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My Elderly Parents Are Planning To Buy Final Needs Insurance, Is This A Good Idea?

You may have seen the TV ads featuring Ed McMahon and other celebrities pitching final needs life insurance.  This coverage is actually just a very small whole life insurance policy (and very expensive).  It also has a provision which provides for virtually no death benefit if the insured dies within the first two years of coverage.

The illusion is created that it is very affordable since the death benefit is so small.  Typically, the coverage is for only $5,000 to $6,000.  Many policies also offer a deceiving incentive such as a $1 first premium payment.  This is really meaningless as the amount of later premium payments are simply increased to offset the lower first payment.


We all know that life insurance companies make money by collecting more in premiums than they pay out in benefits.  This does not mean that all life insurance is bad.  There are forms of coverage though that make more sense than others.  Final needs insurance is probably the worst form of life insurance I have seen.  The insurance companies are clearly exploiting the elderly, especially by inserting a trusted voice in the commercials (Ed McMahon, etc…).  As bad as this coverage is, it may still make sense in some limited situations. 


If your parents do not have life insurance and would not have enough money in their estate to pay for their funeral, this may be a way to prepare for that.  Of course, saving money while they were younger or buying a more legitimate form of life insurance at a younger age, would have been better options.  An even better choice would be to go to a reputable funeral home and begin prepaying for final expenses now.

My own grandmother purchased final needs insurance and just after the two year waiting period passed away.  The money collected from this policy paid for her funeral, so in this one case it worked out.  I have to tell you though that final needs insurance should be viewed as the least attractive option to handle final expenses.

Agree or disagree, click on comments below.

Helping you make the most of God’s money!

James L. Paris
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