Life Insurance Vs Final Expense: What Is The Difference
Understanding all aspects of life insurance can be daunting to some people. For instance, in the case of traditional life insurance vs. final expense policies, are there any differences in the covers? Don’t they serve the same purpose? After all, both life insurance and final expense policies are just different forms of life insurance policies and they are meant to cover end-of-life expenses
While these are products that help you cover end-of-life expenses, each policy has unique attributes that make it suitable for different people, budgets, situations, and uses. Herein we will explore what traditional life insurance and final expense life insurance policies are, and, importantly, what makes each policy different from the other.
Traditional Life Insurance
Life insurance There are two popular types of life insurance on the market;
– Term life insurance, and
– Whole life insurance.
Term life insurance is also called pure life insurance, and it is meant and designed to protect your family from loss of income after your death during a stipulated time span. Your family is guaranteed to receive specified death benefits during the specified term.
As such, the policy is considered as temporary, although you can renew it or convert the policy into a permanent life insurance policy at the end of the term. This type of life insurance tends to be cheaper, but it requires one to take a medical test when applying for one.
Whole life insurance policy, on the other hand, is designed to offer whole life – permanent life – insurance cover. As such, as long you pay for the policy, your policy will stay active your entire life and upon your death, your family will receive death benefits.
Whole life insurance tends to be the easiest type of life insurance one can get as one only needs to answer a few questions. However, given that medical examinations are not required, whole life insurance attracts higher premiums.
Final Expense Life Insurance
Also known as burial insurance, final expense life insurance is a class of whole life insurance products that are designed to cater to the needs of individuals who might otherwise not qualify for the traditional whole life insurance coverage. Final expense policies come in two types:
– the guaranteed-issue life insurance, which guarantees coverage except for individuals who suffer from serious ailments, or
– the simplified-issue life insurance that requires you to give feedback regarding your health.
As such, final expense life insurance life policies are policies that offer lower death benefits. For instance, the policy can help cover burial costs (hence the name “burial insurance”), medical expenses, and unpaid bills. However, the recipients can also choose to use the benefit for other purposes such as college tuition for children.
The Differences Between Traditional Life Insurance And Final Expense Life Insurance
Final expense insurance tends to be easier to qualify for when compared to traditional term and whole life insurance. This is because of your health condition and your age do not greatly affect your ability to get the policy. For instance, you do not need a medical examination for both simplified-issue and guaranteed-issue life insurance as is the case with traditional life insurance.
The vast majority of final expense life insurance policies are available to older applicants between the ages of 50 and 85. Term life and whole life insurance are available for individuals between the ages of 18 and 85.
Final expense life insurance is available for lower coverage amounts than traditional life insurance, especially term life. For instance, the lowest term life insurance coverage you can get is about $25,000. However, you can get final expense policies that start as low as $2,000 or $5,000 depending on the type of policy you choose.
You cannot get high coverage from a final expense life insurance since they top out as a low as $25,000 and as high as $50,000, depending on your policies. On the other hand, life insurance policies can go up to millions of dollars.
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