Many families need help paying for end-of-life expenses after a loved one’s death. Funerals and all the associated costs can get expensive quickly, with the average burial casket costing $2,000.
A traditional life insurance policy includes a death benefit, which can be used to cover funeral expenses. However, there are special types of insurance specifically designed to pay for these types of expenses.
What is pre-need life insurance?
Pre-need life insurance is a type of insurance specifically used to cover funerals, cremations and burials. Unlike traditional life insurance, pre-need insurance policies are sold through funeral homes. When the insured passes away, the funeral home uses the policy to cover the cost of a funeral, casket, cremation, embalming and other end-of-life costs.
A pre-need funeral agreement allows a person to plan their funeral while still alive so their family does not have to worry about that during the grieving process. Key decisions have already been made, and the costs of the service are already paid. Once the funeral home is notified of the death, they begin making the appropriate preparations.
Who needs pre-need life insurance?
Several groups of people can benefit from pre-need burial insurance. This type of policy can be a good fit for people who do not have life insurance and want to help their family pay for end-of-life costs. Pre-need life insurance removes the guesswork for those who think family members would struggle emotionally or financially to plan their funeral.
Pre-need insurance can also benefit people with pre-existing health conditions or do not qualify for a traditional life insurance policy. Unlike regular life insurance, physical health is not a determining factor in the approval process. Most funeral homes allow people within a certain age range to buy pre-need insurance.
How to get pre-need life insurance
The process of getting pre-need insurance is much different than buying coverage through an insurance provider. Here are the steps to purchasing pre-need burial insurance.
Contact funeral homes
The first step is to find funeral homes that offer this type of insurance and can accommodate any special requests for the burial or service since the funeral home that provides the coverage will also manage funeral arrangements after the insured person passes away.
Ask the right questions
When speaking with funeral home directors, it is important to ask certain questions, including pricing, services, cancellation policies and how to make changes to the funeral plan. Here is a list of questions to help get started:
- What services are included in the cost of my policy?
- Am I able to make changes to my funeral or burial plans?
- What happens if your funeral home goes out of business?
- What happens if I move away or die in another state?
- How soon will my funeral be planned after my death?
Get price quotes
The next step is to get price estimates. Each funeral home sets its own insurance prices, so it is a good idea to get at least three quotes to see which one offers the most value.
Choose a funeral home
Based on the quotes and services offered, choose the best funeral home, then notify the company to start the final contract agreement process.
Sign a contract
The last step is to sign a contract that outlines any pre-need plans, covered services and the monthly policy cost. The policy will take effect once the first payment is made, and a copy of the contract should be kept and made available to family members and dependents.
Pre-need vs. final expense insurance
Pre-need insurance is very different from final expense insurance. These are the main differences between pre-need burial insurance and final expense insurance:
|Pre-need insurance||Final expense insurance|
|Purchased from a funeral home||Purchased from an insurance company|
|Does not include a death benefit||Includes a death benefit|
|Money is only used to cover funeral costs||Money can be used to pay for anything|
|Funeral is pre-planned and pre-paid||Family must plan and pay for the funeral|
Alternatives to pre-need life insurance
Pre-need life insurance is a good option for some people, but it is important to consider alternatives before investing. Other options include:
- Term life insurance: Term life insurance is a type of life insurance that offers coverage for a specific period, usually between 5-30 years. A beneficiary is selected to receive the death benefit, and the money can be used to pay for funeral expenses, debt, supplemental income and more. The premiums are very affordable, and it’s possible to get a high level of coverage.
- Simplified issue life insurance: People who cannot qualify for traditional life insurance due to health or age restrictions should consider simplified issue life insurance. Instead of a medical exam, a short health questionnaire is required, and the funds in the death benefit can be used to cover funeral costs.
- Guaranteed issue life insurance: With guaranteed issue life insurance, almost every person who applies is approved for coverage. This type of policy is expensive, but there are no health qualifications or medical exams. When the insured passes away, beneficiaries can use the money to cover anything, including medical bills, hospice care or burial costs.
Frequently asked questions
How do I choose the best life insurance?
Choosing the best life insurance starts by determining personal needs. Figure out what type of policy and how much coverage is needed based on your family’s financial situation. Search for companies that offer the kind of coverage you need and compare quotes to find the best rate.
How much does pre-need insurance cost?
The cost of pre-need insurance varies. Funeral homes set their own prices, and the specifics of the funeral and burial plan will directly impact the cost of the pre-need insurance.
Do all funeral homes offer pre-need insurance?
No, not all funeral homes offer pre-need insurance. It’s best to reach several funeral homes to determine which ones offer insurance.