Funeral Insurance: A Guide To Getting Covered

Funeral insurance, also known as burial insurance, final expense insurance, or pre-need insurance, is a type of whole life insurance policy designed to cover funeral, burial, and other end-of-life expenses. It is a helpful tool for loved ones to pay for a departed family member or friend's funeral, memorial service, headstone, urn, and other final expenses. It is a way to ensure that your funeral is arranged and paid for in advance, so your family doesn't have to bear the burden. The average funeral cost is over $9,420, according to the National Funeral Directors Association's 2021 data, but this doesn't include the cost of a cemetery plot, vault, headstone, flowers, or obituaries. With funeral insurance, you pay monthly or fortnightly premiums for a fixed amount of cover, usually ranging from $5,000 to $25,000. This amount is paid to your family when you die. However, it's important to note that funeral insurance can cost a lot more than the benefit received by your family, and if you stop making payments, you lose what you've already paid.

Funeral insurance costs and how they increase over time

Funeral insurance, also known as burial insurance or final expense insurance, is a type of life insurance policy that helps cover the costs of an individual's final arrangements, including funeral home services, memorial services, caskets or urns, burial or cremation, and headstones or grave markers. The average cost of a funeral with burial is around $9,420, while the average cost of a funeral with cremation is about $7,000. These costs do not usually include cemetery plots, headstones, flowers, or transportation.

There are two main types of funeral insurance: standard and pre-need. Standard funeral insurance is offered by life insurance companies as a whole life policy and is paid out to beneficiaries upon the death of the insured to cover final arrangements. Pre-need funeral insurance is offered by life insurance companies and, in some cases, funeral homes. The funds from this type of insurance are given directly to the funeral home and are usually paid out immediately after the insured's passing.

The cost of funeral insurance can vary depending on several factors, including age, gender, health, tobacco usage, the amount of coverage, and the type of policy chosen. Men typically pay about 30% more than women for life insurance products, as women generally have a longer life expectancy. The older an individual is, the more expensive the insurance coverage will be, as most companies have set rates for each specific age. However, some companies set pricing according to age brackets, charging the same premium for a specific age range.

The type of policy also affects the cost, with term life insurance policies generally being cheaper than whole life policies since they expire around the age of 80. Whole life policies, on the other hand, last forever, and the cost cannot increase over time. Within whole life policies, there are simplified issue and guaranteed acceptance plans. Guaranteed issue plans do not consider health or lifestyle factors and are therefore more expensive. Simplified issue plans take into account health and tobacco habits and are usually more affordable.

The amount of coverage also influences the cost of funeral insurance. The more coverage one desires, the higher the premium will be. Additionally, the state of residence can impact the cost, as insurance companies choose which states to offer their products in.

It is important to note that prices advertised on TV, online, or through other media may not accurately reflect the actual cost of funeral insurance. These teaser rates often quote a young, healthy person seeking minimal coverage. Therefore, it is advisable to obtain personalized quotes from multiple providers to find the most suitable plan.

The pros and cons of funeral insurance

Funeral insurance, also known as burial insurance or final expense insurance, is a type of life insurance policy that can be used to cover funeral expenses and other end-of-life costs. It is typically marketed towards older individuals on a tight budget and in poor health, who may not have savings or other insurance to cover funeral costs.

Pros of Funeral Insurance:

• Peace of Mind: Funeral insurance ensures that your loved ones won't have to worry about making important decisions or covering funeral expenses during their time of grief.
• Inflation Protection: By locking in today's prices, you can protect yourself from rising funeral costs, which have been steadily increasing over the years.
• Control Over Funeral Arrangements: You can choose the type of funeral you want and even select your resting spot in advance.
• No Health Exam Required: Unlike other insurance policies, funeral insurance usually does not require a health exam, making it more accessible to individuals with pre-existing health conditions.
• Guaranteed Coverage: Regardless of your health status, you cannot be turned down for certain types of funeral insurance policies, such as "guaranteed issue life insurance."

