How to Budget for Final Expense Insurance as a Veteran

Final expense insurance, otherwise dubbed as "burial" or "funeral" insurance, is of utmost importance to veterans, given that it provides financial assistance for the payment of end-of-life costs. These costs include not just the funeral services, but also any lingering medical bills or legal expenses. While veterans' benefits will often cover a portion of these costs, there can still be significant financial gaps left for loved ones to handle. Veterans, therefore, should consider laying out a strategic plan to budget for this type of insurance. This blog post delineates a step-by-step approach to successful budgeting for final expense insurance as a veteran.

To begin, understanding the nuanced costs associated with end-of-life services is pivotal. The National Funeral Directors Association (NFDA) estimated the median cost of a funeral with a viewing and burial in 2019 to be roughly $7,640. This figure does not include the cost of a vault, which is often required by a cemetery, an additional median cost of $1,395. Also, end-of-life costs can include miscellaneous expenses such as estate settlement fees, probate costs, and medical bills. Having a clear understanding of these potential costs can provide a realistic benchmark for the amount of coverage required.

The next step is to evaluate the various final expense insurance plans available. There are primarily two types: simplified issue and guaranteed issue. Simplified issue policies require a health questionnaire but no medical examination, and they generally have lower premiums. Guaranteed issue policies are devoid of any health-related questions or examinations, but come with higher premiums. A decision between the two hinges on the veteran's health condition and financial means.

Next, conduct a comprehensive analysis of your monthly budget. This should include all income sources, fixed costs, discretionary spending, and savings. A comprehensive budget analysis can illuminate discretionary areas where cutbacks could be made to afford the premium payments. For instance, if dining out constitutes a significant portion of discretionary spending, consider reducing the frequency to free up some funds.

After determining the amount of disposable income, identify the amount that can be allocated towards the final expense insurance premium. Be sure to take into account the premium type, which can either be leveled (remaining the same over the policy term) or graded (increasing over the policy term). Leveled premiums are generally more affordable over the long term.

Having identified the premium payment that can comfortably fit within the budget, comparing insurance providers becomes the next focal point. Different companies offer different rates, even for the same coverage. Thus, shopping around for quotes can lead to significant savings. Consider factors like the company's financial stability, customer service, and claim process while making a choice.

Finally, reassess and adjust the budget periodically. Life events such as marriage, retirement, or changes in health may necessitate a revisit and possible adjustment of the budget.

Budgeting for final expense insurance as a veteran is not just about the financial aspects. It also has implications on the psychological plane, alleviating concerns about leaving loved ones with possible financial burdens. Undertaking this process with a clear understanding of the costs involved, a thorough budget analysis and a comparison of the various plans available, can indeed culminate in the selection of an affordable and comprehensive final expense insurance policy.

The application of the principles of microeconomics, specifically the concept of opportunity cost, is crucial here. The opportunity cost of purchasing final expense insurance is the foregone consumption of other goods or services that the premium payment could have been used for. However, the peace of mind and financial protection the insurance offers arguably outweighs this cost. The budgeting process, as described above, is an exercise in maximizing utility or satisfaction, which is the ultimate goal of any economic decision.

Thus, budgeting for final expense insurance as a veteran involves a complex and nuanced process requiring judicious financial planning and astute decision-making, while also reflecting a deeper understanding of the underpinnings of basic economic theories.