Understanding differences between pre-paid funerals and life insurance

There are important differences to understand between pre-paid funerals and life insurance.

Make no mistake.  Life insurance is important.  Should you die suddenly and unexpectedly, a life insurance policy could save your survivors from all kinds of financial hardships such as mortgage payments, car payments, living expenses, and even your funeral.

So, you might think, “I have life insurance.  I am all set.”  Here are some good reasons to consider adding a prepaid funeral to your family financial safeguards.

  1. Not all life insurance policies are the same. A term life insurance plan only provides coverage during a specific period of time and then expires at the end of the term.  These are common with young families that want to be insured until the kids have completed college, etc. If the term expires, you are no longer insured.

Whole life insurance does not expire like term insurance does.  As long as you pay your premiums on time and/or complete the payment plan of the policy, your survivors will receive a payout upon death.  This makes whole life policies are more expensive.  They can also become even more expensive or impossible for some people to obtain if they have health issues that are discovered during a mandatory health screening that takes place before the policy begins.

  1. Life insurance beneficiary considerations. Sometimes life insurance policies don’t have beneficiaries named.  If that is the case, the policy payout becomes part of a decedent’s estate and could wind up in probate.  If this occurs, there can be significant delays in accessing the funds.  The same thing can occur if the named beneficiary is now deceased and was never updated.
  2. Inflation considerations. Sometimes families discover that a policy that seemed like a lot of money when the policy originated, has not kept pace with inflation.  Depending on the choices one makes for a funeral service, a $5,000 or $10,000 policy might not cover the full cost of a funeral and all the cemetery fees even if there are no issues with probate or beneficiaries.  This could cause undue stress on a survivor’s finances if this was the case.
  3. Emotional variables. Let’s go ahead and assume that the first three considerations do not apply to your situation.  You have a large, whole life policy, paid in full, and all the beneficiaries are reviewed and updated annually.  Nothing to worry about!  Well, your family will still have to make decisions about a service type, choose a casket or urn, find a cemetery, and work through numerous details with a funeral director.  This is not only an emotional hardship.  It can cause a family to overspend because of their emotions.  The money is there. Let’s get dad the nice casket. Multiply numerous decisions like these, in a short period of time, without the benefit of mental clarity and it’s easy for a family to make expensive choices they later regret.  It is also not uncommon for families to quarrel over some of these decisions which adds even more stress to their grief.
  4. Why Pre-paid funerals make sense. Having life insurance and a pre-paid funeral is the best plan.  A prepaid funeral usually has all the decisions made for the survivors.  These can be changed, but the work and decision making is mostly done.  Pre-paid funerals often had choices made like casket color, scripture selections, and music.  Emotional overspending and quarrels are gone.

Pre-paid funerals have a named beneficiary.  The beneficiary is usually the funeral home where the selections were made and where the funeral will take place.  Money put into a pre-paid funeral remains yours until the death occurs.  The beneficiary can be changed by you at any time.

Another valuable benefit of a pre-paid funeral compared to any kind of life insurance is that inflation is eliminated.  When you pre-arrange your funeral and pay for it in advance you pay for everything at today’s price and that’s it.  The price of your funeral will be guaranteed.  There are no health checkups or medical clearances needed in order to pre-pay a funeral either.

As you can see, adding a pre-paid funeral to your family financial plan makes a lot of sense.  A prepaid funeral can be put on an installment plan just like life insurance so that it will fit comfortably within your budget.

Schedule an appointment today to see your choices and have your questions answered by our friendly helpful staff.

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