As the old adage goes, there are two certainties in life: death and taxes.
But the fact of our impending demise doesn't mean that everyone can afford to die. In fact, many Canadians can't, and provinces spend millions each year to ensure that they get a proper burial.
When your loved one dies, you want to send them off with dignity. Preneed funeral insurance may be exactly what you need to ensure that.
Keep reading to find out what you need to know about preneed funeral insurance and why you need a policy.
What Is Preneed Funeral Insurance?
First, let's address the most basic question: what is preneed funeral insurance?
Like other forms of funeral insurance, preneed insurance is used to pay for the costs of the funeral and burial of the policyholder.
What makes it different from other types of coverage is that you work directly with a specific funeral home rather than an insurance provider.
How Does It Work?
The premise is simple. You or your loved one go to the funeral home that you want to handle the funeral and burial. They'll price the expenses associated with the funeral you want, such as services, a casket, and so on.
Then, you take out an insurance policy through them that will cover those expenses.
The whole point is that you have to work with the funeral home with whom you originally took out the policy. If you go somewhere else, your insurance is invalid and you'll have to pay out of pocket.
The Costs and Benefits of Preneed Insurance
With that in mind, let's talk about a few pros and cons of this type of policy.
The biggest benefit of a preneed funeral policy is that your loved ones won't have to worry about making arrangements after your death.
Remember, the policy is priced based on the specific services and arrangements you wish to have for your funeral. You plan every detail of your funeral when you take out the policy.
This can significantly decrease the burden on your loved ones, especially as they mourn your loss. It can also decrease the financial burden on them since you've already paid for the associated services.
The biggest downside of a policy like this? A lack of flexibility.
When you take out a typical funeral insurance policy through your life insurance provider your policy covers the cost of a funeral — just like a preneed policy.
However, unlike preneed insurance, a funeral insurance policy through your life insurance company allows you to work with any mortuary or funeral home that suits you. This can be helpful if you move at some point before your death.
Remember, your preneed insurance only works with the specific provider. If you move away, another mortuary, cemetery, or funeral home won't recognize the policy.
The Cost of Funerals Today
So, why would you want a preneed funeral insurance policy?
If you're one of the many Canadians who can't actually afford to die, this insurance could be a lifesaver (figuratively speaking). Trouble is, many Canadians don't know what it costs to die.
Of course, figuring out these expenses is more complicated than making a simple list. Let's start by looking at funerals.
Funeral costs can vary widely depending on what you want. In general, they can include things like:
- Professional services fee
- Transfer of the remains
- Body preparation and embalming
- Funeral services, including viewing
- Transportation of the body to the cemetery
- A cemetery plot
- A grave marker
- A grave liner or vault
- Opening and closing of the grave
- Extra copies of the death certificate
- An obituary
They may also vary based on where you live. A cemetery plot or mausoleum in Toronto is significantly more expensive than in the middle of nowhere.
If you want a "good turnout" covering the essentials, you could be facing a price tag anywhere from $5,000 to $15,000.
Then, there are cremations.
A basic cremation with the bare bones essentials will generally start at $600. Cremations with a service and additional disbursements (viewing, obituary, etc.) can go up to $4,500.
Whether you get a burial or a cremation, that's a significant cost to your loved ones — one that many families aren't ready to address.
What to Know When Considering a Plan
Considering the high cost of funerals and cremations, a preneed plan can significantly reduce the financial burden on your loved ones.
That said, it's important to know what you're signing up for when you get a plan. Here are a few things to consider when you're looking into preneed insurance.
Guaranteed and Non-Guaranteed Services
One of the major considerations when looking at a policy is the difference between guaranteed and non-guaranteed services.
Let's say you have the good fortune of living quite a while after you take out your policy. The cost of the services you requested for your funeral may increase by the time you die.
If it's a guaranteed service, your loved ones won't need to make up the difference as these services will always be covered by funeral homes.
If, on the other hand, it's a non-guaranteed service, your family may be responsible for making up the difference, so it's important to know how your plan handles non-guaranteed services.
Questions to Ask
With that in mind, here are a few essential questions to ask when looking into a preneed funeral insurance policy:
- What is included in the cost of the policy?
- How do you handle guaranteed and non-guaranteed services?
- What happens to the money once you've paid for the policy?
- Are you protected if the funeral home goes out of business?
- Can you cancel the plan and get a full refund?
- What happens if you move or die while away from home?
Remember, these policies can help relieve the financial burden on your loved ones, but they're still not cheap. That's why it's important to make sure you're getting the policy you want.
Do You Need Preneed Funeral Insurance?
Now that you know how preneed funeral insurance works, does it sound like the right fit for you?
If so, shop for a policy the smart way. We can help you find the lowest insurance rates in Canada without unnecessary fuss. Click here to get a quote on funeral expense insurance.