8 Common (And Costly) Myths About Final Expense Insurance

Few of us want to think about the end of our lives. But if we don't, we might leave the financial burden of a funeral, burial, and other end-of-life needs on our children's shoulders.

One way to eliminate some money stress for your loved ones is to invest in final expense insurance. This coverage pays out a sum of money to the named beneficiary to cover end-of-life costs.

Some people fail to buy final expense insurance because of a few common misconceptions. Here are some myths about the coverage that could prove costly if they prevent you from shopping for a policy that might save you money.

Final expense insurance is typically less expensive than other forms of life insurance, including term insurance. The amount of coverage is significantly less than you will find in other life insurance policies, and that fact keeps a final expense policy affordable.

Costs vary by provider, and your age, gender, and health status also play a role in how affordable the coverage is. But it is reasonable to expect to pay anywhere from $25 to $200 a month.

You should be able to purchase enough final expense insurance to cover funeral costs. In fact, you can generally choose the level of coverage you desire.

Some folks are comfortable with $5,000 in coverage, while others might want $25,000.

Final expense coverage isn't something to put off, and purchasing it when you are younger and healthier can reduce the overall cost.

If you buy a policy earlier in life, you may have a lower premium and may be able to purchase larger coverage amounts affordably.

Although you will likely be required to fill out a health questionnaire, policies generally do not require medical exams.

It is true that you could put aside money to cover your final expenses in a savings account. While that is an option for many people, it is not always ideal. End-of-life costs can be relatively high.

More importantly, final expense coverage pays out right away at the time of death, making it more accessible to your heirs, who won't have to wait for your estate to be settled.

Final expense insurance and traditional life insurance seem similar because they both pay out a death benefit at the time of your death. However, there are fundamental differences in these policies you shouldn't overlook.

Traditional life insurance allows you to leave funds behind to your named beneficiaries that they can use for anything they need or want.

On the other hand, final expense insurance is intended to cover the final costs of your life, including medical bills, funeral costs, burial costs, and others. And this type of policy typically pays out much faster than other forms of life insurance.

Final expense coverage is just as flexible as any other type of life insurance. Choose the amount that fits your needs and works for your budget.

Also, note that you may be able to add riders to your final life insurance that provide for specific needs. For example, you may be able to purchase an accelerated death benefit that you can tap to cover medical expenses if you are terminally ill.

Final expense insurance can be used for more than just funeral expenses. The payout can be used in most situations without limitation.

Your named beneficiaries can use the money to pay off personal loans, cover your medical bills, or pay for day-to-day costs if you die suddenly. The money can be used however the beneficiary sees fit.

The IRS does not levy taxes on life insurance benefits, including final expense insurance benefits. This type of payout is not considered to be part of a beneficiary's gross income.

This means your heirs do not need to claim the benefits paid to them on their taxes.

To buy final expense insurance, start by estimating the amount of coverage you need based on the funds you wish to leave behind and what you want them to pay for after your death.

Once you do that, start to narrow down the list of policy options based on the terms and conditions, the insurance company's reputation and financial stability, and overall policy features.

Comparing quotes from a number of providers is one of the best ways to get a deal on life insurance. So, shop around for the right final expense policy before you commit to one company.

When you are planning for retirement, don't forget to also make provisions for your end-of-life costs.

Covering your final expenses with insurance can eliminate concerns about who will pay for these costs after you are gone. It ensures your family won't have to go into debt to cover these expenses.

That is a thoughtful and loving legacy to leave behind.