Everything you need to know about funeral insurance

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Thinking, anticipating and organizing your funeral. If the subject is not very encouraging at first glance, it is in fact, an important act of foresight for oneself and those close to it.

While nobody wishes to have conversations with their loved ones about funeral planning, it is an extremely important discussion to have.  Unfortunately, countless people will pass away every year, and their families have no way of covering all the costs of funeral and end-of-life expenses.

What is funeral insurance? 

Funeral insurance is a provident policy allowing the payment of capital in the event of the death of the insured to cover all or part of the costs related to the funeral.  When a person who owns a funeral insurance policy passes away, the proceeds would be paid to the funeral home or beneficiary of the insurance policy.

This death benefit, the amount of which is defined when purchasing the policy, is passed on to the family of the deceased or any other beneficiary designated by the insured. The policy owner would make a one-time premium payment, or more commonly, they’d make monthly or quarterly payments.  Usually, a person can share their banking information with the insurance provider, and premiums are withdrawn automatically.

The funeral insurance contract (or funeral agreement) pays a lump sum and tax-free death benefit at the time of the insured’s death.  If there are any funds left over from the funeral expenses, the family’s beneficiary can use the remaining amount without any restrictions.

Simply stated, having a funeral insurance plan is a way to guarantee your last wishes while financially protecting your family from the cost of organizing the funeral.  Life is much easier when there is a financial roadmap for your family to address your funeral needs.

These types of insurance products are also referred to as final expense insurance, burial insurance, or cremation insurance.  At the end of the day, these are all whole life insurance policies taken out to address your funeral needs.

Why take out funeral insurance? 

This type of life insurance coverage provides you peace of mind and protects your loved ones. Taking out funeral insurance helps to reduce the emotional and financial burden linked to death. Your loved ones do not want to wonder how they are going to cover the costs of your funeral while they mourn.

We see countless GoFundMe campaigns on social media to help others address their loved ones’ funerals.  Nobody should ever have to do something like this.  This is exactly why a person should explore funeral insurance or burial insurance plans.

Planning your funeral also means ensuring that your funeral will be taken care of according to your own wishes. The opportunity to give your instructions regarding the conduct of the ceremony and record your last wishes.

Once the details of your funeral have been settled and the financing arranged, your family and loved ones can reflect on all the great memories they have with you.  Making sure they have a funeral insurance policy in place will only make things easier for everyone.

Define the amount of the policy and name your beneficiaries

When taking out funeral insurance, the insured will have to define the amount of the policy to be insured as well as the beneficiary.  We refer to this as the death benefit.  Your death benefit will be an exact figure and usually ranges from $10,000 to $30,000.

Prior to signing the contract, you’ll provide your personal information and answer simple health questions.  Information you must provide includes your name, current address, date of birth, social security number, and good contact information.

Health questions will vary from insurance company to company.  If one insurance carrier were to decline you, another most likely would approve of you.  Because of this, you’d want to work with an independent insurance agent who could help you select the best burial insurance policy possible.

A consumer would have countless insurance companies to choose from.  Well-known, and reputable insurance providers that offer funeral insurance include AIG, Mutual of Omaha, Lincoln Heritage, Gerber Life and others.

The choice of beneficiary is crucial since it is this person or organization who, on the death of the insured, will receive the amount of your policy. It can be the spouse, another relative, or it can be paid directly to a funeral agency. We’ll also note that you can update the beneficiary of the policy at any point in the future.

Details to a funeral insurance policy

When taking out funeral insurance coverage, you may have some questions about how this form of life insurance works.

The policy owner will enter into a contract with the chosen life insurance provider.  Details of the policy will look the following:

    • At the time of death of the insured, the death benefit is paid to the beneficiary designated in the contract. It can be a legal or natural person.
    • The contract imposes no obligation on the beneficiary as to the use of the death benefit. The amount can therefore be used for purposes other than the organization of the funeral.
    • The wishes of the deceased with regard to funeral services are not contractually defined and remain at the discretion of the family, assisted by the funeral director.
    • If the amount of the death benefit is greater than the funeral expenses, the remaining balance goes to the beneficiary.

How to pay your premiums

The funeral insurance contract can be financed according to 3 contribution methods, also called premiums.

The single premium: this is a single payment corresponding to the total amount of the premiums made when the policy is taken out.  After this payment is made, no further premiums are collected.

The specified premium duration option: these contributions are paid regularly for a specific amount of time.  Common options are for payments to be made for 10 years or 20 years.  After this duration, the policy is paid up and no premiums are ever collected again.

Lifetime premium: with this plan, contributions are also paid monthly, quarterly or annually from the date of the policy until the insured’s death. While premiums are lower initially, a policyholder could pay more into the policy than what the death benefit is worth.  

Are you hesitating between these three options? Your insurance agent will be able to help you and advise you on the method best suited to your age and your situation.  Everyone’s situation is different, so it’s important to know all your options.

Almost every insurance company is using forms of electronic payments.  No matter the duration of your premiums, you will not have to mail in payments.  Rather, on the initial application, you’ll provide your preferred payment information.

At what age should you take out funeral insurance? 

There is no ideal age to take out a funeral insurance contract: everyone is free to subscribe to this life insurance product when they feel the need.  It’s often smart to lock in life insurance on children because of how inexpensive premiums are.

Funeral insurance plans are partly determined by your age and health at the time of applying.  The younger and healthier you are, the cheaper the premiums will be.  Honestly, most people can benefit from having policies like these.  By waiting, you’ll simply pay more in premiums.

No two families’ needs are the same.  Because of this, you’ll want to speak with your insurance agent and have them make suitable recommendations given your financial objectives and financial planning needs.  We guarantee that by having funeral insurance, your family will only benefit from this valuable coverage at the time of your death.