This article discusses the basics of funeral insurance and pre-need insurance, both of which are designed to cover the cost of your funeral or cremation expenses, but there are differences.
Types of funeral expense life insurance
Two common types of funeral expense life insurance policies are burial insurance and Preneed funeral insurance. * Having one of these types of funeral expense life insurance policies can allow you to plan ahead for the costs associated with your funeral/final expenses. However, there are key differences between the two. Before you choose one or the other, here are the basics of how each works.
What is funeral insurance?
Funeral insurance is a type of funeral expense life insurance policy designed to cover the cost of your funeral or cremation expenses upon your death. Because many people don't realize that funerals can cost thousands of dollars, they often don't think to plan ahead. This type of situation can sometimes cause financial hardship for families or loved ones who have to pay for it.
After your death, burial life insurance pays the death benefit of your policy directly to your beneficiary, who can use the money in any way they wish. For example, if you have a $15,000 funeral insurance policy and the funeral expenses are $10,000, your beneficiary can choose to use the extra funds to pay for other final expenses such as unpaid medical bills, legal fees or any other outstanding debts you may owe.
Funeral Insurance Expenses
Funeral insurance policies can vary from one life insurance company to another, so you may find it in the form of a term policy or a whole life policy. Generally speaking, death benefits for burial insurance are low, ranging from $5,000 to $25,000 (although some insurers may offer higher limits). Your specific premium will vary based on gender, health and age.
Funeral insurance benefits
Funeral insurance offers flexibility and can help ease the financial burden of paying for your funeral at a difficult time. Because the death benefit is paid to the beneficiary you specify, that person has the ability to use the money as they see fit. Ultimately, this leaves it up to your loved ones to make funeral decisions at the time of your death.
Funeral insurance can be a way to provide your loved ones with financial support to cover other unexpected expenses you may have at the end of your life, such as medical expenses, legal fees or hospice care.
Pre-need funeral insurance
Like funeral insurance, pre-need funeral insurance is designed to set aside funds for your funeral before the need arises. It is another type of insurance policy that is designed to protect your loved ones from the financial burden after your death. It covers the costs of predetermined expenses such as standard funeral home services, funeral merchandise, religious and funeral services. In some cases, this type of policy can protect against inflation and increases in the cost of funeral expenses by fixing the current prices of services and merchandise.
Prepaid Funeral Insurance Amounts
Prepaid policies generally range from $10,000 to $25,000. You can make a lump sum payment or pay in installments. This type of policy does not require a medical examination.
Prepaid funeral insurance benefits
Advance funeral insurance can help ease the administrative burden on your loved ones during a difficult time of grief. The decision to purchase pre-need funeral insurance allows you to work with the financial home of your choice to identify, outline and pay for exactly what you want for your funeral. This can help avoid leaving your loved ones with difficult decisions that may not be in accordance with your wishes.
Choosing between funeral insurance and provident insurance
Preneed can also be offered as a term life insurance policy or a permanent policy type. However, instead of paying the benefits of your policy to your beneficiary upon your death, the money goes directly to the funeral provider of your choice. At the time of your death, the proceeds of the contingency life insurance policy are often payable immediately to an assignee (usually the funeral home) to cover expenses.
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