If you are considering planning for your funeral ahead of time, you are actually making quite a smart choice. By doing so, you can save your family or the loved ones, both money and decision making during an emotional period of grief.
Nowadays, there are quite a few options available when it comes to advance planning for all your funeral requirements and expenses. Burial insurance, which is also known by the name funeral insurance or final expense insurance, is somewhat different from pre-need funeral insurance.
Not unlike burial insurance, the pre-need funeral insurance is designed to set aside your funeral funds before the need actually arises. It covers the predetermined expenses costs like the standard funeral home services, funeral merchandise, and church and also helps with the burial services.
Paying for a funeral
There are different ways by which people pay for their funeral expenses. Some people may begin setting aside some money regularly in a savings account, which is specifically earmarked for this purpose. The problem with this traditional saving is the discipline that is required to consistently save and leave these savings alone once it’s there.
On the other hand, there are people with already existing life insurance plans and may choose to designate a certain amount of death benefit towards their funeral expenses. However, depending on your age, your life insurance may be a term policy that expires after some time.
If you don’t have some sort of permanent life insurance, you could find yourself unprepared in case your existing life insurance expires. After doing a bit of research, you may have encountered the terms pre-need funeral plans and final expense insurance policies. Both are actually different and have different explanations.
Pre-need funeral plans
The pre-need or prepaid funeral plans are sold to individuals by specific funeral homes. This plan allows you the opportunity to pay for your funeral in advance without finalizing all of the details. Such an option allows you to take the stress away from your family members and have all the details planned.
The prepaid coverage gives this huge benefit that it takes all of the guesswork out of everything, not only for yourself but your family members or loved ones also. Another huge benefit is that you can be able to lock in the current funeral rates and don’t have to worry or care about any type of inflation and pay for it in installments.
There are a few questions that one would ask to make sure that the pre-need funeral plans are the best option. The money that you deposit to a funeral home does it earn interest? Does my health have an impact on the terms of the plan that I choose?
With the positives, there are a few drawbacks of pre-need funeral plans. One of the biggest drawbacks that we see with pre-need funeral plans is locked in commitment. Some of its policies do not allow flexibility with transferable options that you need.
Life changes and things happen quite quickly. As an individual wanting to get a pre-need plan, you want to be aware of when to initially set up the coverage. This also doesn’t allow your family members to pay for the final expenses as it only covers funeral at the specific funeral parlor.
Another drawback that appears with pre-need funeral plans is that they are basically not as regulated as the insurance industry. More of the time, the money that should be allocated for one thing is spent in the wrong way or goes missing. Also, your family will miss out on any cash benefit since the funeral home only pays for things that are related to the funeral.
One may find pre-need funerals as a good financial decision for you and your family members. One has to understand that they fall short oftentimes in providing the flexibility for your family or loved ones. This way, it sometimes becomes a challenge for the family members at the funeral.
Burial insurance plans
There are some extra perks with the burial insurance plans as compared to the pre-need funeral plans. This plan usually refers to a whole life insurance policy that helps and prepares you and your family members to prepare for the burial expenses.
Some of the features of the burial insurance policy include:
It is a whole life policy that has the same price and death benefit for life.
It pays full death benefit right from day one.
With burial insurance, the cash value can be borrowed and can be made into a reduced paid-up policy if the policyholder does not want to pay the premiums.
It doesn’t require an exam or medical records for approval, as only a short phone interview does the job.
The greatest benefit of burial insurance is that you can leave your family members an extra amount of money, and they can use it wherever they want, and it is tax-free. Either they spend it on funeral or final expenses or set this money aside for lost wages, and it is totally up to them.
As the insurance company accepts you as a policyholder; therefore, your insurance may have an immediate death benefit. The final expense insurance policies move with you wherever you want to live. Once you purchase their policy, this policy will cover your life, no matter where you move to.
The final expense policies provide two main types of death benefit products, i.e., Level death benefit plans and Guaranteed issue products. People with average or good health can qualify for immediate death benefit products. It means that once the policy begins, you qualify for an immediate death benefit.
Some of the well-known burial insurance companies that may offer you an immediate death benefit policy are:
Mutual of Omaha
You will have several companies to choose from. There are agencies that can help you to determine which company is in your best interest. These agencies even tell you which plans suit you and which are the ones that you qualify for.
If your health is below average and you have significant pre-existing health conditions, then you may not be able to qualify for the immediate death benefit plan. You would then be eligible for the guaranteed acceptance life insurance plans.
