Final Expense Life Insurance: A Lifeline for Some, a Cost Trap for Others

For millions of aging Americans, the idea of leaving their loved ones with a financial burden after death is unsettling. Funeral costs are rising steadily, with the average traditional burial now exceeding $8,300, according to the National Funeral Directors Association (NFDA). In this context, final expense life insurance—also known as burial insurance—has emerged as a simple, accessible, and fast way to secure small-scale coverage for funeral and end-of-life costs.

But while it may sound like an ideal safety net for those without traditional life insurance, a closer look reveals trade-offs. These policies often come with high premiums, limited coverage, and waiting periods that may surprise the buyer. Still, for certain Americans—especially older individuals with health issues—this type of insurance can be the best or only option.

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What Is Final Expense Insurance, and What Does It Cover?

Final expense insurance is a form of whole life insurance, typically offering coverage between $2,000 and $50,000. Its core function is to cover:

• Funeral and burial costs

• Cremation services

• Medical bills

• Unpaid debts

• Basic household expenses

Unlike term policies, which expire after a set number of years, final expense insurance remains active for life as long as premiums are paid. These policies are usually guaranteed issue (no medical exam required) or simplified issue (a few basic health questions). That accessibility makes them especially appealing to Americans between ages 50 and 85, many of whom are uninsured or underinsured.

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How Much Does It Cost?

Final expense insurance can be expensive for the benefit it provides. According to Policygenius, here’s what a $10,000 policy might cost monthly for a non-smoking applicant:

Over time, those premiums can add up. A 65-year-old man who pays $70/month for 20 years will spend $16,800 in total—68% more than the policy’s $10,000 payout.

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Common Insurers Offering Final Expense Policies

A number of well-known insurance carriers specialize in burial insurance. Below are a few of the most prominent, along with what distinguishes them:

1. Mutual of Omaha

• Policy Type: Simplified Issue

• Coverage Amount: $2,000–$40,000

• Pros: Competitive rates, immediate full coverage for qualified applicants, strong customer service reputation.

• Cons: Health questions may disqualify some people.

2. AARP / New York Life

• Policy Type: Guaranteed Acceptance (for AARP members)

• Coverage Amount: Up to $25,000

• Pros: No health questions; available to members aged 50–80.

• Cons: Two-year waiting period; premiums may be higher than competitors.

3. Globe Life

• Policy Type: Simplified Issue

• Coverage Amount: Up to $50,000

• Pros: Online application; first-month coverage as low as $1.

• Cons: Prices increase sharply with age; long-term costs are high.

4. Colonial Penn

• Policy Type: Guaranteed Issue

• Coverage: Units instead of dollar amount; often confusing for consumers.

• Pros: No health questions.

• Cons: Limited payout per unit; high cost relative to benefit; steep two-year waiting period.

5. Transamerica

• Policy Type: Simplified and Guaranteed Issue

• Coverage Amount: $1,000–$50,000

• Pros: Flexible coverage amounts; available to applicants as young as 45.

• Cons: Must work through an agent; application process less streamlined.

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What to Watch Out For: The Graded Death Benefit

Many guaranteed issue policies include a graded death benefit, which means if you die from natural causes during the first two years, your family won’t receive the full benefit. Instead, they’ll get a refund of premiums plus a small interest amount (typically 10%).

This can be devastating for families who mistakenly believe they’re fully covered.

Example: A 72-year-old woman pays $80/month for a $10,000 policy with a two-year waiting period. She dies 16 months later of a stroke. Her family only receives $1,280 (plus interest), not $10,000.

To avoid this risk, consider simplified issue policies with immediate coverage—available if you’re in fair to good health.

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Alternatives to Final Expense Insurance

Depending on your health, age, and finances, final expense insurance may not be the most efficient tool. Consider these alternatives:

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Who Should Buy Final Expense Insurance?

Final expense life insurance may make sense for:

• Seniors over 60 with no other life insurance

• Individuals who are uninsurable for traditional policies

• Those with modest incomes and no savings

• People seeking small, permanent coverage for burial and small debts

• Families wanting to avoid sudden out-of-pocket funeral costs

For wealthier households or those with good health and time to plan, better financial options are usually available.

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Key Takeaways Before You Buy

• Compare quotes from at least 3 providers.

• Ask about the waiting period and if full benefits are immediate.

• Review cost vs. payout—especially if you plan to hold the policy for decades.

• Be wary of “units” instead of fixed dollar amounts (as with Colonial Penn).

• Consider working with an independent agent who can compare multiple companies.

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Final Thought: Is It Worth It?

Final expense insurance is not a one-size-fits-all solution. It offers peace of mind and accessibility for people who are often left out of the life insurance market—but it comes with a cost. For many, it’s a way to ensure their families won’t face financial stress at an emotionally difficult time. For others, especially those who qualify for cheaper alternatives, it may be a costly convenience.

Like most financial products, its value depends on your individual health, finances, and long-term goals. In the end, it’s about planning for the inevitable—so that others won’t have to.