Funeral insurance can provide financial security for your family should you pass away, helping them to cover the costs of funeral expenses. Depending on the type and amount of coverage you choose, it could cover all or part of the costs associated with a traditional burial or cremation ceremony. Therefore, if you are looking for a way to ensure that your loved ones will not be financially burdened by funeral costs upon your death, then funeral insurance is definitely worth considering. Most plans guarantee acceptance without requiring medical examinations so even those with pre-existing health conditions may be able to purchase a policy.
Contents:
I. What is Funeral Insurance?
Funeral insurance is an important tool for individuals and families to help plan for the cost of a funeral. Funeral insurance policies are designed to cover both the cost of the burial service, as well as provide some assistance in paying for associated costs, such as a monument or headstone. It’s often purchased through a life insurance policy or annuity, and pays out upon the death of a policyholder.
Funeral insurance can be either whole life coverage, meaning it will pay out regardless of when you die, or term life coverage which will only pay out if death occurs during the contracted period of time. The amount payable depends on the value of your chosen funeral services at the time of payment. Other benefits may include travel expenses for loved ones who come to attend the funeral and any debts left behind by the deceased, such as unpaid medical bills.
A range of factors can influence how much funeral insurance one should purchase; such as age, gender, lifestyle choices (smoking), health status and beneficiary preferences. Depending on these factors different policies can range from around $10 per month up to hundreds per month depending on what is included in each particular plan. The price generally increases with age – so those seeking affordable options may want to shop around while they’re still young in order to get good rates down the road.
II. How Does Funeral Insurance Work?
Funeral insurance is designed to provide financial support to cover the cost of an individual’s funeral. This type of insurance policy is sometimes referred to as ‘final expense’ or ‘burial’ coverage. The idea behind it is that the policyholder will pay a predetermined amount for their policy and in return receive coverage for their funeral costs when they die.
When signing up for a funeral insurance policy, individuals must consider both how much coverage they need and how often they would like to make payments on their premium. Generally speaking, most policies will require some kind of monthly payment plan with options for paying quarterly or annually as well. There are different levels of death benefit available depending on the total amount of money needed for burial expenses.
There are usually additional features associated with this type of plan including accelerated death benefits which allow beneficiaries to access part or all of the death benefit while the insured person is still living should they face terminal illness or another qualifying circumstance. Other features may include accidental death benefits and waiver-of-premiums clauses if certain events occur after the insured individual has taken out the policy.
III. Pros and Cons of Funeral Insurance
Funeral insurance is a policy designed to provide financial assistance for burial and funeral costs. It can be a worthwhile purchase, as it can take the financial burden off of bereaved loved ones during an already difficult time. Although there are pros to purchasing this type of coverage, there are some cons that should also be considered.
One advantage of taking out funeral insurance is the predetermined cost plan–you know exactly what you will pay ahead of time, which makes budgeting easier. As well, no medical exams or tests need to be done for approval and individuals over 50 years old may qualify for low-cost policies with no waiting period. This allows even people with pre-existing conditions to obtain affordable coverage quickly and easily.
On the other hand, one potential downside is that burial costs tend to increase faster than inflation rates due to constantly increasing labor fees from service providers and supplies like caskets and headstones becoming more costly over time. As well, if your passing occurs sooner after the policy was purchased rather than later in life then your family may not receive any benefit at all as funeral expenses would likely outweigh the amount paid into premiums at that point in time. If you do not inform your beneficiaries about their designated roles following your death they may incur additional costs associated with looking up companies information as well as having delays getting money quickly when needed most during such trying times.
IV. Costs of a Traditional Funeral vs. Insurance Coverage
The average cost of a traditional funeral in the U.S. Can range from about $7,000 to upwards of $12,000, depending on what kind of services are chosen and where the deceased is laid to rest. When factoring in costs such as caskets, transportation fees and other miscellaneous expenses associated with laying someone to rest, this total quickly increases.
By contrast, funeral insurance can provide coverage for these costs at a fraction of the expense – as long as it’s taken out before death occurs. For example, an average-priced policy might require monthly payments over an extended period that would add up to be much less than the actual price tag associated with burying one’s remains. Many policies often cover additional services that may not be included in a traditional funeral package like burial plot charges or cremation services.
Taking out funeral insurance could potentially save thousands compared to paying for a traditional burial service outright and should at least be considered if wanting peace of mind knowing that those left behind won’t have to worry about footing large end-of-life bills after your passing.
V. When Should You Consider Taking Out a Policy?
While some may assume that it is wise to take out a funeral insurance policy as soon as possible, there are actually certain conditions in which such an agreement should be taken into account. It’s important for individuals to consider their current and expected financial situation before making any decisions when it comes to life insurance or other insurances related to death and funerals.
Those who currently have considerable debt or those expecting significant expenses, such as the purchase of a new house or car, should certainly think twice before taking on an additional expense like funeral insurance. On the flipside, people who are financially secure and anticipate no major expenses can feel more confident in setting up a plan early on.
Age also plays a role in deciding whether or not now is the right time to sign up for burial coverage. Senior citizens may find these policies useful due to their increasing medical bills and potential health problems that could arise later on down the road; however those under 50 years old may still want to keep their options open. After all – though uncomfortable – death is inevitable and its costs should always be taken into consideration at whatever age one might be at.
VI. Alternatives to Buying Funeral Insurance
When faced with the prospect of planning a funeral, many people are considering the option of purchasing funeral insurance to cover some or all of their costs. However, there are numerous viable alternatives that can help cover funeral expenses without having to buy an insurance policy.
One alternative involves contributing to a prepaid funeral plan. This allows you to purchase a set of services for your own future use as well as prepay for them; this relieves loved ones from financial burden once the time comes and provides you with greater control over how your service will look like. In most cases these funds aren’t considered assets if held in certain trust accounts and is not subject to state taxes or creditor claims. It also provides price protection, allowing customers peace of mind that their services won’t be affected by inflation.
Another approach is setting up a Funeral Trust Fund which gives families more flexibility on when and how the money is used while maintaining control over who has access and at what time they have access it. By creating such an account upon one’s passing, any remaining balance goes into the deceased person’s estate rather than being depleted through paying off funeral expenses first. That way, other debts can be settled before any money goes toward funerary arrangements – thus minimizing family members’ out-of-pocket payments in case there isn’t enough cash available in savings or investments elsewhere (or even potentially none).