The guaranteed acceptance life insurance plans are identical to immediate death benefit plans, but these policies might not pay the full death benefit if you pass away from natural causes in the first two years of the policy. If you do, then your family receives all the premiums to be paid with 10% interest.
Your family is not restricted to a single funeral home with the burial insurance policy. All the decisions are up to your family on how and where your funeral should be held. With the flexible payment plans, the burial insurance offers some of the best perks for its policyholders.
Comparison between burial insurance and pre-need funeral plan
Among the people who are searching for funeral insurance, the question arises about how the two work and what is the difference between the two plans. The basic explanations of the two plans are shown below:
|Purchased from a life insurance company||Purchased from the specific funeral house|
|Payout is received by the beneficiaries||Paid ahead of time to the funeral home|
|The benefits are flexible and can be used for final arrangements and much more||The guaranteed service cost will be covered by the funeral home|
|Benefits are portable and not tied to any one funeral home||The non-guaranteed services should be paid by the beneficiary|
|The terms are established by the insurer for the policyholders.||The details are dependent on the funeral home which are highly variable|
Things to know when considering a pre-need plan
Guaranteed and Non-guaranteed services
If you fortunate to live long are setting up a prepaid plan, your desired funeral costs may increase. It depends on whether these costs are guaranteed services or the non-guaranteed ones determine whether your family has to make up the difference or not.
The cost of guaranteed services will always be covered by the funeral home regardless of the worth of your plan. The pre-need plans already forecast the increase in the cost and then price their premiums after considering all factors regarding their cost.
If the pre-need service is not guaranteed, your family or loved ones have to bear the difference in the cost. As a customer, you can check with the pre-need provider to see how their plan actually handles the non-guaranteed services.
The service price is determined by the funeral home
As the pre-need plans are purchased through the funeral homes, therefore, your plans are basically designed to cover the specific costs that the particular funeral home charges as the costs vary from one funeral home to the other, so one funeral home may charge double as much for the same service.
If you have decided to purchase a pre-need plan, make yourself sure, and so some research by comparing the General Price List (GPL) of various funeral homes before you decide from which funeral home you will purchase the plan.
Things to know when considering a burial insurance plan
With the burial or final expense life insurance, the family members can use the benefit for anything, as it doesn’t have to cover the funeral costs. If the beneficiary chooses to use the benefit to cover the expenses of the funeral, they don’t need any specific funeral home to make the arrangements. The cash benefit received from a final expense company can be used anywhere.
The policies do not depend on the funeral homes
As your policy is not dependent on any type of funeral home, so you don’t need to worry about either a certain funeral home gets sold or even goes out of business. You would not be locked into any specific prices as you have the freedom to shop the core services, as well as to choose any funeral items that are offered by the funeral home.
Not all burial policies are the same
It depends on what you want to protect, some of the burial or final expense policies may be better for you than the others. Most of the final expense companies only provide a death benefit to the beneficiary. They don’t provide assistance regarding funeral arrangements or shopping funeral items.
As most people use burial life insurance to help to cover their funeral costs, it is important that you are sure in your mind that you have chosen a final expense provider that includes this as part of the policy. Choosing a burial policy that helps your family in funeral industry navigation can actually protect the family from overspending on the funeral arrangements.
Alternatives to funeral plans and funeral insurance
If one wants to find alternatives to the pre-need funeral plans and the burial life insurance, there are a variety of ways that can be helpful. It depends on how disciplined you are and how well you use these alternatives, but there are some ways that you can find useful.
Putting money into your savings account
This is the most common way, and most of the people who don’t utilize the pre-need funeral plans and burial life insurance keep their savings aside in the savings account, but even this is not risk-free as you may die before you buildup an amount that is enough to pay for a funeral.
Death in service from an employer
Some organizations or employers that value their employees provide a payout if their employee happens to die while he/she is still employed to that particular organization.
The beneficiaries can use the lump sum payment to pay for the funeral. The payments generally take about a month period. Even further delays can be caused if the death of the policyholder requires any type of investigation.
If you are a trade union member, a professional body, or any association, it is quite possible that they pay a benefit when any of their members dies. The beneficiaries of such members can contact the union or association directly to find out in such a case. The average cost of a funeral is $8500.00. Compare us with Colonial Penn or Globe Life Insurance. We have burial insurance with no waiting period.
Hi, I’m Mitch Winstead I have helping people with burial insurance for over 20 years. We have top carriers with the best rates. Here is a couple of companies-Mutual of Omaha burial insurance and AIG Insurance. All of our policies are state-regulated. If you have any questions or would like to get a quote with no obligations, please our office today toll-free at 1-866-598-8170. Or our email address is firstname.lastname@example.org
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