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The Differences between Burial Insurance and Prepaid Funerals

As uncomfortable as it might be, putting plans in place to cover your funeral and burial expenses is wise. It really is unfair to loved ones to leave them with the financial burden when they have so many other things to worry about. Some people choose to cover their financial needs through life insurance; others purchase burial insurance or opt for a prepaid funeral plan.

Life insurance is a completely self-contained world we will not talk about in this post. Instead, we want to tell you about the differences between final expense insurance and prepaid funeral plans. The differences are significant, to say the least. Anyone considering either option needs to compare both. There are many things in play that could influence a decision either way.

Burial Insurance

Burial insurance is a type of life insurance that helps cover the costs of your funeral and burial. According to PBS’ Point of View, the average funeral in the U.S. these days runs between $8,000 and $10,000. The number should make it evident that burial insurance can be very helpful in the absence of term or whole life insurance.

The benefits of purchasing burial insurance are as follows:

•Age Restrictions – There are very few of age restrictions for purchasing burial insurance. This means that seniors usually do not have a problem qualifying. If they have neglected to purchase term or whole life, a burial insurance policy is a great fall back.

final expense insurance

•Health Exams – Health exams are generally not required to qualify for burial insurance. However, the consumer does have to answer some basic health questions and legally attest to the fact that he/she is not gravely ill and expecting to die within a few months.

•Affordable – Most burial insurance policies are relatively affordable. As such, they offer the consumer a way to cover end-of-life expenses without breaking the budget.

The biggest downside of burial insurance is that it really has no investment value. Furthermore, a burial insurance policy will not pay out more in the future because funeral expenses go up. What the consumer agrees to at the time of purchase will be the entire face value of the policy for its duration.

Prepaid Funerals

When the consumer chooses a prepaid funeral plan, he/she is essentially hiring a funeral home and director to provide services in the future. Payments can be made in whole or through an installment arrangement. What the funeral director does with that money is important, so you absolutely must know before signing a contract.

Some funeral directors put your money into a trust fund, which is released upon your death. Others purchase life insurance policies while naming themselves as the beneficiaries. This all sounds well and good, but there are things that must be considered:

•Additional Charges – Should you live long enough, the actual cost of your funeral could be substantially more when you pass on. Your contract should stipulate whether or not there would be additional charges assessed in the event of higher costs at the time of your death.

•Refunds – What happens if you change your mind? What happens if the funeral home goes out of business or suffers financial losses? It is important for consumers to know whether they can get a refund should the need ever arise.

•Services Rendered – Lastly, consumers need to make sure their contracts spell out exactly what services will be provided at the time of death. The contract is the only instrument you have to make sure the services you are paying for are actually being provided.

There is no right or wrong when it comes to choosing between burial insurance and a prepaid funeral plan. Both options have their strong and weak points. Your best bet is to talk things over with your family, your financial advisor, and your insurance agent. Together you can come up with a strategy that will both cover your end-of-life expenses and protect your current financial position.