Do I Need Final Expense Insurance?
The saying goes “two things in life are guaranteed, death and taxes.” Unfortunately, the costs to the surviving family after the death of a loved one can be a significant financial burden.
This is where savvy insurance agents and advisors can step-in to help their clients protect themselves when they need it most with final expense insurance.
Do I need Final Expense Insurance?
As an insurance agent, do you have the experience and product selection necessary to properly serve your customers?
Are you able to answer the question, “Do I need Final Expense insurance?”
As we will cover in more detail below, the United States has an aging population.
Good insurance agents have a thorough understanding of population demographics and how the many diffferent types of life insurance coverage fits into this.
If you need some help in the understanding demographics topic, I am always glad to help. One of my favorite places for up to date statistics is the US Census Bureau QuickFacts page.
Final Expense Insurance Fills A Need
If you haven’t run into this scenario yet, it’s only a matter of time.
You meet with a potential life insurance customer and run a financial needs assessment.
Unfortunately, the applicant’s age makes standard life insurance too expensive.
Or in some cases, simply not available.
So what is your plan? Your customer is relying on you to offer them products that will help protect their financial future.
Absent any significant savings, retirement, or permanent life insurance coverage, final expense insurance should be your go to product in this scenario.
What is Final Expense Insurance?
It’s a whole or permanent type life insurance policy with a smaller benefit amount, usually from $5,000 to $40,000.
The lower benefit makes it more affordable for older consumers to cover end-of-life expenses like a funeral and burial related costs.
Like the above scenario, these days it’s not unusual to hear about people outliving their life insurance policies.
Unfortunately, most insurance carriers won’t issue new life policies beyond age 75 or 80.
Final Expense Insurance fills this void with issuable age ranges from 40 to 90 years (or older in some cases).
Differences Between Life and Final Expense Insurance
As morbid as this subject may seem, introducing clients to final expense insurance coverage is no different than discussing standard life insurance.
If anything, the need is much greater due to the age ranges of the intended audience.
The primary differences between life and final expense insurance coverages are smaller benefit amounts, a much broader consumer audience, and a more straightforward application process.
How so? Let’s review some features and benefits of final expense insurance products:
- A simplified issue whole life policy.
- Benefits available from $5,000 to $40,000 (or more depending on the insurance carrier).
- Easy application process, no health exam necessary.
- Rate and benefit locked in for the life of the policy.
- Issuable age range from 40 to 90-years-old (or higher in some cases).
- Affordable rates due to a smaller benefit amount.
To understand the importance of these types of insurance plans, one only needs to look at the specific reason for the smaller benefit amount — funeral costs.
Death Costs Have Spiraled Out of Control
Death in the United States is an expensive event.
Death costs have spiraled out of control to the extent that many people literally can’t afford to die.
And that’s without even considering all the legal and estate issues involved.
So, let’s talk about the actual funeral by itself for a moment.
The NFDA (National Funeral Directors Association) estimates the median cost of a funeral with viewing and burial at $7,360. When you add in the burial vault, which is required in many states, the median cost of a funeral is $8,508. These statistics are current through 2016 and the most recent available when this document was published in 2019.
It’s Expensive to Die Anywhere
Please keep in mind that these median costs will also vary depending on the area of the country where you live. For example, downtown Los Angeles will have much higher average funeral costs than the suburbs of Pittsburgh.
It’s expensive to die anywhere these days, but even moreso in LA. And DC. And NYC.
As death costs outpaced average savings amounts, insurance carriers saw a need for older Americans to protect themselves and their families from these end of life expenses.
Unfortunately, obtaining a life insurance policy above age 65 is often cost prohibitive. Final expense insurance seeks to resolve this with smaller benefit amounts and more affordable rates.
Burden of Funeral Costs
More than one-third of adults are concerned with leaving others to pay for their funeral expenses. With many older Americans on a fixed income, the burden of funeral costs will ultimately fall on their children or extended family.
