Death is an inevitable traumatic event that can be extremely emotional and stressful for those left behind.
Even so, making a solid plan can help alleviate part of the financial stress on your loved ones and friends when you pass away. That’s why it is necessary to take up funeral insurance.
As the name suggests, funeral insurance is a form of permanent life policy that pays a specified amount of money to designated beneficiaries in the event of a policyholder’s death.
Although the amount comes with no strings attached, the funeral insurance payout is mainly intended to cover costs associated with the funeral of the insured.
There are many practical reasons why anyone should obtain coverage to defray their end-of-life expenses.
If you’re contemplating whether or not to purchase funeral insurance, here are the practical reasons and benefits of funeral insurance policies.
Below are the 14 major benefits of funeral insurance
Funeral insurance eases the financial burden on your loved ones.
Funeral insurance is perfect for exactly that – covering funeral expenses.
A dignified funeral is a non-negotiable expense, and your family, as well as friends, view the responsibility of laying you to rest as their last chance to express how they loved you.
Considering that a decent funeral can be very costly and death can sometimes come when least expected, it can be difficult for your loved ones to manage the financial burden of your funeral.
The average cost of a funeral getting close to $10,000, your family and friends may be forced to spend more than they can afford if you pass away without having a burial policy.
One of the key benefits and, of course, the biggest reason for buying a funeral insurance policy is to minimize the financial impact of unexpected death on the surviving members of your loved ones.
The payout of your funeral insurance will help your loved ones cover your funeral and other end-of-life expenses.
Precisely, purchasing a funeral insurance policy gives your and your family members peace of mind knowing that funding will be available to cover expenses associated with your burial.
Covering the whole family.
Funeral insurance policies are mainly designed to cover the insured’s end-of-life expenses. But there is much more to these policies.
When it comes to funeral insurance policies, you have the option to customize your policy to meet your needs.
Most providers of funeral policies allow you to add other family members to your policy and pay a small amount above your policy premiums towards the funeral coverage of the whole family.
This eliminates the need for your loved ones to buy separate policies, which can be cost-effective.
With this arrangement, your insurer will pay out a lump sum should one of your family members predecease you, even when they never had individual policies.
This makes it easy to bury your loved ones with dignity without adding unnecessary pressure on your personal finances.
Whether you purchase a family funeral insurance or an ordinary policy and customize it with riders, you will find the extra dollars worth it.
Doesn’t require a medical exam.
For many years, people of different social classes have used life insurance policies to defray expenses associated with their funerals.
While there are many types of life insurance policies, funeral insurance, also known as final expense insurance or burial insurance, is the commonly used policy by people who want to keep their families from paying for their funeral.
One exciting thing about this form of insurance is that it has no medical qualification. In fact, funeral policies are often marketed to seniors who are more likely to have less than perfect health.
The lack of medical examination is probably because these policies usually provide a low face amount.
Overall, the lack of in-person medical exams makes funeral insurance policies easy and somewhat straightforward to apply.
Seniors with poor health can qualify and have their applications approved after answering a few questions relating to their health and lifestyle.
Even better, some life insurance carriers offer funeral insurance products that do not require the applicant to take a medical exam or answer any health questions. These policies make for a great resort for seniors looking to purchase policies but are sickly.
If the carrier you are considering requires you to be in pristine health while applying for a funeral policy, run away. There are many companies out there that accept applicants with poor health.
You should be able to obtain a policy even when you have serious conditions like heart disease, AIDS, ARC, lung disease, kidney disease, dementia, and Alzheimer’s disease. Some accept applicants who are already bedridden or confined in a nursing home.
Applying for funeral insurance is super easy.
Compared to other life insurance policies, funeral policies are very easy to apply. For the most part, seniors can complete the application for a policy online or through a call.
Most funeral insurance providers have made it easier to get quotes and apply for policies. When comparing offerings from different providers, you can easily get quotes and see which provider is right for you.
You should, however, note that you will be required to share some basic information in exchange for a quote.
It is common for life insurance companies to ask you about your full name, phone number, email address, age, gender, and state of residence. Anything further is questionable.
Although many seniors do not have much to do as they approach their ripe age, the absence of medical exams and the easy application process save time.
Affordable, and premiums never change.
While many people are tempted to think that life insurance is expensive, the truth is that not all forms of life policies are expensive.
Funeral policies are one of the forms of life insurance that stay on lower to medium-high end as far as price is concerned, but depending on several factors.
If you are buying a policy from a reputable carrier like Mutual of Omaha, you can be sure to save a significant amount of cash. On average, policy rates range from $20 to $200, which is affordable for most seniors.
The exact price of your policy will depend on a number of factors, including your age, gender, state, and overall health.
When you buy a policy, as long as you are dealing with a reputable funeral insurance provider, you will also get a “price lock” guarantee.
Price Lock is a feature that assures policyholders that rates will never increase for any reason. This makes life easy and smooth for seniors on a fixed income as they can easily integrate their premiums into their budgets.
Overall, considering that the average rates for $10,000 coverage are between $40 and $50, many seniors won’t experience a significant challenge settling their monthly premiums. The rates can be even cheaper if you buy your policy before getting too old.
Provides lifetime coverage.
Funeral insurance is a form of permanent life insurance, meaning it stays in force throughout the insured’s lifetime as long as the insured pays the premium on time. As such, when you buy a policy to defray your end-of-life expenses, it will never expire.
Even better, coverage amounts of final expense policies never fluctuate even when the economy is badly hit by inflation. With a policy, you and your loved ones can have peace knowing that the carrier of your policy will make funding available to cover your funeral.
