Are Final Expense Insurance Policies a Ripoff?

Level, Graded, and Guaranteed Issue policies are heavily marketed as affordable, easy solutions for funeral costs — but is final expense insurance worth it?

This guide explains how these insurance policies work, why they’re often overpriced, and suggests better alternatives.

Final expense insurance (or funeral or burial insurance) is a small whole life insurance policy typically covering between $5,000 and $25,000.

It’s designed to help cover:

• Funeral and cremation costs
• Medical bills
• Outstanding debts and expenses

• Easy to qualify for – no exam, just a few health questions
• Premiums and benefits stay level for life
• Widely advertised on TV, radio, and online

But that convenience comes at a cost. In many cases, final expense insurance is more expensive and provides fewer benefits than other options.

Some life insurance companies market these policies as a great option for people with high-risk health issues.

There are three types of final expense insurance:

Policy Type	Full Coverage Starts	Health Questions	Cost	Good For
Level	Day 1	Yes	$$	Good health
Graded	After 2 Years	Yes	$$$	Health Conditions
Guaranteed Issue	After 2 Years	No	$$$$	Uninsurable

We explain the differences between level, graded, and guaranteed issue and tell you what to look for when considering this type of policy.

What it is: Pays the full death benefit starting day one. Typically for seniors with average or better health.

Pros:

• Immediate full coverage
• Easy to apply
• No medical exam

Cons:

• You may qualify for better underwritten policies
• Smaller death benefits ($25,000 or less)
• More expensive than necessary

Here’s an example from another website, for a 65-year-old female diagnosed with diabetes at age 42 for a $20,000 life insurance policy.

• Mutual of Omaha – $20,000 of coverage – $98.79 with a two-year waiting period.
• Aflac $20,000 of coverage – $83.77 monthly with no waiting period.
• Aetna – $20,000 of coverage – $91.70 with no waiting period.

Compare that to an underwritten policy:

• Pacific Life – $25,000 of coverage – $78.75 per month – no waiting period.

The above policy is a guaranteed universal life insurance policy (GUL).

If you qualify for a level final expense policy, you likely qualify for a better underwritten policy with lower premiums and higher coverage.

What it is: A waiting period (often 2 years) before the full death benefit is paid. If death occurs early, partial or no benefits are paid. These policies use a knockout question system:

• Diagnosed with AIDS?
• Bedridden or confined to a nursing home or hospital?
• Require assistance with daily living activities?
• Alzheimer’s, Lou Gehrig’s, dementia?
• Terminal or metastatic cancer?
• Do you have congestive heart failure?

• Diabetes? Type 1 or Type 2
• COPD or emphysema?
• Cancer – Breast, prostate, colon, lung, leukemia?
• Kidney disease – Elevated lab results, transplants?
• Heart Conditions – heart attack, bypass surgery?
• Mental health conditions – bipolar or depression?
• Parkinson’s disease or multiple sclerosis?
• Stroke or TIA?

We’ll use this example: Male, age 65 – $25,000 graded benefit final expense policy. If you die during the graded benefit period (24 months), your beneficiary will not get $25,000.

This chart shows how little money your beneficiary would receive.

Company	Monthly Premium	Payout in Months 1 – 12	Payout in Months 13 – 24
Physicians Mutual	$148	$148 – $1776	$1776 – $3552
AAA	$168	$168 – $2016	$2016 – $4032
USAA	$170	$170 – $2040	$2040 – $4080
AARP	$172	$172 – $2064	$2064 – $4128
Gerber	$212	$212 – $2544	$2544 – $5088
Fidelity	$220	$220 – $2640	$2640 – $5280
Corebridge	$249	$249 – $2988	$2988 – $5976

You’re paying thousands, but your family is only going to receive what you paid if you die during the graded period.

If you qualify for graded policies, you probably qualify for underwritten insurance that pays in full from day one.

Real Alternative: Underwritten Guaranteed Universal Life (GUL) – $25,000 Policy, Male Age 65

Underwriting Rate Class	Monthly Premium	Death Benefit Payout for Death in Months 1 – 12	Death Benefit Payout for Death in Months 13 – 24
Standard	$87	$25,000	$25,000
Table 2	$105	$25,000	$25,000
Table 4	$122	$25,000	$25,000
Table 6	$136	$25,000	$25,000
Table 8	$146	$25,000	$25,000

And if you’ve been told that your health condition would only allow a graded policy, don’t believe it! The above rates are available for people with health conditions like heart disease, a history of cancer, diabetes, hepatitis, and HIV+.

What it is: No health questions, no medical exam, and everyone gets accepted — but with a 2-year waiting period. If you die in those first 24 months, your beneficiary only gets a refund of your premiums plus interest.

Example: Male Age 65 – $25,000 Policy

• Gerber Life – $211.53/month or $2538.30 annually
• Corebridge Financial – $271.30/month or $3253 annually

If you pass away in month 23 after faithfully paying Gerber, your family gets $4,865.19 ($211.53 x 23), not the $25,000 you hoped for.

Only if you’ve been declined for underwritten coverage AND have no other assets to pay for your burial. Otherwise, consider saving the money instead.

It’s aggressively marketed to seniors. Companies like Colonial Penn and AARP spend millions advertising their whole life insurance policies.

But:

• You pay more
• You get less
• You might qualify for something better

Compare quotes from lesser-known but top-rated insurers that don’t advertise on TV — you’ll often get more value.

Final expense insurance can work — but only after you’ve ruled out better options:

The Bottom Line:

• Level Benefit Final Expense – If you qualify for this, you likely qualify for a better underwritten policy.
• Graded Benefit Final Expense – If offered, you might still get full coverage through underwriting
• Guaranteed Issue – Only buy this if no other option exists. Sometimes, saving cash is smarter

Before you buy a final expense policy, take the time to compare your options.

You could get more coverage, with better guarantees, for a lower premium.

Request your no-pressure, no-obligation life insurance quote today.

We offer whole, universal, and term life insurance policies to meet your needs.