What is final expense insurance?

Because the death benefit is modest, final expense policies use light underwriting — most are simplified-issue (a few health questions) or guaranteed-issue (no questions), so people who can't qualify for traditional life insurance can often still be covered. Premiums are fixed and the benefit does not decrease as long as the policy stays in force.

The payout goes to the beneficiary as cash, not to a specific funeral home, so the family can use it for any expense and choose any provider. Watch for graded-benefit policies, common on guaranteed-issue plans, which pay only a partial benefit or return premiums plus interest if death occurs in the first two to three years.

Final expense insurance is one of two common ways to prepay for end-of-life costs; the other is a preneed plan that locks in a particular funeral home's services. Insurance is more portable, while a preneed plan can lock in today's prices. Estimate the coverage amount you'd need from your expected funeral cost before buying.