Are you a senior considering planning your final arrangements ahead of time? Well, signing up for pre-need funeral insurance to cover costs associated with your funeral can alleviate financial stress on your loved ones.
Pre-need funeral insurance, like other forms of whole life insurance, ensures that your final wishes are carried out as you intended.
According to reports, at least 54% of United States residents have life insurance policies, and the number of people purchasing policies continues to grow.
This is probably due to the increased advertisements and awareness of the importance of life insurance policies, mainly through social media platforms and TV shows.
Besides, life insurance providers and promotion and marketing organizations are strengthening the information drive about insurance as many people are scared whenever they hear anything concerning insurance.
This helps many prospects who see life insurance as a liability rather than an investment understand it better and even obtain coverage for their families.
Talking about funeral expenses, while it is a smart idea to set an account where you can save money to cover your end-of-life expenses, with the funeral cost increasing year after year, it can be hard to save enough for your burial arrangements.
Currently, funeral costs stand at around $8,000 to $10,000 on average, with cremation not far behind at around $6,000. For the most part, this means people who pass away before saving enough can leave a significant financial burden on their loved ones.
If you are a senior contemplating the idea of purchasing a policy, there are practical reasons why you should consider pre-need funeral insurance. Read on to find everything you need to know about pre-need funeral insurance so that you can make an informed decision before purchasing.
Overview of pre-need insurance
As the name suggests, pre-need insurance refers to an agreement or contract designed to specifically cover funeral expenses and merchandise selected for an individual’s funeral arrangements.
Unlike other policies meant to cover end-of-life expenses, pre-need funeral insurance is sold through funeral homes, not life insurance companies. Typically, the benefits of these policies are used to cover pre-determined expenses of a funeral or cremation.
As such, pre-need funeral insurance helps seniors defray their final arrangements, ultimately saving their loved ones from unneeded stress when grieving.
What sets pre-need funeral policy apart is that you choose the funeral home you want to work with and specify the arrangement you desire.
As such, the funeral home will be the only beneficiary of your policy, and, depending on the contract terms, you can pay the cost once over time.
Many people confuse pre-need insurance for funeral insurance and vice versa. So what is funeral insurance?
At its core, funeral insurance, also known as burial insurance or final expense insurance, is a whole life insurance policy that pays out a set amount of money to a designated beneficiary when the insured dies.
With this policy, you choose at least one beneficiary, typically a family member or friend, who will be responsible for carrying out your final wishes.
While funeral policies are usually designed to cover end-of-life expenses, the payouts come with no strings attached, meaning it is your beneficiary who will manage the proceeds. For this reason, policyholders should always choose someone they trust to be their beneficiary.
Although funeral insurance policy payouts may not necessarily be used to cover funeral costs, they can help the family of the insured survive financial stress amid grief.
Understanding pre-need funeral insurance
Pre-need funeral insurance, popularly known as prepaid funeral plan, involves an individual agreeing with a funeral home of their choice so that the funeral home takes care of the insured’s funeral and merchandise selected by the insured for their final arrangements.
While both pre-need and final expense insurance help covers funeral costs, funeral policies only set away funds to cover funeral arrangements and do not make any planning decisions. On the other hand, pre-need insurance policies cover specific items that the insured agrees with the funeral home.
Funeral policies offer level premiums, whereas pre-need policies offer a price guarantee for insured’s selections, so you won’t pay more even when prices of individual items and services surge. As such, pre-need policies offer an excellent way to avoid policies whose rates may increase due to inflation.
What pre-need funeral insurance covers
Pre-need funeral policies are used to cover funeral services and burial or cremation. With this policy, policyholders can customize the funeral service they are paying for so that it aligns with their preferences and interests.
Even so, like other policies, pre-need funeral plans outline specific arrangements, depending on the insured’s desires.
Here are some of the things that pre-need funeral insurance policies commonly cover:
- Cost of digging and filling of the graves
- Burial or cremation
- Casket or urn
- The viewing, visitation, and church services
The most exciting thing about pre-need policies is that you don’t have to worry about possible inflation or changes in prices due to economic changes over time.
Once you have paid the required costs, you can rest assured that you will be laid with dignity as you intended. While purchasing a pre-need funeral insurance policy may sound strange, it is a sign of being financially responsible and a symbol of love to your family.
