End-of-life costs such as funeral costs and final medical bills may seem like costs you could plan for, but the truth is they often creep up on families who lose a loved one.

According to data collected by GoBankingRates, end-of-life costs can range anywhere from $18,000 to more than $42,000, depending on where you live. To help cover some of these costs, many people look into final expense insurance. But what is final expense insurance, and is it always the best path forward?

Below, we take a look at how final expense insurance works and factors to consider before you buy it.

How does final expense insurance work?

Technically, final expense insurance is a whole life insurance policy specifically marketed to cover the expenses associated with a funeral, memorial service, reception, cremation and/or burial. It is also commonly known as burial insurance, funeral insurance, or cremation insurance.

But while it is described as a policy to cover final expenses, beneficiaries who receive the death benefit are not required to use it to pay for final expenses — they can use it for any purpose they like. That’s because final expense insurance really falls into the category of modified whole life insurance or simplified issue life insurance, which are typically whole life policies with smaller death benefits, often between $2,000 and $20,000.

When buying final expense insurance, you will have to answer a series of questions related to your age and health. After you're approved, coverage will be in effect as long as you pay your premiums.

Should I get final expense insurance?

Because final expense insurance typically does not require a medical exam, it is often much easier to qualify for coverage even if you are older or in poor health. So if you can't qualify for traditional whole life insurance, final expense insurance may be an option.

But you may also find that final expense insurance does not provide the level of coverage you would want to leave behind for your loved ones. If you have dependents who rely on you financially, a final expense policy may be able to help cover funeral expenses and end-of-life medical costs, but not much else. It may be smarter to get term life, whole life or a combination of the two to provide a much more significant death benefit.

Also, if you already have a life insurance policy, your death benefit may already be enough to cover funeral expenses and you likely don’t need extra final expense insurance.

If you are unsure whether you have enough life insurance coverage, talk to a financial advisor so you can understand your options and the role different forms of life insurance can play in your financial plan.

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