How to Protect Your Loved Ones From Financial Trouble After You are Gone

No one likes to think about their eventual death, but it’s even more disturbing to think about leaving your loved ones burdened with significant costs when you die. Final expenses can pile grief and hardship on those we leave behind if adequate insurance isn’t secured. While it’s an unpleasant notion, it’s one that many Americans share.

The London International Insurance and Reinsurance Market Association (LIRMA) carried out a survey in 2015 that yielded some interesting statistics about these issues.

Many of the Americans surveyed were greatly concerned about burdening their dependents and heirs when they died:

• Almost 50% of those younger than 25.

• 43%, only slightly less, of those 25 to 44.

• 36% percent of those 45 to 64.

• 23% of those 65 and older.

Many were also worried about leaving burdensome funeral expenses:

• 50% of those 25 and younger.

• 41% of those 25 to 44.

• 35% of those 45 to 64.

• 30% those 65 and older.

What Am I Leaving Behind?

The same research showed that leaving an inheritance was also a major financial concern for Americans. 50% of those 25 and younger feared they wouldn’t have enough saved, or that their final expenses would consume their savings, leaving nothing for their dependents. This concern was shared by 38% of those 25 to 44 and 27% of those 45 and older. 

The cost of funerals has increased dramatically in the past 50 years. According to the National Funeral Directors Association, a funeral cost around $700 in 1960. By 2006, the average cost of a funeral for an adult was more than $6,000, and it’s around $10,000 today. Perhaps that is one reason for the dramatic increase in the number of cremations in the U.S. According to the Cremation Association of North America, cremations have increased from about 3.56% in 1960 to about 40% in 2010.

Opting for cremation rather than a traditional burial can help reduce final expenses, but can still be costly. According to the Cremation Research Council, the average cost of a direct cremation is $1,100; it’s $2,000 to $4,000 if arranged through a funeral home. Final expense insurance can make sure those costs don’t add to the stress your loved one’s experience when you die.

What Is Final Expense Insurance?

During the 2015 LIRMA survey, 51% of the respondents said that the main reason for buying life insurance was to cover burial and other final expenses, an increase of 3% in just four years. There are several types of life insurance policies that can help cover your final expenses, but which is right for you?

• Term life insurance: This offers death benefits for a specific period of time, for terms of 5, 10, 15, 20, 25 or 30 years. It is less expensive than permanent life insurance.

• Permanent life insurance: This offers more than just final expense coverage. It can be purchased as a whole life policy or a universal life policy. It covers you for your entire life and also comes with a cash value accumulation feature, which can benefit your dependents.

• Pre-need funeral insurance: This can be term or permanent and is usually linked to a funeral service provider. It features an installment payment plan that can extend for 1, 3, 5, 7, or 10 years and remains in effect for your entire life after the premiums are paid. People like this type of policy because they can do much of their own funeral planning rather than leaving the details up to their loved ones.

• Burial insurance: This is usually a term life insurance policy with death benefits of $5,000 or $10,000 dollars, or enough to cover your planned burial expenses. The death benefits are paid to a named beneficiary, who can use them in any manner.

Why Should I Purchase Final Expense Life Insurance?

Although many Americans are worried about financially burdening their loved ones with final expenses, several misconceptions about this insurance prevent them from purchasing coverage. The LIRMA survey found that the reasons some go without included:

• 65% said it was too expensive. (The average cost of a 20-year term policy is around $260 a year.)

• 61% percent said they had other financial priorities at the time.

• 38% said they did not trust insurance companies. (Independent agents do not work for insurance companies.)

• 38% said they were not sure how much they needed or what type to buy.

Some kinds of final expense insurance are even more affordable than a 20-year term policy. If you are unsure of what type is best or how much coverage you need, find a professional to help you navigate the various options to find a policy that meets your goals.

Where Can I Find the Right Policy?

It’s important to work with a knowledgeable, independent insurance agent when choosing a final expense policy. Our agents work for their clients, not an insurance company. That means they will assist you in finding a number of quotes with the coverage options you need so you can be certain to find the right policy at the most affordable rates. These agents can answer any questions you may have and leave you with peace of mind, ensuring your loved ones are not burdened with your final expenses.