How to purchase a preneed insurance policy
Investing in a prepaid funeral plan takes a lot of courage. If you are a senior looking to defray your end-of-life expenses with a pre-need insurance policy, here is a step-by-step guide on how to purchase a pre-need funeral insurance policy:
- Choose a funeral home that you would like to take care of your funeral arrangements.
- Make an appointment with the funeral director of your chosen funeral home
- Discuss (with the funeral director) your final wishes and how you would want your funeral arrangements to be like. For the most part, this involves specifying whether you will be buried or cremated. Depending on your wish, you can propose a unique casket or urn design, then agree on flowers and how the funeral ceremony will be conducted.
- Schedule with the mortician so that you can view the merchandise set for your final arrangements.
- Confirm if the service is guaranteed. It is always a good idea to purchase a policy that offers guaranteed services. That way, your family won’t be anything when you die. On the other hand, if you buy a policy whose service is unguaranteed, your loved ones will have to pay for any difference between the cost of your policy and the actual prices the funeral charges at the time of your death.
- Upon agreeing with the funeral director, pay the contract amount. Pre-need funeral insurance policies can be paid out in a lump sum or over time.
Who sells pre-need insurance policies?
Unlike other types of burial insurance, pre-need insurance policies are offered by funeral homes.
According to a study completed in 2019, there are about 19,136 funeral homes across the United States, meaning seniors looking to purchase a pre-need funeral plan can easily find a funeral home.
Even so, it is advisable that you do your due diligence, inquire, then compare the services and pre-need plans individual funeral homes offer before making a purchase. That way, you will increase your chances of landing a great deal – better prices for good-quality products and services.
Best places to purchase pre-need insurance policies
While there are many funeral homes out there, not all of them sell pre-need funeral policies. To the surprise of many, there are only 24 registered institutions whose primary business is to offer pre-paid funeral plans. However, this doesn’t mean you can’t get a pre-need policy elsewhere.
If you are in the market for a pre-need funeral insurance policy, here are some of the reputable providers of pre-need insurance policies you can consider:
Hillenbrand, Inc. (HI)
Hillenbrand is a burial casket manufacturing company and a recognized leader in the death care industry. While it is a diversified industrial company with businesses that serve a wide variety of industries, they are known to manufacture and sell funeral services products such as caskets, urns, and cremation containers.
Hillenbrand also provides personalized memorial products and technology applications for funeral homes. Hillenbrand’s portfolio constitutes various industrial businesses, including Batesville and Forethought.
Batesville manufactures caskets and cremation-related products, whereas Forethought deals with funeral planning financial products. In other words, the Forethought Group is the seller of pre-need plans.
Service Corporation International is a highly regarded provider of funeral goods and services as well as cemetery property and services. The company is arguably the world’s largest owner and operator of funeral homes and cemeteries.
Since 1962, SCI has been helping families survive their most difficult, personal, and challenging moments. They have well-established funeral homes and partnered with other reputable organizations to offer pre-need funeral policies to people looking to defray their funeral arrangements.
Currently, Service Corporation International owns and operates over 450 cemeteries in 43 states. When you buy a pre-need policy from the, you can rest assured that your final wishes will be carried out as you intended.
Walmart is one of the well-known retail companies operating a chain of hypermarkets, discount stores, among other businesses. Recently, they made yet another move into the death care industry and are now one of the largest sellers of low-price caskets sold online.
As part of ensuring that their customers get the best, they have partnered with the Prudential Insurance Company of America. Through this partnership, Walmart offers pre-need policies.
Carriage Services Inc. (CSV)
This is yet another reputable consolidator and provider of deathcare services and merchandise in the United States.
Carriage Services operates funeral homes and cemeteries, currently operating 178 funeral homes across all 50 states. They help these funeral homes streamline their operations so that their funeral services and related products meet the needs of the communities they serve.
As for insurance policies, Carriage Services offers pre-need funeral contracts, where the proceeds are used to pay for services at the time of need.
Stewart Enterprises Inc. (STEI)
Located in New Orleans, LA, Stewart Enterprises is another large provider of funeral and cemetery services. The company owns and operates funeral homes and cemeteries in multiple states.
Their funeral services and merchandise and cemetery property are available both at the time of need and on a pre-need basis.
Currently, Stewart Enterprises operates 218 funeral homes and 140 cemeteries across 24 states and Puerto Rico.
It may be worth noting that this company was fully acquired by Service Corporation International.
