Planning for one’s final expenses can become an odd source of comfort, usually because of the knowledge that family members aren’t saddled with sudden liabilities. On the other hand, it can also be a reminder of one’s mortality. Either way, it’s a wise move that helps your family avoid extra stress in the future. While funds from life insurance policies might be allocated for a funeral, other alternatives exist to take care of their costs. Exploring one’s options well in advance is prudent, and you might discover funeral insurance to be a worthwhile investment.
What Is Funeral Insurance?
Coverage intended to handle funeral expenses comes in a few different forms. Funeralwise revealed that these products are sometimes called burial insurance, final expense insurance or pre-need insurance. These terms are mostly referring to plans that are funded with regular, periodic premium payments. Nevertheless, they differ in one major aspect: the person or entity who will receive their benefits after you die. Some versions are sold by funeral homes in the form of pre-need contracts and generally cover caskets, urns, most ceremonial expenses, grave markets, the preparation of the body, burial plots, flowers and hearses to transport the deceased to the cemetery. Others are offered by insurance companies and may pay beneficiaries directly, without special conditions as to how the death benefit is used. If you wish to purchase any coverage, it’s wise to understand what exactly you’re buying before you fork over any premiums or sign a contract.
Guaranteed Issue Versus Underwritten Policies
Guaranteed issue products are usually available to everyone, regardless of their health or age, and may come at higher rates because the company is assuming more risk. Some varieties come with a graded death benefit, which means that you must pay premiums for a specified amount of time before the entire amount of the policy is available to your beneficiaries. If you die prior to the end of that grading period, your coverage’s payout will be reduced. These work in a somewhat similar fashion to graded benefit whole life policies, as an article in The Nest disclosed, and are generally purchased for individuals in poor health with a limited life expectancy.
On the other hand, underwritten coverage can often price out to be cheaper than guaranteed issue products. That’s because underwritten policies generally require the completion of either a medical history questionnaire or an exam. You won’t usually be subjected to the exact same stringent standards as for life insurance policies, but there is always the potential you could end up with higher rates or be denied coverage outright. This is most often true for people with certain lifestyle and health factors, such as smoking or having conditions like heart disease or diabetes.
A Few Last Words
Before purchasing any coverage, you’ll need to know two things: how much your final expenses may be, and whether you’ll be able to pay them. Funeral coverage tends to cap out at upper limits between $25,000 and $40,000, and these funds will likely be available immediately after your death. On the other hand, life insurance policies are usually written for larger amounts and are intended to help support your family after you’re gone. Pre-need contracts are useful for the security of locking in today’s prices, but it’s vital to make sure you choose a reputable funeral home. Alternatively, funeral coverage gives you the flexibility of not being tied to a specific provider. Finally, having both life and funeral insurance may be a great way to ensure that your funeral is paid for without dipping into life insurance funds. Whatever you decide, you should carefully consider your situation before you make a purchase.
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