Do You Need Funeral Expense Insurance?

Posted on April 24, 2018

Even though it may be scary or unsettling to think about it, we're all going to die. And, here's the more unsettling news: even dying will cost you money!

Because of that, it's important to plan ahead for the end of your life. Doing this will give you a peace of mind. It will also alleviate some of the pressure from your loved ones during a vulnerable time.

If you're on the fence about whether or not you need funeral expense insurance (or you have no idea what it even is), we're here to outline it out for you.

Let's get into it!

What is Funeral Expense Insurance?

Funeral expense insurance can help offset end-of-life fees and funeral costs. It helps pay for all the expenses (and they can add up) that happen when you die.

After all, funerals can be expensive, ranging anywhere between $5000-$15000 with cremation averaging between $600-$5000.

Currently, Canada offers three different policies.

Standard Life Insurance Policy

Commonly known as either term life insurance or traditional life insurance, this can include funeral expense insurance, as well. In order to qualify, all potential customers must complete a detailed health questionnaire and take a medical exam.

If you don't have any pre-existing health conditions, are in generally good health, this is typically the recommended option.

With that said, insurance companies can deny you, as they are medically underwriting your plan.

Simplified Issue Life Insurance

This policy is similar to the standard life insurance policy. You will need to complete a health and medical questionnaire. However, you do not need to take a medical exam to get a quote.

Not everyone will be eligible for coverage. If you have poor health or poor lifestyle factors, you may not qualify for an insurance premium.

Guaranteed Issue Life Insurance

This form of insurance does not require a health questionnaire or a medical exam. That means anyone can apply and qualify for this kind of policy.

With that said, this tends to be the most expensive form of funeral expense insurance. Most providers also carry a 2 or 3-year probationary period. That means if you die within two years of purchasing the plan, the claim will not be paid.

How Much Coverage Does One Need?

The coverage you need varies on a variety of preferences such as:

  • • Casket or cremation.
  • • Having a viewing available.
  • • Broadcasting services for those who cannot attend.
  • • Flower selection.
  • • Refreshments and beverages for guests.
  • • Headstone or tombstone options.

Finally, you may have other end-of-life expenses to consider, such as medical bills, legal costs, and credit card bills.

It may feel somewhat morbid to think about how you want your loved ones to take care of your body after you die. However, it's a loving gift to plan ahead. You don't want your family and friends scrambling to make a last-minute (costly!) decision based on what they think you would have wanted.

To adequately determine your needed coverage, it's a good idea to simply plan and price out your preferred funeral. Once you have a ballpark number, it's much easier to select the coverage and premium you need.

You can buy policies at a very low rate, setting premiums at $1000 if needed. For those opting for cremation, this makes your funeral expense insurance incredibly cheap.

Does Life Insurance Cover Funeral Costs?

The purpose of having life insurance is to provide financial security for your designated survivors.

If your family relies on your income, then life insurance can absolutely help subsidize the costs of the funeral. With that said, life insurance typically comes in larger coverage amounts than the $25,000-$40,000 limits for funeral insurance.

For that reason, some people choose to purchase both kinds of policies.

What About Pre-Need or Prepaid Funerals?

It is possible to plan your own funeral service and pay it upfront in cash or with a payment plan.

Each individual funeral home provides its own preneed policies. You can arrange for the kind of services and casket you want. The home will put your money in a designated trust fund, or it will buy an insurance policy naming itself as the beneficiary.

This process eliminates the guesswork from your loved ones, and it eliminates people fighting over who has to pay for what.

However, there are some expenses that may not be covered, and it's essential that you review your terms and conditions in lengthy detail before signing anything.

For example, you want to make sure that you completely trust the funeral company handling your money. There are definitely horror stories entailing employees mismanaging your money, and that's something you absolutely want to avoid.

A few other concerns you'll want to iron out:

  • • What happens to your money if you change your mind about something?
  • • Does your money accrue interest? How much?
  • • How does the funeral home account for inflation?
  • • Will your health status impact the plan's terms?
  • • What happens if the funeral home goes out of business?
  • • What happens if you end up moving to a different state?
  • • Where does leftover money go? Do your heirs receive it?
  • • Does the insurance policy have a waiting period?

Because there can be so many loose-ended questions, this route certainly won't be for everyone.

For these reasons, it's usually easier to buy funeral expense insurance or save money in an emergency or trust fund.

Final Thoughts on Funeral Expense Insurance

Even though it may not be fun or joyful to plan for your death, it's one of the most responsible things you can do for your survivors and estate.

Interested in checking out a quote? Look up the lowest rates available today!


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