StoneMor Partners (STON)
StoneMor Partners provides an industry-leading approach and promises to ease the burden of end-of-life planning for every family they serve. The company owns and operates 301 cemeteries and 69 funeral homes in 24 states and Puerto Rico.
As one of the largest companies in its space, StoneMor provides a broad scope of products and services. Their cemetery property and services as well as funeral services and related products are offered on a need and pre-need basis.
As such, you can pre-purchase a burial plot, casket or urn, vault, mausoleum space, and other details related to burial.
Matthews International Corporation is a global provider of memorialization products and merchandise for the other two segments. They design, manufacture, and market high-quality and custom-made products.
Matthews cemetery products, a full-service cemetery industry partner, provides solutions that help families memorialize their loved ones with high-quality, handcrafted memorial products. They also offer cremation and mausoleum solutions.
These are some of the reputable companies that allow you to pre-purchase funeral and cemetery services and merchandise as well as cemetery property. Importantly, when buying a pre-need funeral insurance policy, you want to make sure the company or agent you are dealing with is licensed.
While discussing your final wishes with the funeral director of the funeral home of your choice, you can ask whether or not they are licensed; otherwise, you risk losing your hard-earned money.
Reputable providers will most likely display a copy of their licenses and other federal and state permits in a place where their customers can easily see them.
As always advised, read the reviews of the company you are considering to get an idea of their services from real customers.
Making a purchase, it makes perfect sense to contact some of the companies listed above so they can direct you to some of the funeral homes they own. That way, you will be sure to get value for money.
What is contained in a pre-need funeral insurance contract?
Like other forms of burial insurance, a pre-need funeral plan is a binding agreement between the policyholder and the funeral home underwriting the policy. That said, a complete pre-need funeral contract will specify the following:
- Funeral goods and services – the funeral establishment agrees to provide specified merchandise and service when the insured dies
- Cost – The total cost of funeral goods and services, non-funeral establishment charges, and other charges.
- Funding method – How the policyholder will fund the policy, either depositing the money into a funeral trust account or to a specified insurance provider
- Payment – Terms of payments, including initial deposit and how the balance will be paid.
- Cost protection
- Terminations conditions
- Policy disclosure
- Incorporation by reference
- Buyer’s guide
- Governing law
When buying a pre-need funeral insurance policy, it is imperative to read and understand the terms of the policy before signing the contract.
Importantly, while your preferences have a big role to play as far as your choices are concerned, you should be very cautious with the decisions you make because pre-need policies are not transferable.
For instance, it may not make sense to buy a policy when you are pretty sure that you will relocate to another city. So, before making the purchase, consider all other factors that may affect your policy.
Pre-need funeral trust
Pre-need funeral insurance and pre-need funeral trusts are talked about together because they have a very focused scope.
At its core, a pre-need funeral trust is a financial contract with a funeral home, cemetery, or cremation service to pay for the costs of a funeral in advance. It is similar to a pre-need funeral policy in that it has comparable risks and is set up through a funeral home, not an insurance company.
What sets a pre-need funeral trust from a pre-need policy is that a funeral trust account accrues interest, mainly due to inflation. Because the money in a pre-need trust account remains your money, you can also specify what happens to any unutilized money.
Pre-need funeral trust helps individuals set aside money to cover their end-of-life expenses.
The provider of the pre-need funeral trust ensures that the benefits or services are delivered as specified in the agreement. With pre-need funeral trust, there is an option to make adjustments based on personal preferences and the current budget.
If you opt to invest in a pre-need funeral trust, remember that, even though the money in the trust account is still your money, there are terms to be understood.
At some point, you will also need to discuss with your provider how the excess money will be used. Most pre-need companies allow you to specify what you want to be done with the money. Sometimes the surplus can be forfeited in favor of the pre-need company.
How pre-need funeral insurance works
When you buy a pre-need funeral policy, you enter into a contract with your chosen funeral home. This means you agree with the policy terms, and the funeral home offers to deliver funeral services and merchandise as stipulated in the agreement.
Before entering into the contract, the funeral director of your chosen funeral home will ask you to disclose your final wishes. This will help the funeral home tailor its services and the products you need, ultimately ensuring you are buried with dignity.
