While life insurance rates will vary according to your particular health and risk profile, term policies are typically the least expensive form of coverage, since they only pay out if you die during a certain period of time (the “term” of the policy). However, if you are specifically looking for permanent insurance to make sure family members are able to cover costs associated with your passing, final expense insurance is an affordable option as well.
Term Life Insurance
Term life insurance offers coverage for coverage for a specified period and, if you pass during the policy’s term, the beneficiary will file a claim to receive the policy’s death benefit. It’s typically the cheapest life insurance product, as coverage isn’t permanent and you cannot borrow against the policy. On average, a 20-year level term policy with $500,000 face value would cost $277 per year for a 30-year old male in great health.
When shopping for term life insurance, the key policy features which will impact premiums are the term length and death benefit. Term lengths can range from one year to 35 years, and your financial situation typically determines the appropriate length. For example, if you’ve just had a child and want to make sure their college tuition would be covered, you would probably choose a term of 20 to 25 years. Similarly, a policy’s death benefit can be customized (the amount can range from $50,000 to over $1 million) and should reflect your family’s financial needs if you passed.
Read more about the types of term life insurance policy >>
Final Expense Insurance
Final expense insurance is typically a permanent insurance policy with a small face value (often $5,000 to $25,000) since it’s intended to cover limited expenses associated with your death. It’s often marketed to seniors but can be applicable if you’re younger as well since the average cost for a funeral is often around $10,000, an amount most families don’t have on hand in case of an emergency.
Final expense insurance is distinct from similar-sounding products, like funeral insurance, in that the death benefit can be used however your beneficiary sees fit. For example, a child or spouse designated as your beneficiary could use the payout for your funeral, arranging travel for relatives, or even paying off a small loan. Funeral insurance, on the other hand, typically pays the death benefit to the funeral service provider to cover a predetermined set of costs associated with your burial, such as the casket and service.
The average premium for a final expense policy was $711 in 2014, according to a survey by CSG Actuarial, an industry consulting group. When shopping for coverage, keep in mind that “final expense insurance” is offered by dozens of companies and how a policy works may change based upon the insurer, so we'd advise checking that a particular product aligns with your expectations before purchase.