Concerning the coverage amount, keep in mind that if you pass away while having an outstanding loan borrowed against your policy’s cash value, the outstanding loan amount will be deducted from the policy’s payout, reducing the amount payable to your beneficiaries.
Builds cash value.
This is one of the biggest benefits of purchasing a final expense insurance policy. Unlike term policies, pretty all funeral insurance policies accumulate cash value over time.
When you make your monthly payments, your insurer allocates a portion of each premium to your cash-value account. This account grows to a significant amount that you can use while alive. Interestingly, the accumulated cash can be used in various ways.
While some carriers may have restrictions on how policyholders can use their policy’s accumulated cash value, for the most part, you should be able to use the amount to pay premiums or borrow against it.
Some insurers allow you to withdraw the build-up cash value and use it for any purpose.
If you are borrowing a lean against your policy’s cash value, first think about the financial effect it may have on your loved ones should you pass on repaying the loan, as the outstanding loan amount will be deducted from the policy’s payout.
Funeral benefits can be used for any purpose.
As the name suggests, funeral insurance is primarily designed to cover funeral costs and other associated expenses.
In fact, insurers only pay out death benefits immediately after the insured’s death to help ensure that the money serves the intended purpose. But is that all? What if all the policy’s payout isn’t used?
While funeral insurance payouts are meant to take care of costs associated with the insured’s funeral, the beneficiaries can use the money to fund just about anything.
In other words, your beneficiary is responsible for deciding what to do with the payouts. That’s why you should ensure you pick a responsible and ethical beneficiary with some financial discipline.
Payouts of a funeral insurance policy come with no strings attached, so the beneficiary could use them to fund whatever they wish.
Even so, many people use the payouts to cover end-of-life expenses, medical bills, hospice care, and payment of debts.
After laying the late insured to rest, beneficiaries can use the money for any purpose, including paying tuition for dependents, buying a new home, funding a wedding, or even donating to a charity.
While this can be a massive benefit to the beneficiaries, the worst mistake you can make is listing an irresponsible person as your beneficiary.
Buying a policy gives you more power to plan your final arrangements.
Many people crave planning their final arrangements, but the urge to document how they wish to be buried quickly disappears because they can’t plan for what their families and friends will be willing to contribute.
If you have special wishes or things you want to be done in your funeral service, you can document them and allow the insurer to keep them; otherwise, a family member can keep them.
Buying a funeral insurance policy can motivate you to write down how you wish to be buried and even provide your loved ones with a breakdown of how you want your policy’s payouts to be used.
Depending on the coverage you purchase, you can draft your final arrangement so that you can be buried in a way that represents who you are.
Considering that many funeral homes have models designed to take advantage of grieving families, planning your funeral presents you an opportunity to do your due diligence and choose quality service.
Ultimately, this saves your family stress from having to look for services that align with your wishes.
Importantly, if you opt to plan your final arrangements, make sure to write down everything; otherwise, your wishes, especially spoken, can be a cause of chaos in your family.
Payouts of funeral insurance policies are not taxable.
As straightforward as it is – death benefits are not taxable. If you have funeral insurance, the face amount you obtained while purchasing your policy will be paid tax-free to your beneficiaries after your death.
That said, be aware that this will not always be true. There are situations when a death benefit of any amount can be subjected to tax laws.
For instance, if the beneficiary of your policy is not a close relative, RHS might consider the payout as a gift from the deceased and subject it to tax laws.
For this reason, you need to be prudent when choosing who will be your beneficiary.
Policies can be customized to fit personal needs.
There is no denying that not all life insurance policies can be customized to suit individual needs.
In the world of life insurance, there are riders, which are benefits added to your policy by your provider, or you can buy for a little extra dollars.
Riders offer extra protection, allowing you to customize your funeral insurance policy to fit your needs.
While the riders offered by different carriers can vary wildly, most providers do offer accelerated death riders and accidental death and dismemberment (AD & D) riders.
Some insurance companies have riders that allow you to protect your spouse, children, parents, grandchildren, and other family members within your policy.
Protects your family and gives them peace of mind.
Defraying your end-of-life expenses is an excellent way to save your loved ones from financial stress when they are mourning you.
It is one of the essential things you can do to give your family peace of mind and keep them from struggling to pay for your funeral, and cover other costs that come when you pass on.
Depending on your coverage amount, your policy could offer much-needed financial protection to your family when you pass.
If you are the breadwinner of your family, the payouts of your policy can partly replace your income as the family looks for another source of income or means of survival.
Whether the face amount of your policy is huge or just enough to cover your end-of-life expenses, your loved ones will be grateful that you saved them from stress, which is a sign of love.
You can choose an amount that’s enough for your end-of-life costs.
There is no denying that burial costs increase year after year, and the coverage you can obtain with funeral insurance is small. But the seemingly small amount is all that many seniors need and can afford.
Most seniors do not have lifelong dependents, and all they may want is to leave money to take care of their burial. In this case, seniors can purchase policies with coverage amounts ranging from $2,000 to $50,000, which are enough to accord them a dignified send-off.
While the face amount of funeral policies is small, the amount is usually enough to offset burial expenses.
You can choose anyone as your beneficiary.
Choosing a beneficiary can be tricky, especially when it comes to funeral policies.
Thankfully, seniors have ample freedom to pick anyone as a beneficiary when buying a policy.
Even better, a policyholder can change their beneficiaries without the consent of the beneficiary they are replacing.
When it comes to picking who your beneficiary will be, you have endless options.
With proper planning, everyone can be laid down according to their wishes.
If you are a senior wishing to be accorded a decent send-off, the right time to make that possible is now.
For the most part, you need to purchase a funeral insurance policy and write down your final arrangements.