The cost of a funeral with a burial increased by 6.6% between 2016 and 2021, and the cost of a funeral with a cremation increased by more than 11% during the same period. For many families, being faced with costs in excess of $7,000 after the death of a loved one would be incredibly stressful. Funeral insurance, often referred to as final expense insurance, takes away the burden of dealing with those costs. Some policies even allow the policyholder to nominate a funeral home and specify their burial preferences in advance.
This guide looks at the different types of funeral insurance and their pros and cons. It discusses who might benefit from having funeral insurance and when it’s worth taking out a policy.
What Are the Benefits of Burial Insurance?
Funeral insurance is an affordable form of life insurance that covers the cost of the burial ceremony, including the casket, plot, flowers and other expenses. Burial insurance can be paid out to a loved one, allowing them to make the funeral arrangements themselves, or to a nominated funeral home that will carry out the wishes of the deceased as described in the policy.
There are several reasons a person might choose to take out funeral insurance:
- Someone may nominate a funeral home as part of a broader life insurance policy.
- A person who struggles to get life insurance due to existing medical conditions might choose burial insurance instead.
- Burial insurance can be more affordable than life insurance for many individuals.
- Some burial insurance policies offer guaranteed acceptance, making them a simple option.
Some individuals feel life insurance doesn’t make sense for their household. This may be true if a couple owns their home, their children are fully grown (or their college expenses are already covered), and their spouse’s future is secure through other investments or assets laid out in a will. In this case, rather than taking out life insurance, they might prefer a simple burial policy that costs less and will help cover the cost of their funeral, taking some stress away from their partner in a trying time.
Pros and Cons of Funeral Insurance
The key advantages of funeral insurance are that this kind of policy is usually quite inexpensive, and it’s possible to take out a policy without having to go through a medical checkup. A policyholder can decide whether they want the death benefit to be paid to a loved one or to go to a nominated funeral home that will manage their final arrangements for them.
However, funeral insurance is not always cheaper than life insurance. Someone who is generally healthy may be able to get a life insurance policy worth $100,000 for a similar fee to a much more modest funeral insurance plan, even if they’ve reached or are approaching retirement age. Life insurance payouts can be spent on anything the beneficiary wishes, giving them more flexibility. This means it’s worth it for a senior to shop around before deciding what kind of policy to take out.
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Pros
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Cons
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Price
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It’s more affordable than life insurance.
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A younger person may find life insurance better value for money.
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Flexibility
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It can be paid to a loved one or direct to a funeral home.
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The policyholder must decide how they want their funeral performed in advance.
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Health Checkup
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Many policies do not require a medical checkup.
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The payout may be reduced if the policyholder dies within 2-3 years of taking out the policy.
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Coverage
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It covers final expenses (burial/cremation, and in some cases, legal or medical fees) only.
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The policy doesn’t cover ongoing expenses for the beneficiary.
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Bottom Line: Is It Worth Getting Funeral Insurance?
Funeral insurance is a good option for low-income households and for those who are worried about how their loved ones would cover the cost of a burial in the event of their death. Someone who has clear wishes about how they would like their burial ceremony to be conducted might opt for a pre-need plan that allows them to make all of their burial arrangements in advance.
Funeral insurance can be a cost-effective choice for those who have preexisting health conditions that might disqualify them from more traditional life insurance. However, those who do qualify for life insurance might find such a policy offers better value for money, with similar monthly premiums and a much larger payout.
It’s a good idea for seniors to discuss their needs with a financial planner or advisor and read some reviews of the best funeral insurance policies so they understand their options. Having a conversation with loved ones about final wishes and arrangements may also be beneficial.
FAQs
What are the different types of funeral insurance?
There are two main types of funeral insurance. They are standard funeral insurance, which is paid to loved ones in the event of the beneficiaries’ death, and pre-need insurance. With a pre-need policy, the policyholder nominates a funeral home that will conduct their burial wishes for them, and the payout for the policy will go directly to that home.
Are you guaranteed to get accepted for burial insurance?
Some burial insurance policies ask the applicant to fill out a health questionnaire and may disqualify applicants who answer yes to certain questions. Other policies provide guaranteed acceptance. These policies may restrict the payout amount offered to someone who dies of a preexisting health condition within the first couple of years of taking out the policy.
