Small Amounts of Life Insurance Can Cost You A Fortune

Looking for so-called "Final Expense" coverage can be expensive. We receive calls almost daily from children seeking small policies for their parents or grandparents.

Usually they are interested in coverage amounts of $5,000 to $25,000 to cover funeral and other "end of life" costs. All policies sold under this category are whole life with level premiums and cash value accumulation. The problem with this coverage for many is that the cash value does not accrue, nor is it paid to the beneficiary upon the insured's passing.

However, at the $25,000 level another type of policy known as "flexible premium universal life" is available for many of these applicants, and can be significantly less costly than $10,000 or $15,000 of whole life insurance.

Why the difference? In short, the universal policy can be designed without any cash value accumulation which lowers the total overall cost of the policy.

However there can be some caveats to consider:

Final expense policies do not require a paramedic exam. If all questions are answered negatively and the applicant takes no medications that are on the insurance company "decline" list such as those for dementia, then approval is usually quick. However, you may pay for such ease of purchase with higher cost.

Sometimes universal coverage requires medical records which can lead to higher premiums depending upon health conditions that may not be an issue in the final expense type policies.

The key takeaway is that options exist that most consumers don't know about. Each case is different and requires a good independent agent to guide them. The good news is that this expertise is free of charge, so don't be fooled into tricks some company's use that may not be in your best interest.