Funeral insurance is a life insurance policy that covers your funeral, burial, and other "final expenses." Funeral insurance is also known as final expense insurance, preneed insurance, or burial insurance. These plans are all similar in nature, but there are some distinctions to keep in mind. Let's call it funeral insurance for simplicity's sake.
There are some things you should know about funeral insurance:
- Determine how much you'll need to cover your final expenses.
- Decide if funeral insurance is required.
- Determine the sort of coverage you'll get.
- Figure out if you can afford the policy you want.
THE BEST WAY TO PURCHASE FUNERAL INSURANCE IS TO DO YOUR RESEARCH
Here are the actions a cautious shopper should take when purchasing funeral coverage. Every step is further detailed in the sections that follow.
- Estimate Your Final Expenses.
- Determine If You Have Enough Money Left Over.
- Decide Whether or Not You Need Funeral Insurance.
- Select the Type of Insurance You Want.
- Obtain A Quotation For Funeral Insurance.
- Decide If You Can Afford
- The Coverage That Interests YOU Most
How To Buy Funeral Insurance
Step 1: Estimate Your Final Expenses
Your first line of defense is to figure out how much you'll need to cover your end-of-life costs. The initial item that springs to mind when talking about funeral expenses is often the most costly single element. However, there are other "final expenditures" — such as medical bills, legal fees, living costs, and credit card bills – to consider. Visit our Funeral Costs page for a detailed explanation of these last expenses. This page also includes two useful tools to assist you in estimating how much your final expenditures will be.
Step 2: Determine If You Have Enough Money Left Over.
The pressing issue is: Will there be enough cash in your estate to pay for your final costs? You might wish to contact a financial adviser for assistance.
Another issue to consider is whether or not your beneficiaries will have immediate access to the money in your estate to pay your obligations. If you can't get at your cash owing to probate, that might be a difficulty because funeral providers (and cemeteries) demand payment up front. There will most likely be additional bills that come due following your death. Who is going to pay them if your cash is not accessible? For helpful ideas, see our guide on what to do after the funeral.
Step 3: Decide Whether or Not You Need Funeral Insurance.
A funeral insurance policy may be a wise investment if you don't anticipate having enough cash to pay for your last costs at the end of your life. Even if you believe you have enough money, you might not want your final expenses to eat up all of your assets. Having a funeral insurance coverage is one method to guarantee that your entire inheritance will go to your heirs.
CHECK FOR A POLICY THAT INCLUDES THESE CHARACTERISTICS
- Ideally a whole life policy – that accumulates cash values and can stay in force until the end of your life.
- Level premiums – that is, premiums don’t increase as you get older.
- No medical exam – although you will have to answer health questions for an underwritten policy.
- Top rated insurance company – with an A.M. Best rating of A- (Excellent) or better.
Step 4: Select the Type of Insurance You Want.
There are several specialized insurance policies accessible on the market now that can assist you cover your final costs. Funeral insurance, burial insurance, and final expense insurance. The typical limit for these plans is $25,000 to $50,000, while standard life insurance typically has a coverage of $50,000 or more. Funeral policies are only sufficient to cover final expenses by design. As a result, they offer less protection. Regular life insurance is intended to help your survivors financially after you pass away.
Here are the key questions about funeral insurance and what you need to know:
What is the distinction between Simplified Policy and Guaranteed Policy?
When purchasing an insurance policy for final expenses, there are two types of policies to choose from: Simplified Issue and Guaranteed Issue. If you have concerns about your medical history, it's critical to understand the differences.
With a Simplified Issue policy, the insurance company reviews or "underwrites" your health based on your responses to a set of questions regarding your medical history. A medical checkup is rarely necessary. Because funeral insurance premiums are lower than those for typical coverage, underwriting standards are generally less stringent. You could be declined for health or lifestyle reasons, though. Pre-existing conditions, smoking, and engaging in hazardous hobbies might all lead to your application being rejected.
Guaranteed Issue insurance is offered to everyone, regardless of medical history. To apply, you only need to fill out a form. So, what's the catch? There isn't one. However, because the insurance company assumes greater risk in order for premiums to be higher than other types of coverage, there is more possibility that your health will cause coverage to be declined or that you won't want to share any relevant information. If you're concerned about your health affecting your coverage or don't want to disclose any medical information, then choose a Guaranteed Issue policy.
What is the distinction between Level benefit and Modified benefit plans?
Even if the death is caused by natural causes or an accident, a Level Benefit Policy provides full payouts beginning on the policy's issue date. The acceptance of a Level Benefit Policy is based on the applicant's responses to medical questions.
The full death benefit is not accessible until the policy has been in force for a specific length of time under a Modified Benefit Policy. The restriction period is generally 24 or 36 months. If you die before the Restriction Period runs out, your beneficiaries will only receive a part of the money. Even if the death happens during the Restriction Period, most accidental deaths result in payment of the whole death benefit. Modified Benefit Policies are available in a number of forms, so double-check the policy terms. The payout may be based on a Graded Death Benefit or a Return of Premium clause, and they have distinct meanings.
What is the distinction between Whole life and Term life insurance?
The most basic choice you'll have to make when purchasing funeral insurance is whether or not a Whole Life policy is appropriate for you. The terms we've gone over may be found in both Whole Life and Term Life plans.
There are two types of life insurance policies.
Whole Life is when you can stay covered until the end of your life. Some Whole Life policies terminate at 100 years old, although that's good for most people.
A Term Life policy will expire at a certain time. For example, it can be for 10 years or until you are 75 years old.
At the time of your death, you might want to have funeral insurance. There are two different types, one called Whole Life and the other called Term Life. The big difference is that Term Life is less expensive because it has less risk for insurance companies.
A whole life policy will always cover you, no matter what. It costs more than term life, but it is worth it to have coverage.
When you are buying funeral insurance, it is important to read the contract. You need to know what kind of life insurance you are buying. This is a contract that will last a long time and it can be hard to undo. If you want life insurance for a long time, buy whole life.