Search for the “best funeral insurance” plans, and you’ll get plenty of results. Most of these results will talk about policies offered by specific insurance companies. There are so many options; how do you choose? Well, you start by creating a funeral plan. Your funeral plan is the key to finding the best funeral insurance policy.
Here’s Why You Need a Funeral Plan
With any type of insurance policy you buy, you need to know how much coverage you will need. If you are buying homeowners insurance, you must know the value of your home and possessions. Likewise, when you buy a funeral insurance policy, you must know how much your funeral will cost. You do that by creating a funeral plan and determining what it will cost to carry it out. The best agents will help you create a funeral plan with an estimated cost before they offer you a policy.
Remember that your funeral plan is not just the basis for purchasing a funeral insurance policy. It is a plan you leave behind for your family to fulfill your wishes. It serves as a guide for them when they have many decisions to make at a difficult time.
Once you have a funeral plan, you can consider your options for a funeral insurance policy.
What Does Funeral Insurance Cover?
You’ll see various terms when researching for insurance to cover end-of-life expenses, including funeral, burial, and final expense insurance. People often use these terms interchangeably. All mean essentially the same thing–a specialized insurance policy to cover funeral, burial, and other final expenses such as:
- Funeral service: This includes costs of the services of a funeral director and staff, facilities for ceremonies and a visitation, casket, embalming, transportation, and officiant fees.
- Burial: Includes cemetery plot costs, grave opening and closing, and headstone expenses.
- Cremation: This covers the cremation process and the urn if desired.
- Related expenses: These may include flowers, video streaming, death certificates, and obituary.
- Other final expenses: May include medical bills, legal fees, and other expenses of wrapping up one’s final affairs.
These costs can vary widely. That’s why you need a funeral plan to determine the expected costs. Let’s look at the types of policies and the factors you should consider when evaluating them.
What are the Types of Funeral Insurance?
While funeral, burial, and final expense insurance all refer to insurance designed to cover funeral expenses, there are significant differences in the features of the policies. There are two basic types of funeral insurance policies: Preneed Insurance and Final Expense Insurance. For the most part, policies promoted as burial insurance are actually final expense insurance policies.
PRENEED VERSUS FINAL EXPENSE: QUICK LOOK
| PRENEED POLICY | FINAL EXPENSE POLICY | |
| Premiums | Fixed payment amounts paid in a single premium or in 1, 3, 5 or 10 year payment plans. When paid in full, the policy stays in force until the funeral. | Choose a policy with level premiums paid monthly, quarterly, or annually. Premium payments must be made to keep the policy in force. |
| Death Benefit | Most preneed policies have a growth factor over time. Guaranteed coverage may be available – see Funeral Plan below. | May not cover all the costs due to rising prices – see Funeral Plan below. |
| Health Considerations | No medical exam, but typically a few health questions. If there are health issues, the death benefit will phase in over 2 to 3 years. | Generally, no medical exam, but typically a few health questions. If there are health issues, you can buy a Guaranteed Issue policy. The death benefit for GI policies phase in over 2 to 3 years. |
| Funeral Plan | Most preneed policies are attached to a prearranged funeral contract with a funeral home. However, unassigned policies are available. A funeral home may guarantee that the funeral cost is covered by the policy regardless of the stated death benefit. | Final expense policies are not attached to a prearranged funeral contract. There is no guarantee that the death benefit will cover the funeral cost since funeral costs tend to rise over time. |
| Payout Flexibility | If the policy is attached to a prearranged funeral contract, the payout goes to the funeral home. | The payout goes to the policy beneficiaries. They determine how the funds are used. |
| Cost | Cost varies by policy. Premium payments for preneed policies are typically higher than final expense policies, but no further payments are required once the policy is paid in full. | Final expense premiums are typically lower than preneed policies. Premiums for guaranteed issue policies are higher than those without medical issues. Payments must continue to keep the policy in force. |
| Control Over Wishes | More. Having an attached funeral plan ensures that the policy holder’s wishes are honored. | Less. If there is no defined funeral plan the policy holder has less control over how death benefit is used. |
How Much Does Funeral or Burial Insurance Cost?
Funeral costs vary widely based on the type of funeral arrangements. Consequently, the cost of an insurance policy to cover those costs can also vary widely. The cost also varies by the type of funeral insurance purchased.
For example, the monthly premium for a preneed policy will be more than a final expense policy. However, preneed policies can be paid in full. The death benefit grows over time, and the funeral cost can be guaranteed. A final expense policy must be paid continuously to stay in force. The funeral cost is not guaranteed. Which one is better for you depends on your unique situation and financial considerations. It is not strictly a cost comparison decision.
To learn more, check out our article on How to Find the Best Policy.
What is the Best Company For Funeral / Burial Insurance?
You want a policy from a top-rated insurance company. AM Best is an international credit agency specializing in the insurance industry. Their ratings are widely considered to be a good measure of an insurance company. According to AM Best, ratings of A++ or A+ are Superior, A or A- are Excellent, and B++ is Very Good. Many insurance companies have earned these top ratings, but their policies may differ.
How do you decide what type of funeral insurance is best for you?
The best funeral insurance is the one that fits your unique needs. With so many options available, it is difficult to narrow your choices and find the right policy. Fortunately, there are experts to help you through the process. Try our Funeral Insurance Finder to create a simple funeral plan and get a free quote as well as advice from our Preplanning Specialists.
Whatever funeral insurance policy you choose, you’ll get peace of mind from knowing that your final expenses will be covered when the time comes. You’ll know that your loved ones can begin their journey through grief without added financial burden.