Well, while the services your chosen funeral home can deliver depends on your wishes, most pre-need policies cover the following:
- Funeral parlor:
When you obtain pre-need funeral insurance, the funeral director and his team will professionally take care of all aspects of your funeral. When you pass, they will set space where your lifeless body can be prepared for burial, cremation, or other procedures.
If your final arrangements include viewing, when the time comes, the funeral home will prepare the body for viewing and offer a venue where your loved ones and friends can meet and mourn you.
Many funeral homes usually have gorgeous venues like funeral reception areas where family and friends can gather and mourn their loved ones.
- Casket or urn cost:
Virtually all pre-need funeral insurance policies cover the casket or cremation containers or urn. When you pass away, the funeral home you chose will get the casket you pre-purchased if your funeral arrangements include burial and urn if it involves cremation.
It’s the funeral home’s responsibility to ensure your final arrangements are carried out as you intended, so they will ensure the styles and material of the casket or urn matches the plan.
- Transport to the funeral home and to the cemetery:
If you have pre-purchased funeral insurance, your family won’t have to transport your lifeless body when you pass.
Your chosen funeral home will transport the body from where you were when you meet death to their premises, then later from the funeral home to the cemetery or where you chose to be buried.
- Other essential items and services:
Depending on what is included in your pre-need funeral plan, the funeral homes will offer other covered items and services. These may include flowers, memorialization products, and decorations.
Pre-need funeral insurance usually covers merchandise and services related to funerals. The beneficiary, usually a funeral home, ensures that everything is fulfilled according to your wishes.
Pros of preneed insurance
Pre-need funeral insurance has several benefits that make most people prefer it over other policies offered by funeral insurance companies.
Paying for your end-of-life expenses before you die gives you and your family peace of mind as you await your death. Here are some of the pros of buying pre-need life insurance.
- Lifts the burden off your family members:
Buying preneed insurance relieves your family members from the burden of paying for your final rites.
They will not contribute any amount towards your funeral because you will have already paid for all the costs before your death. This may help your loved ones heal easily from the pain of having lost you.
- In most cases, the service is guaranteed:
Once you pay for all the funeral arrangements, you will be assured that the services you have paid for will be rendered in the event of your death and as you intended.
Whether the prices of the items and services you paid for an increase in the future, your family members will not be asked to pay for the extra cost. The funeral home you had signed with the guaranteed plan will independently cover the increased cost.
- The initial cost may be lower than the actual cost at death:
When paying for preneed insurance costs, pricing will be done with the current prices offered.
However, all goods and services pricing is subject to change with time due to inflation and deflation effects—similarly, the cost of production changes from time to time.
In case the prices of all you had signed for with the company rise at the time you pass on, you will be treated just as you had requested despite the increase in cost. In this case, you will have paid lower than the actual cost of your funeral.
- The prices are locked in:
Once you complete negotiations with your insurers and completely pay for the cost, the price will be locked in.
You will not be requested to pay more later, nor will your family be asked to pay at the point of your death. Your body will not be denied some services just because you paid less than they cost at the time you die.
- You have control over your funeral expenses:
Buying a pre-need insurance policy gives you the power to control all your funeral plans. You will decide what you want to be done to your lifeless body.
This way, you will have the power to budget rightly since you will be financing the costs from your savings or salary. You will also eliminate the things that you don’t wish to happen to your lifeless body or at your funeral. You can also eliminate anything that you feel is worthless.
- You will make decisions concerning your lifeless body:
You have the chance to have your body handled in the best way you wish. The entire process is predetermined and therefore gives you a chance to advise your family and insurers on what to do once you die.
You will have the freedom to choose which clothing to be dressed in, the casket or urns, the flowers, the kind of cars to carry your body, and even the way you wish to be laid to rest.
Such freedom gives satisfaction that your body will be handled with respect. If you wish your body to be viewed, a funeral service to be held, or your body to be cremated, you will clearly advise the funeral home.
Moreover, this gives your family a chance to grieve as they will not be involved in the funeral arrangements and plans. Therefore, they are not expected to make difficult decisions at the time of their emotional distress caused by your demise.
- It gives you peace of mind:
To all human beings, death is inevitable, but still, no one wants to think hard about death. Buying a preneed plan gives you peace of mind because you are assured that your burial plans are already scattered.
Additionally, you will be assured that your family members will be peaceful financially in case you pass on. They have no great contributions toward your final rites because everything concerning burial will be handled by an insurance company you had contracted.
