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Funeral Expense Insurance: Everything You Need to Know

Life Insurance for Funeral Expenses

The cost of an average funeral is over $8,500 but the price ranges drastically depending on a variety of factors, making it a challenging financial burden for many families following the loss of a loved one. As a final gift to those they leave behind, more and more Americans are taking out final expense insurance, also called funeral insurance or burial insurance.

Here’s everything you need to know to determine whether final expense insurance is right for you.

Evaluating your need

Not everyone needs final expense insurance, so it’s important to evaluate your need before proceeding. These steps can help you make an informed decision:

  • Familiarize yourself with laws in your state that address pre-need or final expense insurance.
  • Evaluate the resources available to assist with burial expenses. Do you have an adequate life insurance policy or estate that can cover the costs?
  • Visit with your family about the need for insurance, including implications for them, and request their insight and input in the decision.
  • Compare plans and costs from different insurance providers so you’re well-informed on the options available. It’s important to compare at least two or three plans (with different insurance providers) before committing to a policy.
  • Meet with an attorney for guidance.

You might find that final expense insurance isn’t a good investment for you, but you may find that it offers you – and your family – peace of mind that’s well worth the investment. If that’s the case, here’s what you need to know to secure and use your coverage.

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How burial insurance works

Although final expense insurance goes by many names, the policy is simply a whole life. The primary differences between your traditional whole life insurance policy and your burial insurance are the amount of coverage and the beneficiary.

When you take out a whole life policy with the sole intention of covering funeral and burial expenses, you’ll choose an amount sufficient for those services – typically around $10,000. If you have other plans for your traditional whole life policy, this supplemental policy can protect those dollars by covering final expenses and easing the burden on your loved ones.

Many people list their funeral home as the beneficiary of final expense insurance, and in many cases, the funeral home requires this in order to pre-plan services. This is called pre-need insurance. In contrast, your survivors are most likely listed as the beneficiaries for your traditional whole life policy.

Comparing policies

It’s common to feel a little out of your comfort zone when comparing final expense insurance policies; after all, you’ll only ever need one, which doesn’t provide you with much foundation to develop expertise. Here’s what to evaluate when comparing your options:

  • Is the insurance plan whole life? Term life insurance doesn’t satisfy the need for final expense insurance as the policy may terminate before you pass away.
  • Who do you want to receive the funds? If you feel comfortable having the funds issued to a family member knowing that they can technically spend it however they choose, whole life might be a good fit. If you want a funeral director to receive the funds, choose pre-need insurance.
  • How much does coverage cost? Evaluating the cost vs. benefit of each plan will help you make an educated decision.
  • How can you pay for the coverage? Some plans require one lump sum payment, which then guarantees you coverage when you pass regardless of the number of years from now, while other plans allow you to make monthly payments that slowly (or quickly) increase as you age.
  • Have others found the policy easy to access? Check the Better Business Bureau ratings and online reviews for each policy you evaluate.

Next steps

Although it can be a difficult task, preplanning your service provides a myriad of benefits for both you and those you leave behind. In most cases, it locks in the price of your services and burial despite inflation between now and when those services are required. It allows you to express your wishes for your service and the handling of your remains by choosing between cremation and burial, selecting the burial site, purchasing a casket that reflects your tastes and preferences, and even choosing the music for your service.

Perhaps most importantly, preplanning your funeral allows you to predict and prepare for funeral expenses, purchasing adequate coverage to ease the burden on loved ones when you pass.

Once you’ve met with a funeral director to preplan your services and selected and taken out final expense insurance, share that information with someone you trust, like your spouse or beneficiary. Make sure they have contact information for the funeral home you’re working with, a copy of your final expense insurance, and an understanding of how the insurance policy works and what they need to know in order to access those funds. Send your estate attorney a copy of the policy, as well.

Make sure you receive everything in writing, including the signed agreement and the full policy.

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