What is the difference between life insurance and final expense?

Life insurance and final expense are very similar types of insurance. However, they also have their differences. Before you make the ultimate decision of which policy is right for you, make sure to consider these similarities and differences.

What is Life Insurance?

Life insurance is described as a legal contract between a policyholder and the insurer. The policyholder is legally obligated to pay a one-time, lump-sum premium, or pay monthly premiums. In return, a death benefit will be provided for the policyholder’s beneficiaries when the policyholder dies. 

There are several life insurance policies to choose from, the most popular being Term, Whole, and Universal. 

  • Term Life Insurance is meant to replace your income for your loved ones should you pass. It is more affordable than Whole Life Insurance, but keep in mind that you can only have this policy for a certain amount of time, known as a term. The policy’s length is your choice, but common terms are 10, 20, or 30 years. Once this term ends, you can choose to renew the policy.
  • Whole Life Insurance is a permanent life insurance policy that does not have a specific term. Whole Life offers the death benefit, but it also accumulates a cash value that can be invested.
  • Universal Life Insurance is a type of permanent life insurance policy that includes flexible and lower payments, including an investment savings element.

What is Final Expense?

Final expense, also called burial insurance, is a type of life insurance policy meant to cover your funeral, burial, leftover medical bills, and other final expenses. It is a permanent policy that does not expire.

You can receive coverage with a final expense policy in one of two ways: guaranteed life insurance or simplified life insurance. You might be asked a few medical questions with guaranteed issue, but you are guaranteed to receive the coverage. With simplified issue, you are required to answer a short medical questionnaire, but it does not require a medical exam. However, some simplified issue coverage types do not require a medical questionnaire at all.

Main Differences

Compared to the other forms of life insurance, final expense insurance offers a smaller death benefit, usually ranging from $2,000 up to no more than $50,000, whereas the other life insurance policies can cap out in the millions.

It is also simpler to qualify for a final expense policy. With final expense, you do not need to participate in a medical exam to qualify, nor are the policies strict. However, you may need to answer a short questionnaire. With other life insurance policies, not only are you expected to answer questions about your health (which affect your eligibility), you are also subjected to a medical exam.

Which Policy is Right for Me?

The policy that is right for you is ultimately based on the coverage amount you feel is necessary, if you need a permanent policy or not, the premium payment amount, and your health status. Once you have determined these factors, you can make a more informed decision on which type of policy is best for you and your family. However, talking with a specialized agent like the ones with BTW Insurance can help you further understand your options.