AD Banker Comprehensive Practice Exam

What type of insurance is primarily intended to cover funeral expenses and other last expenses?

1. Term life insurance

2. Whole life insurance

3. Final expense insurance

4. Universal life insurance

The correct answer is: Final expense insurance

Final expense insurance is a specialized form of whole life insurance designed specifically to cover end-of-life expenses, including funeral costs and other related expenses. This type of insurance typically offers a smaller death benefit than traditional life insurance policies, often ranging from $5,000 to $25,000, which is sufficient to alleviate the financial burden that can arise from funeral and other last expenses. Purchasing final expense insurance can help ensure that loved ones are not left to bear these costs, thus providing peace of mind for both the insured and their family members. Unlike term life insurance, which only provides coverage for a specific period and does not build cash value, final expense insurance provides lifelong coverage and can be an important financial planning tool for individuals looking to manage their end-of-life costs. Whole life and universal life insurance are more comprehensive policies that provide benefits beyond just final expenses, including a cash value component and potential for larger death benefits, but they may not specifically address the need for covering funeral costs in a straightforward manner as final expense insurance does.