance. This will ensure they understand the ins and outs of the policies and can find the best one for your needs.

Can I see some sample policies? Most agents will be happy to show you sample policies from their companies. This will give you a better idea of what to expect from each company and help you decide.

How can I stay in touch? Some agents disappear after selling you a plan. Stay away from those agents. They avoid accountability and won't be there to help you when needed. A good agent will want to stay in touch and be available to answer any questions you have. They should also provide regular updates on the policy or company changes.

What type of training have you had in final expense planning? Make sure your agent has received training in final expense planning. This will ensure they understand the process and can help you find the right policy for your needs.

Do you have any experience with my particular situation? If you have a unique situation, such as a pre-existing medical condition, it's crucial to find an agent who has experience dealing with it. This will ensure they can help you find the right policy to cover your needs.

Do you have more than one final expense option? This allows them to find you the best possible rate.

Do you offer support? A good agent will offer support and guidance throughout the process and after. They should also be available to answer any questions you have.

[WARNING] Questions agents should ask you if they don't run.

At a minimum, they should ask:

• What is the maximum amount you believe you'll need for funeral and end-of-life costs? How did you arrive at that figure?

• Do you already have a life insurance plan? If so, how much coverage do you have?

Other questions they should ask:

• Have you made any arrangements with a funeral home or crematorium?

• Do you have any outstanding debts that will need to be paid off after your death?

• Do you have any other assets that could be used to cover funeral costs?

When you've found your new agent, the next stage is to locate a policy that matches your requirements.

3. Choose the right coverage for your needs.

The agent should help you choose the right coverage for your needs. First, they will ask you questions about your financial situation and health and consider any pre-existing medical conditions. Then, they will present one or more options for you to discuss.

Once you have a list of options, it's time to compare policies.

Compare policies

The four touchpoints to consider when comparing insurance policies are:

1. Your health - When it comes to life insurance, your health situation will determine what kind of policy you can qualify for and how much it will cost. The agent should ask you these questions about your health, such as:

Do you have any pre-existing medical conditions?

Have you been to the doctor or had any tests done in the last 12 months?

Do you take any medication regularly?

What is your age or date of birth?

Are you a tobacco user?

Although health questions are not the same for every insurance provider, you will almost certainly be asked to respond to some health queries when you apply.

2. The death benefit - The death benefit is the amount of money your beneficiaries will receive when you die. You want to make sure the death benefit is enough to cover your final expenses and any other debts or obligations you may have.

Some individuals only get enough money to pay for burial expenses. This protects the family from losing or begging for money to bury their loved ones. Most people aim for a $25,000 final expense life insurance policy to have more money and cover extra charges.

3. The premium - Is the money you'll need to pay to keep the final expense coverage active. You will have to pay monthly, but some insurance providers allow you to pay quarterly or annually. Some companies even give you discounts when you pay quarterly or annually.

Make sure you can afford the premium and that it fits into your budget.

4. The policy term - Is the length of time the policy will be active. Make sure it's long enough to cover your needs. The majority of final expenses on whole life insurance are intended never to expire if you make on-time premium payments.

Every whole life has a maturity date. The expected maturity date is 120 years old. If you live to 120, the insurance company will just issue your death benefit check while you're still alive.

Depending on your age, you may still qualify for term life. However, term life policies are not final expense life insurance, especially since they expire, which is highly detrimental to an older person; even final expense policies have a cut-off age when you can apply for a new policy.

For example, let's say you're 55 years old and start a new term life policy for 30 years. You're alive and healthy after 30 years, and the term life policy expires and has ended. Shopping around, you are exposed to the horror of being too old to start a new life insurance policy and being unable to get life insurance.

Other points to think about

The waiting period - Some policies have a waiting period before benefits are paid out. For example, some plans have a waiting period of 3 years. Imagine paying for life insurance that you can't use for three years.

The riders - This is an add-on to the policy that can provide additional coverage. Make sure you understand what each rider covers and how much it costs.

The company - The final expense company you choose is just as important as the policy itself. You want to choose a reputable company with an excellent financial rating.

Cash Value -  Some policies build cash value over time. This cash value can be borrowed against or used to pay premiums if needed.

Medical Exam - Some policies do not require a medical exam, which can benefit those with health concerns.

Lapse - The time before your policy ends due to nonpayment. Some companies wouldn't issue you a policy if you had a life insurance policy lapsed within 12 months.

Grace Period - The time you have to make your premium payment after the due date.

Reinstatement - Restoring a lapsed policy.

Cancellation - Ending a policy before it expires.

Payment Options - Single pay, annual, semi-annual, quarterly, or monthly

Premium Increase - Policy rates may increase over time depending on the company.

Once you've compared policies and found the one right for you, it's time to decide and purchase the policy.

The agent you're writing it to can fill it out and apply for you. You can also usually purchase the policy online or over the phone. The insurance company will then send you the policy documents. 

If you need final expense life insurance, it's time to get it. Don't wait until you're sick or have health issues. It's easier to get coverage when you're healthy.

Now that you know how to compare final expense policies and what to look for, you're ready to start shopping around and find the best approach for you.

In conclusion

Final expense planning is an essential but difficult task. However, by making a list of final expenses and choosing the right coverage, you can ensure that your loved ones are taken care of after you're gone. If you have any questions about the process, don't hesitate to contact an experienced insurance agent.

Frequently Asked Questions

How do final expense policies work?

Most final expense policies work by providing a payout to the policy's beneficiary after the policyholder passes away. This payout can be used to cover any costs associated with the funeral and burial. Some policies also offer riders that can provide additional coverage.

How do final expense agents get paid?

The primary way in which final expense agents get paid is by commissions. Commissions are typically a percentage of the premium paid by the policyholder, and carriers will differ on what percentage they offer.

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