Cons of Funeral Insurance:

• Limited Flexibility: Funeral insurance plans often do not transfer to other funeral homes, so if you move or pass away in a different location, your loved ones may be responsible for additional costs.
• Funds Cannot Be Used for Other Purposes: The money paid towards funeral insurance is specifically designated for funeral expenses and cannot be used for other end-of-life costs, such as medical bills.
• Potential for Higher Costs: Funeral insurance can be expensive, and there may be more cost-effective ways to plan for funeral expenses, such as investing or saving.
• Limited Payout: Funeral insurance policies typically have a small death benefit, ranging from $5,000 to $25,000, which may not be sufficient to cover all final expenses.
• Graded Death Benefit: Some funeral insurance policies have a graded death benefit, meaning that if the insured person passes away within a few years of purchasing the policy, the beneficiaries may only receive a refund of the premiums paid instead of the full death benefit.
• Lack of Regulation: Funeral insurance plans are not regulated by the Financial Conduct Authority (FCA) in the UK, and there have been concerns about mismanagement of funds by funeral homes.

It is important to carefully consider your personal circumstances, financial situation, and preferences when deciding whether to purchase funeral insurance. It may be beneficial to consult with a financial advisor or insurance expert to explore all your options and make an informed decision.

How to choose the best funeral insurance plan

Funeral insurance, also known as burial insurance, final expense insurance, or funeral expense insurance, is a type of life insurance policy that covers the costs of a funeral, memorial service, headstone, urn, and other final expenses. It is typically purchased to cover final arrangements but can also be used to pay off the deceased's debts.

When choosing the best funeral insurance plan, there are several factors to consider:

Coverage Amount:

The first step is to determine how much coverage you need. Funeral costs can vary depending on whether you choose cremation or burial, the type of service, and other factors. The average funeral costs in the United States range from $7,000 to $10,000, but can be higher depending on your specific wishes and requirements.

Provider Support Services:

Consider whether the insurance provider offers support services for your family during the claim process. This can include assistance with funeral arrangements, grief counselling, and other support services.

Medical Exam Requirements:

Some funeral insurance plans require a medical exam, while others have simplified or guaranteed acceptance with no medical exam needed. If you are in good health, you may be able to get a discount on your premiums by undergoing a medical exam. However, if you have pre-existing health conditions, a plan without a medical exam may be a better option.

Average Funeral Costs in Your Area:

Funeral costs can vary by location, so it is important to research the average funeral costs in your area. This will help you determine how much coverage you need and ensure that your chosen plan is sufficient to cover the expenses.

Compare Different Plans:

Shop around and compare multiple funeral insurance plans from different providers. Consider the coverage amount, premiums, waiting periods, and other benefits offered. By comparing different plans, you can find the one that best suits your needs and budget.

Read the Fine Print:

Be sure to read the terms and conditions of the insurance plan carefully. Pay attention to any exclusions, limitations, and waiting periods. Understand what is covered and what is not, so you can make an informed decision and avoid unexpected costs for your loved ones.

Consider Pre-paid Funeral Plans:

Pre-paid funeral plans allow you to pay for your funeral expenses in advance, either through monthly instalments or a lump sum payment. These plans can help lock in current prices and ensure that your loved ones do not have to bear the financial burden at the time of your death. However, be sure to read the fine print and understand the terms and conditions of these plans.

Government Assistance:

In some cases, government assistance may be available to help with funeral costs. This is usually available to individuals receiving certain benefits, such as income-based allowances or disability-related benefits. It's worth checking if you qualify for any government assistance programs that can help offset funeral expenses.

Your Final Wishes:

Consider your final wishes and communicate them to your loved ones. This includes decisions such as burial or cremation, the type of service, music, flowers, and any other preferences you may have. By making these decisions in advance, you can ensure that your funeral reflects your wishes and alleviates the burden on your family.

Choosing the best funeral insurance plan involves careful consideration of your personal circumstances, financial situation, and the level of coverage needed. Be sure to compare different plans, read the fine print, and seek out plans that offer the best value and peace of mind for you and your loved ones.

