Will Funeral Expenses be Covered by Life Insurance?
Many unexpected financial obligations remain to be handled after a loved one passes away, such as paying for the funeral if no initial plans were made.
Although nearly 60% of Americans have life insurance, you may not always be able to pay for funeral costs using the money you would get as a surviving family member. Even if your loved one had insurance, you might not get the money in time, or it might not cover the total cost, forcing you to pay out of pocket for funeral expenses.
We explain why a prepaid funeral policy might be a better option for covering expenses to avoid this.
Life Insurance: What Is It?
A life insurance policy is an agreement with an insurance provider in which you pay premiums over time, with payouts made to your loved ones in the event of your death. This payment, referred to as a death benefit, is to replace the lost income and assist in paying off debts and taxes, not necessarily to cover funeral costs.
The policyholder’s demands and preferences are considered while selecting the type of life insurance. In general, there are two forms of life insurance, including:
Term: This policy is intended to offer monetary security for a set amount of time. Term life insurance is often less expensive than permanent life insurance. Still, it only covers you for as long as you need it to support your beneficiaries. However, the policy ends when the term is over.
Permanent: This policy is intended to offer lifelong protection. A permanent life insurance policy typically requires more significant premium payments than term life insurance due to the lifetime coverage period.
Families frequently assume that life insurance benefits will be used to cover funeral costs. Still, there can sometimes be several unforeseen issues.
If you have life insurance, your family must pay the funeral home in full at the time of the funeral. However, the life insurance company may not deliver the death claim for several weeks or months. The payment date may be extended if there are delays in submitting a claim or gathering the necessary paperwork. During an already trying period, this makes loved ones frustrated and financially burdened.
Note that some life insurance policies also provide funeral insurance (called a final expense plan). This extra purchase provides money to assist your beneficiary in covering funeral costs. This plan’s benefit is that, in contrast to other life insurance policies, it doesn’t call for a medical examination. As a result, many people can qualify, increasing prices.
A Prepaid Funeral Policy: What Is It?
The purpose of prepaid funeral coverage is to cover the cost of the funeral. The services you choose are secured at today’s prices by making final arrangements in advance, protecting you and your family from rising funeral costs.
Planning provides flexible payment options. You can spread out payments to match your budget rather than a sizable lump sum upfront, safeguarding surviving family members from having to assume responsibility for this debt on their own.
The price you agreed to at the original prearrangement is final because, according to Ohio law, all prepared plans are completely transferable at any time. And in most circumstances, if you pass away unexpectedly before making all of your payments, the insurance will take care of the outstanding sum.
Other Reasons I Should Think About a Prepaid Funeral Policy
Beyond the practical benefits, planning gives you and your family peace of mind. Having a plan in place minimizes the strain on loved ones and allows you to express your preferences in writing. Additionally, it will enable you to reflect on how you want people to remember you.
When you get prepaid funeral coverage, you work with an advisor to write down your last wishes. Together, the two of you can create a unique memorial that honors your chosen funeral arrangements, such as:
You can choose between cremation and burial.
Your preferred service is a get-together, visitation, funeral, or memorial service.
Which things do you want? (ex: casket, headstone, cremation urn).
Individual touches (ex: video tribute or photo display).
This ensures that your final desires are honored and frees up your family from having to handle the details alone, allowing them to concentrate on spending quality time together during this terrible time.