People often plan for their own retirement. Many have life insurance to provide for their family after they die. These same careful planners often assume that retirement planning and life insurance are enough to cover final expenses. They may be, but this is not always the case.
Planning ahead for the funeral and pre-paying for funeral and burial expenses reduces the burden on your family to design an appropriate memorial and locks in today's prices. When you plan ahead, you can write down your wishes, from readings and songs to memorabilia and cemetery property, and ensure that all costs are covered.
Funeral insurance is a way to protect your loved ones from the financial problems associated with planning a funeral. Known by many other names - funeral insurance, pre-need insurance or final expense insurance - funeral insurance products provide financial assistance for the costly and often unexpected expenses of a funeral and burial.
What is the difference between final expense insurance and pre-need insurance?
Not all funeral insurance policies are alike and it is important to understand the differences.
Final expense insurance
Final expense insurance is a life insurance policy that pays a fixed amount-typically $5,000 to $25,000, depending on the plan you choose-to the beneficiary you choose to pay for your final expenses. The benefit can be used for funeral and burial expenses, as well as medical bills, credit card debt and other expenses. The beneficiary decides how the money is spent, and there is no protection against inflation. In addition, your family may have to pay for funeral expenses and wait for the policy to pay later.
Pre-need insurance
Like final expense insurance, pre-need insurance covers final expenses. However, pre-need insurance only covers expenses associated with a pre-planned funeral, cremation or burial. The benefit is paid directly to the funeral home chosen by the insured. This insurance also protects you from inflation, as funeral expenses are locked in at current prices.
Dignity Memorial® providers offer pre-need insurance through American Memorial Life Insurance. This allows you to pre-plan a service and pay monthly premiums over a defined period of time. Pre-need arrangements can include embalming or cremation, a funeral or memorial service, flowers, funeral cars and more, depending on the plan you choose.
What are the benefits of prepaid insurance?
Eliminating the emotional and financial burdens of funeral planning is the primary benefit of pre-need insurance. When a family member contacts the designated funeral home to inform the provider that a death has occurred and that funeral insurance is available, a funeral director handles the rest. This allows family and friends to focus on remembering and celebrating their loved one, instead of dealing with the business side of funeral and burial planning.
The pre-need funeral insurance benefit is paid immediately to the funeral home, instead of taking 30 to 60 days to be paid, as some other insurance policies may do. This way, your family won't have to fight for money for funeral expenses. Most importantly, they know that the celebration of your life is exactly as you wanted it to be, because you made all the decisions yourself.
Another reason to purchase pre-need insurance is to lock in funeral expense prices at current rates. This means that when you choose a funeral package with a Dignity Memorial provider, you know exactly how much you'll pay for a casket or urn, embalming or cremation, transportation and more-and you have the assurance of knowing that even if you live another 10 or 20 years, the cost won't increase.
Because pre-need plans are generally easy to obtain and you make payments over a period of time, you don't have to pay a lump sum when you pre-arrange your funeral services.
What types of funeral insurance plans are available?
There are three categories to consider when purchasing a funeral insurance plan: term or whole life; guaranteed issue or medically underwritten; and guaranteed or non-guaranteed expense blocking. A policy may have a combination of these components.
Funeral Term Insurance
Term insurance may be less expensive than the other types, but it has a limited duration for which a benefit will be paid and for which the premium payment will remain unchanged. Term choices typically include 10 or 20 years. If the insurance has not been used and a benefit has not been paid during that time, you may have the option to renew, but often at a higher premium rate. This type of policy does not protect against rising funeral costs.
Whole life funeral insurance
A whole life funeral insurance plan (sometimes called permanent insurance) has a higher premium because the benefit does not expire within a certain period of time. In other words, a term plan might pay a claim; a whole life plan will pay a claim. These plans remain in effect until death, at which time the benefit is paid in full to the designated beneficiary (funeral home or individual).
Guarantee Issue Policy
With a guarantee issue policy, you cannot be denied or declined coverage, regardless of medical conditions.
Medically underwritten policy
If you are in good health or have minor health problems that you feel would still allow you to qualify, you may want to consider a medically underwritten policy. There are issues associated with these policies, but they offer the possibility of a higher maximum benefit.
Guaranteed Pre-need Policy
A guaranteed pre-need policy sets the rate for funeral services. It offers you the opportunity to plan very specifically with a Dignity Memorial professional who can help you select a casket or urn, flowers, type of service, transportation and a monument or memorial. Pre-planning your service and locking in the pre-need price allows you to choose the exact level of services. Once the policy is paid for, there are no surprises and no additional fees or expenses. If purchased through a Dignity Memorial provider, whole life, warranty issue and medically underwritten policies fall into this category.
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