Last expense cover: Why it is essential for end-of-life planning

When it comes to the demise of a loved one, we are never prepared, yet death is an inevitable part of life. Be it natural, accidental or due to an illness, its financial implications often catch families off guard.

In the midst of grief, the last thing anyone wants to worry about is how to cover funeral expenses and other end-of-life costs.

This is where last expense or funeral insurance policies comes into play - a crucial but often overlooked component of comprehensive financial planning.

You don’t want to think about it but planning for end of life is a way to ease the burden after loss. An immediate payout ensures that the beneficiaries have necessary funds right away versus having to pay out of pocket.

It also ensures that the day-to-day activities in a family are not financially disrupted.

Last rites insurance is intended to alleviate the financial burden on the deceased’s family. It is designed to cover expenses associated with a person’s funeral and other end-of-life costs. Let’s look at what these kinds of policies entail.

Who is eligible for last expense insurance?

An individual, or a family comprising of the principal member, spouse, children, parents and parents-in-law. Some insurers have policies whose benefits extend to brothers and sisters.

When it comes to age, different insurers have different age requirements, which can range from age 18 to 69 for principal members, 1 month to 25 years for children, 35 to 84 years for parents and in-law.

Some also without an exit age, provided there is no gap or breach of a policy condition.

Most insurers do not require medical examination, making the cover accessible to older adults or those with health issues. However, disclosure of one’s health status is required at inception.

Chamas and churches

Persons who are members of groups can adopt this as a way of dealing with bereavement of a member or dependant. This waives the burden of contribution considering, the benefit payable is way more compared to the premiums paid towards a last rites policy.

Companies and organisations

Most organisations have a welfare fund established to assist staff in case of demise of their loved ones. Most at times, the funds are minimal compared to the burden of loss.

Integrating a last rites policy can be ideal if not full replace the fund as the benefits tend to be more.

Premiums

Since coverage amounts are lower than other types of life insurance, the premiums for a last expense policy tend to be very affordable.

Oftentimes, premiums are fixed and can be paid monthly or annually, with the benefits fixed to a certain limit.

Coverage

The amount of cover is dependent on affordability and/or the type of memorial service you want.

These policies have a lower coverage amounts compared to the traditional life insurance policies, ranging from as low as Sh30,000 to Sh1 million.

Use of funds

The benefits can be used to cover funeral costs, burial or cremation, medical bills and other related expenses.

Disability and critical illness benefits. Some insurers have included these as value adds to the last rites insurance. For critical illness, it’s important to note that this benefit is a percentage of the sum assured and is payable upon the first ever diagnosis of either a heart attack, stroke, cancer, coronary artery disease, major organ transplant, kidney failure, paraplegia, paralysis and any other disease regarded as such.

Claims payment

Payment is usually made within 48 hours upon notification and presenting the required documents.

There are waiting periods applied to this. For death due to illness, usually one month for the nuclear family to three months for parents, parents' in-law, and additional adults. There are no waiting periods for accidental deaths.

Exclusions

Just like other life insurance policies, there are several events that may result to declinature. Such events are and not limited to, driving a motor vehicle while over the legal alcohol limit, active participation in war, civil commotion, riot, terrorist activity, or rebellion, hazardous sports, for instance, bungee jumping, and paragliding.

What happens when the principal member dies?

Dependants cover continues to the end of the policy period. Upon renewal, the spouse has the option of continuing the cover as the main member.

Remember, such policies stand as a testament to foresight and responsibility. It is not just a policy but a promise to your loved ones that they won't face financial burdens in their moment of grief.

Keep in mind the true value of this last expense policies lies not in the money it provides, but in the peace of mind it offers. It allows families to focus on what truly matters during times of loss - honouring their loved one's memory and supporting each other emotionally.

Whether you're young or old, an individual or part of a chamaa, the time to act is now.

Do not leave your family's financial security to chance. After all, your last act should be one of care, not burden.

The writer is a Risk Consultant and can be reached via[email protected]