Many people have a very difficult time making a decision between final expense and term life insurance. I think that has to do with a lack of information given to them and not much guidance.
So which is better? Term or Final expense?
Each have their own strengths and weaknesses, which I will go over in this article.
By the end of this, you should have a solid understanding of the differences between the two, and more importantly, which one is best for you. Let’s get started!
Table of Contents
Final Expense Insurance
Final expense insurance goes by many different names. I commonly refer to it as burial insurance, some call it funeral insurance, but all of these names are referring to small whole life insurance policies that are designed to pay the costs of a funeral.
They are designed for people ages 50-85, but exceptions can be made. It is not uncommon to see young people even under 40 have a final expense policy, or to see people over 85 have one. Each case is different.
These types of policies are offered by almost all companies that offer life insurance, as it has become an increasingly high demand product.
We have more people turning 65 every day, and with inflation and rising costs of funerals, more and more people are left vulnerable when their loved ones pass.
Final expense has several pros that I will list here:
- Locked in rates
- No medical exam
- Instant approval
- Coverage for life
- Fast Payout
Why are these things important? Because I believe it is important as we reach the typical age of our final expense clients that we know exactly what we are getting.
Once you have been approved for a final expense policy, you know exactly how much coverage you have and how much you have to pay for the entire lifetime of the policy. The rate will never increase, and the coverage amount will never decrease.
This is definitely one of the strong suits with Final Expense.
Another Highlight for Final Expense is the fact that most carriers do not require a medical exam.
In fact, with my carriers that I represent at arkburialquote.com, none of them do! I feel it is best to do business with the best carriers, and the best carriers do not do medical exams for these policies.
The last thing I want my clients, who are typically seniors, to do is go through a physical or get their blood drawn to take care of their families. The only thing they have to do is go through a prescription check, which is done electronically.
One of my personal favorite aspects of Final Expense is that you can get approved instantly! Especially with the carriers that I represent, 90% of the time my clients are covered with Final Expense insurance before we get off of the phone.
That is so important especially when we think about how unpredictable our world today is. You never know what tomorrow will bring, and when it comes to getting life insurance, you need to get it as soon as possible. The time for waiting is over, and my clients need protected immediately.
The last pro I will discuss about Final Expense is the fact that the coverage lasts forever. In my opinion, the best policy is the one you have when it is needed.
With Final Expense, you never have to worry about the policy lapsing, terminating, or going away for any reason other than lack of payment. These policies last the lifetime of the client. Most of them until age 121. I’m not sure about you but I don’t know anyone who lives that long!
The best part about this is that you never have to worry about your family being left vulnerable just because you aged too much. I have seen that happen time and time again. Once you reach age 75 or 80, sometimes certain policies will just cancel. This leaves people in terrible circumstances, because once you reach those ages these final expense plans can get pretty expensive, and term policies are near impossible to get.
The most important part of any life insurance policy is how fast the payout gets to your beneficiary.
With Final Expense, it gets to them sometimes within a couple of days. That is definitely one of the major highlights of a Final Expense policy.
You won’t have to worry about your kids coming up with money in the meantime while waiting for your life insurance to come through. They are very fast, especially the A+ rated insurance carriers that I represent.
The cons to Final Expense are few, but in my opinion, the biggest one is
- Cost/Coverage Ratio
This is by far the biggest con to Final Expense insurance. Because it is a whole life policy, it is priced higher than Term products.
The reason is the coverage never goes away no matter what. So it doesn’t matter if you have a stroke, heartattack, COPD, or anything of the sort AFTER you have gotten your final expense policy, the company can’t drop you.
Nevertheless, it is more expensive than a term policy. And if you are looking at the coverage amounts, it is more expensive by a good amount. It is so important to remember that Final Expense lasts your life, term only lasts for a portion of it.
Term Life Insurance
Term life insurance is arguably the most common type of policy that people purchase for themselves. The reason for that is it is cost effective, and you get huge amounts of coverage for what you’re paying.
But what are the pros and cons? I’m glad you asked!
The pros for Term Insurance are as follows:
- Lower Cost
- Bigger Insurance Amounts
- No Medical Exam (Sometimes)
It is no doubt that Term insurance is cheaper. But is it always better to be cheaper? That just depends on your circumstances.
In some cases, yes it is better to go the more affordable route. When it comes to life insurance, I am not a fan of anyone just getting the cheaper option simply because it is cheaper. I believe you should look at why it is cheaper.
With term insurance, you can also get much larger amounts of coverage. For example, some term carriers won’t even write a term policy for less than $100,000 in coverage.
This is much different than Final Expense. You can use these types of policies to cover things like mortgages, large amounts of debt, your children’s education, etc.
So if you are wanting a million dollar or half a million dollar plan, this is the product for you!
Another strong point of Term Life insurance is that sometimes you don’t have to go through any medical exams.
Thanks to the Pandemic, many term carriers relaxed their underwriting guidelines. So if you are wanting $500,000 or less in coverage, I can actually get you covered without ever having to do a medical exam!
That’s very convenient especially now days. I only predict that more policies will follow this trend as well.
The cons for terms are not many either! They are as follows:
- Length of Coverage
- Outliving your Policy
- No Convertability
The first major con of Term is that you are only covered for a limited amount of time. This is usually 25-30 years.
You can get terms for 10, 15, 20, 25, and 30 years with me. It is important to remember that you will only be covered for those amounts of years! Once those years are passed, it is over. Your coverage is terminated.
In reality, the vast majority of people will live longer than their terms. However they do serve a purpose.
As I mentioned before, mortgages are a popular reason that people get Term insurance, including myself! You typically get a policy to match the amount of years you will pay on your mortgage so that your kids or spouse won’t have to worry about it if something were to happen.
The fact of the matter is that the vast majority of people, even 80% according to some statistics, will outlive their term policies.
So what does that mean?
It basically means that after your term policy ends, that is it. The money that you have put into your policy belongs to the company, and you don’t get anything in return.
With final expense, you have your cash value building as you pay. With term, you are just paying the company to cover for an allotted amount of time. Nothing more.
The last con of term insurance is that many of these policies have no convertability.
What does that mean? Some carriers, like the ones I have, offer convertability at the end of the term. This means that when your term is coming to a close, you can convert it to a whole life or final expense policy and get the same health rating that you got when you purchased the term.
Unfortunately, this is not common with Term carriers, but it is with me thankfully! Many times, if you are coming up on your end of the term and want it to be a final expense policy, you will have to go through underwriting again. Most likely, you will get a much higher rate than you would if it just converted straight over.
To wrap this up, I believe it is important to have your life covered. No matter whether you choose to do it with a term policy, a final expense policy, with me or with someone else, you should have life insurance.
Term is excellent for the right client, and so is final expense. I believe people should try to have both if possible. I know I do!
As always, if you have any questions about this topic or comments, leave them below! Feel free to reach out to me directly as well.
You can get a free burial insurance quote here on the site also by filling out our form on the “Check Burial Insurance Rates” tab! I look forward to serving you and your family.