How to get quotes and buy funeral insurance online

Funeral insurance is an important way to ensure that your family has the financial support they need to cover your funeral costs and settle any outstanding debts or expenses. It's easy to get started with a quick online quote and there are many companies that offer this service. Here's a step-by-step guide on how to get quotes and buy funeral insurance online:

• Research and compare: The first step is to research and compare different funeral insurance providers. Look for companies that offer online quotes and have a good reputation. Compare the benefits, coverage amounts, and prices to find the best option for your needs.
• Determine your needs: Consider the type of funeral you want and any other final expenses your family may need to cover. This will help you decide on the amount of coverage you need.
• Get a quote: Once you've found a few potential providers, get an online quote by providing some basic information such as your age and residency. This will give you an estimate of the cost of the policy.
• Review the policy details: Before purchasing a policy, carefully review the terms and conditions, including any exclusions or restrictions. Pay attention to the coverage amount, payment options, and any additional benefits offered.
• Provide necessary information: To finalise your quote and purchase the policy, you'll need to provide some personal information, such as your full name, date of birth, and contact details. You may also need to answer some health-related questions, depending on the insurer.
• Make your purchase: Once you're happy with the quote and have reviewed the policy details, you can proceed to make your purchase online. Provide your payment details and finalise the transaction.
• Review and update: Funeral insurance should be reviewed periodically to ensure it still meets your needs. Life circumstances can change, and you may need to update your policy or increase your coverage over time.

By following these steps, you can easily get quotes and purchase funeral insurance online, ensuring that your loved ones have the financial support they need during a difficult time.

How to pay for a funeral with life insurance

Planning for a funeral is a challenging task, and it's made even more difficult when grieving the loss of a loved one. Funerals are expensive, costing up to $10,000 or more, and payment is often expected upfront by funeral providers. This is where life insurance comes in as a sensible option to ease the financial burden.

Types of Life Insurance that Cover Funerals

There are several types of life insurance policies that can help cover funeral costs:

• Whole Life Insurance: This is a permanent life insurance policy that covers you for your entire life and pays out to beneficiaries regardless of when you die. Premiums are more expensive but guaranteed to stay the same. Whole life insurance policies accrue cash value and offer cash payouts that can be used for funeral expenses.
• Term Life Insurance: This policy covers you for a chosen period, such as 20 or 30 years. It does not accrue cash value, making the premiums cheaper. However, if you outlive the policy, there will be no payout to cover funeral expenses.
• Universal Life Insurance: This is another type of permanent life insurance that offers more flexibility than whole life insurance. The death benefit and premium can be adjusted, and a portion of the premium can be borrowed against or withdrawn.
• Burial Insurance/Final Expense Insurance: This is a small policy specifically for funeral expenses, typically ranging from $5,000 to $25,000. The application process is usually simple or non-existent, but these plans often only pay out a prorated amount based on what you've paid.
• Pre-Need Funeral Insurance: This insurance is purchased through a funeral home and covers services provided by that specific home. The funds are usually paid directly to the funeral home rather than family members.

Receiving Benefits

To receive the payout from a life insurance policy, the beneficiary must submit a claim to the insurance company, along with an official death certificate and basic information about the deceased. The company will then review the claim, which can take a few days to a few weeks or even months if there are complications. It's important to understand that life insurance payouts don't occur immediately, and the funds may not be available when needed for funeral arrangements.

Policy Assignment

Depending on the insurance policy, a beneficiary may be able to assign the benefits directly to a funeral home to cover service charges. Most funeral homes accept life insurance policies as a form of payment, but it's essential to verify the policy assignment terms with the insurance company.

Advance Funding

Advance funding companies are another option if you need money quickly to pay for funeral expenses. They offer beneficiaries an advance on their life insurance benefits, providing payment in just a few days to cover pending funeral bills.

Regular Updates

It's crucial to update your life insurance policy regularly and review it after major life events. You should also routinely check your list of beneficiaries and make adjustments as needed. Remember that a beneficiary can use the insurance benefits for expenses other than the funeral, so it's important to communicate your wishes clearly.

Alternative Payment Options

If you don't have life insurance or need additional funds, there are other ways to pay for a funeral:

• Cremation: Direct cremation is often a less expensive option than a traditional burial, and it gives more flexibility for memorial services.
• Green Burial: These burials are more environmentally friendly as they don't use embalming fluid, and biodegradable and non-toxic caskets are used.
• Fundraisers: Families or friends can organize fundraising events or use online platforms like GoFundMe to raise money for funeral costs.
• Funeral Loans: Although these loans typically have high-interest rates, they can provide relief if you have a good credit score.
• Home Burial: In some cases, a private home burial may be an option, but be sure to follow all state and federal laws.

Planning ahead for funeral expenses can be a smart financial decision, and life insurance is a valuable tool to ensure your loved ones don't bear the burden of these costs.

Frequently asked questions