Funeral Insurance Frequently Asked Questions
Funeral insurance, burial insurance, and final expense insurance are all names for small life insurance policies ($5,000-$40,000). These policies cover the cost of final expenses such as funeral products and services. For more details on these specialized policies, visit our funeral insurance pages, burial insurance, and final expense insurance.
PreNeed insurance is similar to funeral insurance, but they are tied to a preneed contract with a funeral service provider. A preneed contract is a statement of goods and services contract you sign with a funeral service provider when purchasing preneed funeral insurance. It itemizes the specific funeral services and products you selected for your funeral. Visit our Preneed Page for more information.
The most important benefit of funeral insurance is financial security for your family. According to the 2013 General Price List Survey by the National Funeral Directors Association, the average cost of a traditional funeral is over $8,343. This number doesn’t even include cemetery costs. A traditional funeral can easily cost $10,000 or more. Covering funeral costs is a heavy financial burden for most people, especially if it comes unexpectedly and at a stressful time. Having a funeral insurance policy protects your family against this financial hardship. It also avoids the added stress of paying for final expenses while dealing with their grief.
The value of your policy will depend on the type of funeral service and burial you anticipate having. Most funeral insurance policies range from $5,000-$40,000. A small, simple service or cremation will cost less than a grander service so you won’t need as large a policy. The best way to estimate how much money you need to have available for funeral costs is by preplanning. We have several free online tools that can help you determine the cost of the type of funeral service you have in mind. (Click here to learn more about funeral planning.)
You might decide to increase the policy amount to allow for additional funeral costs or cover other final expenses. Some people choose to cover credit card bills, rent, utilities, and other outstanding items that are due at the time of your funeral. You could also reduce the policy amount if you only wish to insure only a portion of your estimated funeral costs and minimize your premium payments. For help estimating what your funeral costs might be, please take advantage of our Wise Planning System.
The cost of funeral insurance depends on factors such as age, health, how much coverage you request, and the type of policy you choose. A guaranteed issue policy will not take health into consideration so the cost may be somewhat higher than for a medically underwritten policy. If you select an underwritten policy, the price depends on your unique situation. For example, the premiums for someone who is age 55 and does not smoke will likely be lower than for a 70-year old smoker. The best way to find out exactly how much your premiums will be is to request a quote. You are under absolutely no obligation but will be able to find out for certain if funeral insurance is something that fits within your budget. Click here to get an instant quote.
Once the holder of a burial insurance policy dies, the beneficiaries can use the funds in any way they desire. The funds are usually used as intended, but you should choose your beneficiary carefully. Make sure that the people you want to take care of your final farewell know what you want. If you have opted for a preneed contract rather than straight funeral insurance, the proceeds will go directly to the funeral home where you have made your arrangements.
It’s important to remember that funeral insurance is highly regulated, so it’s hard to score “deals.” If you find something that looks too good to be true, you probably need to look at it more closely. It probably isn’t what you want or need. You can use strategies to lower your premiums, such as scaling back your service, locking in today’s prices through a preneed contract, or choosing term over whole life. We highly recommend that you create a funeral plan to help you think about what products and services you need. You may want to visit our page on funeral costs to learn more about how much money you need to set aside.
You can purchase a funeral insurance policy through an insurance agent or a funeral service provider such as a funeral home. Some insurance companies sell the policies directly as well. Many people prefer to use an agent since it gives them a more personalized way to get customer service. There are many online sources for funeral insurance. This website, for example, offers a portal to policies provided by Gerber Life and Mutual of Omaha. We hope that you will consider requesting a quote here since we believe the policies provided by these companies are among the best out there. Click here to get an instant quote.
You may be able to do the whole process online, but it is always best to talk with an agent to ask questions, get clarifications, and make sure that you understand exactly what you are buying. One good strategy is to request a quote online and then talk with an agent. This way, you can be confident you are getting the best policy for you at the best price. An independent agent (also called a broker) is typically self-employed and represents a variety of companies. An exclusive agent represents only one company and may be an employee of the company they represent.
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The type of insurance that is right for you will depend on your circumstances. The goal is to have a policy that will provide enough money to fund your funeral and burial. Most people find that a relatively small whole life policy will suit their needs. It is always a good idea to consult your financial advisor to get a definitive answer on what the outlook for your end-of-life situation will be. To learn more about the types of funeral insurance available, visit our funeral insurance page.
