What is Preneed Funeral Insurance?

Written by Rob Pinner


What is Preneed Funeral Insurance?

Preneed funeral insurance is a type of insurance policy that covers the expenses of a funeral, burial, or cremation. This type of insurance is designed to help individuals and their loved ones prepare for end-of-life expenses and avoid financial hardship³.

Preneed insurance is used to fund a funeral service agreement between you and a funeral home. You decide every element you want included in your funeral service, which includes everything from the casket to flowers to transportation for the family.

The funeral home director totals the costs, and that amount is the basis for your Preneed insurance plan. You can either pay the amount in one installment or through monthly premiums. Upon your death, the funds are used to pay the funeral home for your funeral.

Over time, inflation will likely cause funeral costs to increase, but a funeral contract combined with a Preneed insurance plan can offset inflation for the items and services you include in your policy. Preplanning also allows you time to understand the process and make clear choices that are right for you.

You can decide if you want an in-ground burial or cremation, select a casket or urn, and even arrange for items incidental to the ceremony. Best of all, prearranging everything with a funeral home makes the entire process easier for your family.

Your wishes are spelled out clearly, so it eliminates all the guesswork. They will not need to wonder what kind of service you wanted or whether you desired a burial or cremation. Every detail will be outlined in advance, so they won’t be overwhelmed with choices while grieving.

There are many companies that offer preneed funeral insurance plans. It’s important to research and compare different plans to find one that best fits your needs.

What does an average funeral cost?

funeral cost

The average cost of a funeral can vary depending on several factors, including location, type of service, and personal preferences. According to the latest data from the National Funeral Directors Association (NFDA), the average cost of a funeral and burial is $7,848. If you get a vault — required by many cemeteries — that number rises to $9,420. The average cost of a funeral and cremation is a little lower: $6,971. These costs do not include a cemetery, monument, marker, or other things like flowers.

It’s important to note that these are average costs and the actual cost of a funeral can vary depending on individual circumstances. It’s always a good idea to research and compare prices from different funeral homes to find one that fits your budget and needs.

What is the difference between preneed insurance and burial life insurance?

Planning ahead for funeral expenses is essential to alleviate the financial burden on loved ones. Two common types of funeral expense life insurance policies are burial insurance and preneed funeral insurance.

While both serve the purpose of covering funeral costs, they have distinct differences. In this article, we will delve into the basics of each type of insurance, their benefits, costs, and considerations to help you make an informed decision.

What is burial life insurance?

Burial insurance is a whole life insurance policy designed to cover the costs of funeral or cremation expenses upon your death. Many people are unaware of the substantial expenses associated with funerals, often leading to financial hardships for families or loved ones left behind.

How does burial life insurance work?

Upon your death, the burial life insurance policy pays the death benefit directly to your chosen beneficiary. The funds can be utilized at their discretion, including covering funeral expenses and other outstanding debts such as medical bills or legal costs. Burial insurance policies typically offer death benefits ranging from $5,000 to $40,000, with the actual premium varying based on factors like age, gender, and health.

What are the benefits of burial life insurance?

Burial insurance provides flexibility by allowing the beneficiary to allocate the funds as needed. This relieves the burden of making immediate funeral decisions and may also assist in covering unexpected end-of-life expenses like medical bills or hospice care.

Things to consider before buying burial insurance

Burial insurance is suitable for those without existing life insurance coverage, individuals with limited savings, or those seeking a separate policy dedicated solely to final expenses. It can be integrated into an estate plan to manage burial and funeral expenses efficiently. However, for seniors aged 65 and above, premiums tend to be higher, and policies may include a vesting period before the death benefit is payable.

How Does Preneed Insurance Work?

Preneed funeral insurance covers predetermined expenses such as funeral home services, burial services, church fees, and funeral merchandise. The policyholder can work with their chosen funeral home to outline their desired funeral arrangements and pay for them in advance. This type of insurance can also protect against inflation by locking in today’s prices for future services and merchandise.

What are the benefits of preneed insurance?

Preneed funeral insurance relieves loved ones of the administrative burden and allows the policyholder to ensure their funeral preferences are respected. The proceeds from the policy are typically paid directly to the assigned funeral service provider upon the policyholder’s death, providing immediate coverage for expenses.

Choosing between burial life and preneed insurance

When deciding between burial insurance and preneed funeral insurance, it is essential to consider your specific needs and preferences. Burial insurance offers flexibility in fund allocation, allowing beneficiaries to cover various expenses beyond funeral costs. Preneed insurance, on the other hand, ensures that your specific funeral arrangements are followed and provides immediate payment to the funeral service provider. It’s important to speak with a licensed insurance agent to help guide you through the process.

Rob Pinner
Rob Pinner

My name is Rob Pinner and I own EasyQuotes4You. At EasyQuotes4You we aim to make your life insurance buying process a smooth and stress free transaction.  We are independent life insurance agents servicing all 50 states. I have over 15 years of experience and have focused solely on life insurance for the past 5 years. If you have any questions or comments please don’t hesitate to give us a call.

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