How Does Funeral Insurance Work?

By: Melissa Descant
Friday, August 16, 2019

Throughout our lives, we purchase several types of insurance, all equally important and necessary. We need insurance for our life, health, car, and home, but have you ever considered purchasing funeral insurance? Yes, it exists and it’s just as important. This type of insurance goes by many different titles. Some call it memorial insurance, while others bluntly call it burial insurance. Whatever you choose to call it, it’s purpose is all the same. It’s meant to curb the burden of paying for memorial service expenses for your loved ones. This type of insurance is considered a part of pre-planning and pre-funding your funeral plans.

Many people wonder what the difference is between life and death insurance. The idea is very similar, but burial insurance is usually much cheaper than life insurance. You pay monthly payments towards a plan and upon your death, the total is paid out to the beneficiaries named in the policy. This money is intended to pay for burial or cremation services so that your survivors do not have to worry about the expenses and can focus on grieving and handling the other arrangements that are associated with losing a loved one.

These insurance policies are generally taken out for much shorter periods of time, which is why the amount paid into them is usually much less than a normal life insurance policy. Typically, the elderly or ill who expect their demise to be within the next few years will purchase burial insurance. It’s rarely purchased and paid for in advance when death is not a considerable factor in the near future. Life insurance is often purchased in young adulthood and paid into throughout the individual’s life. This policy is paid out to beneficiaries in the incidence of death which can occur at any time within the person’s life. This is important for those who have families and dependents because it assists in paying for financial burdens aside from memorial-related expenses, like mortgage payments or medical bills. Burial insurance is generally meant to pay for service-related expenses only.

There are different plans for burial insurance, all of which are meant to cover the following expenses:

Embalming services
Cremation services
Viewing services
Casket or Urn
Cemetery plots and headstones

These services are necessary and can be costly if not pre-funded or planned for in advance.

Standard Burial Insurance

Often times a part of regular life insurance plans, Standard Insurance is paid out to beneficiaries upon the insured’s death to assist with service-specific expenses. The benefit of having burial insurance provided as a part of a life insurance plan is the freedom to work with any provider you would like. This gives your loved ones flexibility to find the provider they think will best serve and honor their departed. In addition, these funds can be applied to other post-mortem financial obligations outside of the memorial service needs.

Pre-Need Insurance

Pre-Need Insurance is not given to beneficiaries. This insurance plan is paid out directly to the location that the deceased has chosen to work with prior to their passing. This type of plan is offered as a part of life insurance, much like standard insurance, or can be offered by a funeral home as a part of the preplanning and pre-funding process. The benefit of this type of insurance plan is that it locks in prices for services and associated accessories such as caskets, urns, vaults, headstones, etc. and promises that they will remain the same regardless of any fluctuation in the market value of these services and goods. This protects your family from having to pay any extra fees when you thought all the services would be paid for in full. Unfortunately, if there is a surplus between the amount your insurance company or plan pays towards the services and what they actually cost, it won’t be paid out to your beneficiaries.

These different types of insurance plans have different requirements and stipulations. Some provide premiums that are capped by age, some get more expensive as you age, and some are locked in regardless of changing health or increasing age. It’s important to consider what type of coverage you need and weigh all of your options. You can research these options on your own by visiting websites that offer detailed information about them or a licensed director who offers pre planning services can help you navigate through your options and make a decision that is reflective of what’s best for you and your family.

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