Funeral insurance, sometimes called burial insurance or end of life insurance, is a type of life insurance designed to pay expenses after the death of the insured individual. The policyholder can use the policy as he or she would during life. This insurance protects the family from the financial hardship that may result if the insured dies prematurely. There are many advantages of purchasing funeral insurance.
Funeral plans provide immediate financial support to the family of the insured after the death of the insured. Whereas other policies may provide coverage only for the pre-need periods, funeral insurance plans provide coverage throughout the life of the policy. The primary advantage of pre-need policies is that they pay the expenses for expenses not covered by some other type of policy such as accidental death, dismemberment, and dismembered body. Most policies pay the cost of cremation costs, even if it has been determined that the cremation costs will be more than the remaining life insurance amount. Most policies also provide coverage for funeral expenses beyond the pre-need period.
Premium payments on funeral insurance plans are usually based on several factors. One of these factors is the age of the person insured. Insurance companies base the amount of premiums on the average age of people who die within a certain range of years. In general, the higher the average age of those who die, the greater the amount of premiums.
Some companies also base their premium rates on the level of coverage provided. Full reimbursement, full indemnity, and basic funeral arrangements all have different premiums from company to company. Policies intended for families with little financial means often have more expensive premiums because of the higher risk of payout. In addition, if the insured party is under the age of 65, the policy may be considered a catastrophic policy, and its premiums may be significantly higher.
Policies that are designed as whole life or term life plans are considered more expensive compared to other types of funeral insurance plans. Whole life plans guarantee a payout to the beneficiary and the policyholder for the lifetime of the policy. This is a permanent fixture in most funeral arrangements. Unlike pre-need insurance plans, the insured party is not allowed to change the policy in any way during his lifetime. Changing premiums or terminologies within the policy is prohibited.
Pre-need insurance policies are designed to cover funeral costs until the family can establish its own budget for the funeral service. Under these plans, the insured pays premiums that are predetermined by the insurer. As such, the family must take care of expenses like the purchase of the casket, burial and memorial costs, and any other related fees and expenses before the policy comes into force. When these pre-need insurance policies expire, the premiums become payable by the insured.
The benefits of final expense policies are not limited to families with little financial means. In fact, families with modest income can even obtain full coverage policies for their burial. It is important to note, however, that if a person dies during the coverage period, his survivors will only receive payment if the burial was paid for in full. Also, a surviving spouse will only receive payment if the insured person’s burial was covered by the final expense policy.
Many states allow the families to choose either type of policy, depending on their families’ financial status. With full refund plans, there are no deductibles to be met and there is no cap on the total amount paid or death benefit amount. A pre-need funeral costs policy allows the family to cover the funeral costs until the pre-need amount is attained. These are very good options available to many families.