If you’re concerned about the financial burden your loved ones might face when it comes to covering your end-of-life expenses, funeral insurance offers a viable solution. Funeral insurance is a specialized form of life insurance designed to provide financial coverage for your funeral, cremation, burial, and other outstanding expenses, including medical bills.
What is Funeral Insurance?
Funeral insurance, sometimes referred to as burial insurance or final expense insurance, is a whole life insurance policy with a modest payout specifically tailored to cover final expenses. These policies typically come with capped coverage, often ranging from $5,000 to $25,000. The reason behind the relatively modest payout is that it is designed to address a specific set of expenses.
While technically your life insurance beneficiaries have the freedom to utilize the funds as they see fit, it is customary to allocate the death benefit towards covering funeral-related expenses, which may include:
Most insurers do not require a medical examination for funeral insurance. Instead, eligibility is determined based on your responses to a health questionnaire. Some burial insurance policies are guaranteed issue policies, making them accessible to applicants, even those with significant health issues. However, these policies typically have a two-year waiting period. This means that if you pass away during the initial two years of policy activation, your beneficiary will receive a refund of your premiums plus interest, rather than the full death benefit.
Understanding the Cost of Funeral Insurance
As with any life insurance policy, the cost of funeral insurance premiums varies based on factors such as your age, gender, health, and tobacco use. For instance, a 50-year-old individual seeking a $10,000 burial insurance policy with Lincoln Heritage may find their monthly premiums as low as $25 to $30. On the other hand, an 80-year-old individual could be looking at monthly premiums as high as $150 to $190 for the same $10,000 coverage.
Funeral Insurance vs. Preneed Insurance
Funeral insurance and preneed insurance both serve the purpose of covering final expenses. The key distinction lies in the fact that funeral insurance is a type of life insurance policy, while preneed insurance represents a prepaid funeral plan.
Funeral insurance can be obtained through a life insurance company, whereas a preneed plan is typically purchased directly from a funeral home. In the case of preneed insurance, the payout does not go to your loved ones upon your passing; instead, the funds are directed to the funeral home, effectively prepaying for your funeral expenses.
The terms and conditions of preneed plans may vary among funeral homes. Some services may be guaranteed, meaning that if costs increase after you purchase the plan, they will still be covered by the funeral home. However, other services may not be guaranteed, potentially necessitating additional expenses on the part of your family if costs rise.