The term “Whole Life” generally refers to “Ordinary Whole Life,” an insurance policy that will stay in force for the length of your life as long as you pay the premiums. Most whole life funeral insurance policies are “ordinary” whole life. A “Term” life insurance policy runs for a selected time period, typically 1, 5, 10, 15, 20, or 30 years. It is particularly important to be aware of the type of policy you have since the beneficiary payment will take place only if the insured dies within the specified period. If you are buying a term policy to cover funeral costs and die after the expiration period, there will be no funds to cover funeral expenses.
Many people choose to purchase funeral insurance as a supplement to life insurance. Funeral insurance will protect your estate from being depleted by your final expenses. One key advantage of funeral insurance is that it pays out more quickly than regular life insurance. Even if you have a sizable estate or significant life insurance, your loved ones may not have the cash to cover your funeral expenses. Remember, most funeral services companies require that you pay at the time of service.
No. Health insurance and Medicare are specifically for health coverage; they do not pay for funeral expenses. If you are looking for insurance coverage, you need some type of life insurance policy, such as funeral insurance, that pays out upon your death.
What insurance company to buy from is an essential question since the wrong choice can leave you empty-handed. The short answer is that you should only buy from a top-rated company. One good source for insurance company ratings is A.M. Best. This highly regarded company offers independent analysis regarding company stability and the ability to meet financial obligations. If you choose an insurance company with an A.M. Best top rating (AA through A), you can feel reasonably confident that you are making a good choice. Once you have identified reliable companies, the next step is to request quotes.
How you apply depends on the company from which you are buying. For some, you can apply by phone or hard copy. For others, you can apply online. Generally, you will request a no-obligation quote and wait for a reply. If you are applying to multiple companies, you can compare quotes once you receive them and then move forward with the policy you decide is the best fit. It is generally simple and quick. We recommend that you start by requesting a no-obligation quote from our top-rated companies (click here to get started.)
If you purchase a policy with “level premiums,” your premiums will not change over the policy’s life. Price is based on the policy value, your age, and health at the time of purchase. (The “premium” is the price you pay for your life insurance policy. You make the payments monthly or annually. Prices vary between insurers and types of policies, so be sure you know what you are buying and from which company.)
In most cases, your policy cannot be canceled unless you stop paying your premiums. If you don’t pay for any reason, then the policy would automatically terminate. Keep in mind that if you stop paying, then there will be no payout should you die.
If you have a whole life funeral insurance policy and you pay your premiums on time, your policy will last until you pass away. At your death, the beneficiary will receive a cash payout of the value of the policy. If you have a term funeral insurance policy and pass away before the term’s expiration, your beneficiary will receive a cash payout upon your death. If the term passes before your death, then, unfortunately, there will be no payout. A burial insurance policy can only be canceled, in nearly all cases, if you stop paying your monthly premiums.
Your beneficiary is the person or persons you designate as the recipient of a life insurance claim proceeds. In the case of funeral insurance, the person you designate as the beneficiary can decide not to use the funds to pay for the funeral, so be sure to select a person you trust to carry out your wishes. You should also make sure that whoever you choose is fully aware of your wishes. Remember to review your beneficiary from time-to-time so that you can make adjustments if your circumstances change.
“Graded” refers to the reduced death benefit payable if the policyholder’s death occurs within the early years of the policy. For example, a policy may only pay out the total of premiums paid if death occurs within 1 year. The death benefit will be an increasing percentage of the face amount until the policy matures to usually the third year.
Stepped premiums are insurance premiums that are recalculated (generally once a year) to determine if the level of risk warrants a higher (or lower) premium. Age is generally the determining factor. On the other hand, level premiums are insurance premiums that do not change from month-to-month as you get older but are locked in at a specific rate.
The term “Funeral Service Provider” generally refers to a funeral home. It may also refer to a funeral director, crematory, or other professionals who provide services to the funeral industry. For help selecting a funeral service provider, visit our Find A Provider Tool.
With guaranteed issue policies, almost everyone is accepted regardless of age or medical history. You sometimes hear these policies called “Guaranteed Acceptance Life Insurance.” These policies are generally more expensive than underwritten policies. The policy may also be “graded.” With an underwritten policy, the insurance company evaluates your medical history to determine if it will accept the policy. Medical underwriting may also be used to determine the price of the policy.
We think that a step-by-step approach is the best way to find a funeral insurance policy that will meet your needs. Watch our short video to learn about these steps.