Nobody wants to be the cause of added financial stress, especially when their family is already dealing with the emotional turmoil from the death of a loved one. Final expense insurance can play a part in helping your clients protect their families from this happening.
The Final Expense Insurance Market
Clearly the need for final expense insurance is already here, but what about the market for this product?
With a target audience of older Americans, the final expense insurance market is one of the fastest growing segments of our population.
It should be no surprise to any insurance agent or advisor that the United States is an aging country. These days, it seems like everybody is talking about Baby Boomers getting older.
What you don’t hear discussed very often, however, is their children, the Generation X’ers. Just like their parents, they are getting older too.
Baby Boomers are the generation name attributed to the massive increase of children born during the period after World War II.
- Baby Boomers were born between 1946 and 1964.
- At their peak in 1999, Baby Boomers numbered 78.8 million.
- As of 2019, Baby Boomers range in age from 55 to 73.
The children of Baby Boomers make up the majority of Generation X. They are sometimes also called the “Baby Bust” due to their much lower birth numbers or the “Forgotten Generation” from living in the shadow of their Baby Boomer parents.
- Generation X children were born between 1965 and 1980.
- There are 65.8 million “Gen X’ers,” but they are expected to be a larger population group than the Baby Boomers by 2028.
- As of 2019, Generation X’ers range in age from 39 to 55.
An Incredible Opportunity
Together these two generations make up a huge population group of nearly 145 million people. This represents an incredible opportunity for insurance agents and advisors to help these families protect themselves from the burden of end of life expenses. The perfect products to handle this are life insurance and final expense insurance plans.
What about Millennials? We keep hearing everybody talking about them. Isn’t our country getting younger?
According to the US Census Bureau, “older population” is considered anybody above the age of 65.
Back in 1970, that was 9.8% of our population.
In 2010, the older Americans group increased to 13.7%.
Now it’s growing at a much faster rate.
By 2030 older Americans will make up 20.3% of the US population.
And 2050 will have an estimated 83.7 million people older than 65.
Annual Death Numbers are Increasing
Sadly, as more people get older, their annual death numbers are increasing. In 2017, there were 2,813,503 deaths in the United States (the latest year stats are available). An increase of 69,255 deaths over 2016. Deaths result in funerals. And funerals cause the end of life expenses that many families need help paying.
The market and the need is here. It’s not a question of ‘do I need final expense insurance?’ It’s when will I need it?
Your Focus is Local
The potential market numbers for final expense insurance might sound massive and overwhelming when taken as a whole. But your focus is local and regional customers that are your part of this broader market.
Your backyard is filled with consumers that need your insurance expertise.
Even in 2019, it’s relatively rare for insurance agents and financial advisors to be licensed in all fifty states and operate a colossal website serving a national customer base.
It’s incredibly difficult. I know this from first hand experience building such a monstrosity.
If this is your goal, great. But you need to start somewhere. So go local. Your local community is a vast untapped market.
The Need for Final Expense Insurance is Already Here
A quick refresher on insurance market statistics from LIMRA’s 2018 Insurance Report:
- People Need Information: Half of all adults visited a life insurance company website for information on life insurance in 2017. How many of these consumers would have preferred dealing with a local insurance agent or advisor?
- Online is Popular: 1 in 3 adults either purchased or attempted to purchase life insurance online in 2017.
- People Don’t Have Enough Insurance: Among the adults with life insurance, about 1 in 5 say they don’t have enough.
- Insurance Costs are Still a Mystery: Nearly everyone thinks life insurance is much more expensive than the actual cost — especially younger generations. Millennials overestimate the cost of life insurance at FIVE TIMES the actual amount.
- Most People Don’t Like Needles: Surprise! Those visits by paramed nurses at home or work are still not popular with consumers. Half of all adults say they are more likely to purchase life insurance if it’s priced without a physical examination. Which means most of the consumers you talk to are going to like the simplified underwriting aspects of final expense insurance plans.
The market and the need for final expense insurance is already here. It represents a unique opportunity for the right financial advisors and insurance agents.