It isn’t easy to think about the end of your own life. But, if you consider it as planning for your family’s future when you’re gone, you realize it’s important to ease their financial stress by preparing now. Unfortunately, it’s easy to confuse what the differences are among Final Expense, Pre-need, and Term Life insurance plans.
What Final Expense insurance is
By its name, you may think that a Final Expense policy only pays funeral costs, but it can cover an array of expenditures. It ensures that immediate and long-term expenses will be taken care of when you pass away. A Final Expense insurance policy can help your loved ones pay for funeral costs, estate taxes, mortgage payments, outstanding debts, and even college funds.
Do I Need Final Expense Insurance?
The answer to that question will vary from person to person. Do you already have term or whole life insurance? If you do, that policy can help your loved ones pay for final expenses. However, if you have term life insurance and you outlive the policy term, it’s a different story. In that case, you may want to consider final expense insurance.
Alternatively, maybe your family will have plenty of assets to work with when you die. In that case, you could use what’s called “self-insurance.” “Self-insurance” is one of those terms that sounds more complicated than it is. To self-insure is just to use your own money rather than use a life insurance payout.
Could your family self-insure for your final expenses? It’s a good idea to assume around $10,000 for funeral expenses. But don’t forget to take into account whether you will want a catered party after the service. Or perhaps a trip abroad to scatter your ashes. Maybe you’ll end up leaving big bills behind. If situations like these sound like your situation, you may want to consider springing for final expense insurance. Additionally, it’s probably best not to count on the lump sum death payment from Social Security to pick up the slack. It’s only $255.