For the days you will live after having paid for a preneed plan, you can focus and concentrate on other activities to benefit your family when you finally die.
- It can be purchased anytime:
There is no prespecified time to buy a preneed cover, unlike in the case of final expense and burial insurance plans.
There is no specified age limit for preneed that one must attain for them to qualify for the guaranteed coverage. Anytime is the perfect time for an adult to buy a preneed insurance policy.
Once you determine how you wish your body to be handled, then you can freely purchase a policy.
- Payments can either be a lump sum or monthly:
Once you agree on a specific amount to be paid, you can either subdivide it into premiums to be paid monthly for a specified period or simply pay the whole amount.
If you can afford the whole amount, then you are free to pay. Otherwise, you can still pay in small proportions if the budget is too tight.
- Anyone can buy the cover despite the health status:
Many insurance companies that offer funeral expense services examine the health and lifestyle of an individual before accepting to give a cover.
However, if you wish to buy a preneed cover, you will only be requested to state clearly how you want your body to be taken care of after you pass on, then pay for the predetermined cost of everything you want.
Whether you have a medical problem or you live a reckless lifestyle, it is not a consideration to qualify you for coverage. Therefore, there are no limits to anyone who can buy the policy, whether healthy or not, tobacco user or non-tobacco user.
Cons of preneed insurance.
- The funeral home is the sole beneficiary:
Preneed insurance is usually sold by insurance companies, but you have to choose a funeral home as a beneficiary.
The funeral home is the only beneficiary to the coverage and not your loved ones. To be safe, ensure you carry out sufficient research before deciding on which funeral home to choose. Always select a funeral home that is reputable and with a good rating.
- Your family may need to pay for the unanticipated payments:
Some petty needs may arise in the event of your death, and your family will be expected to pay for such needs. The funeral home strictly pays for the things you had signed up for and nothing more.
On some occasions, your family may wish to improve the care accorded to your dead body, but the costs will be upon the family.
- The funeral home may fail to pay all the funeral costs:
Funeral homes will only pay for what is in the insurance policy. Any other thing, whether it is of great importance or not, they will not pay for it.
For example, if you pay for your body to be cremated, but you fail to pay for an urn, then your family will be forced to buy the urn. The funeral home will only pay for your creation and stop there.
On other occasions, the funeral home might choose just to ignore some of your demands. For example, they can opt to decorate your casket with the flowers you never liked nor recommended during the time of agreement.
- You can not get back your money:
After paying for preneed insurance, you cannot take back your money. Chances are, you might opt to change an insurance policy or simply withdraw the agreement.
However, when it comes to preneed insurance, you cannot change or even get back your money. Therefore, a preneed insurance cover is a lifetime agreement, and once you get into it, you can not change or withdraw.
- The coverage is small:
Many life insurance companies offer a very small amount for preneed insurance cover.
They can limit you to choose your burial expectations within a certain range of cash within their brackets of coverage. For this reason, most people will prefer to buy either a term or whole life insurance cover.
- Benefits can’t be transferred:
If you decide to move from one state to the other and had already bought a preneed plan, you may end up losing your money because the cover cannot be transferred.
Specifically, any plan arranged through a funeral home cannot be transferred to any other funeral home or company.
- Ties up money that could have been used as an investment:
You may spend a lot of money paying a preneed cover, yet you will not benefit from it until you die. If this money is invested elsewhere, it could yield many returns.
Unlike whole life insurance, where premiums earn a cash value, preneed does not. After paying, the funeral home will only act once you have died.
Questions to ask yourself before purchasing pre-need funeral coverage
Even though there is a wide range of benefits that you will get when you buy a preneed plan, it is important for you to analyze every single aspect of this insurance plan before committing to your finances.
More so, it is necessary for you to question the company or funeral home as many relevant questions as you wish before deciding to purchase the plan.
Another great significance of questioning is to ensure that you get into an agreement that you won’t regret. Similarly, you should gauge if there is an exit plan in case you change your mind in the future.
Here are some of the questions you can ask just to be sure of what you are purchasing.
Can you transfer the policy?
You may need to know if you can transfer the policy if you change your residence. Ask the policy giver if they can allow you to transfer the agreement to another provider in case you leave.
This is a question that any civil servant should get an accurate answer to because you can be transferred to another state after buying a preneed plan. Avoiding this question might cost you an entire insurance plan if they fail to transfer the agreement.
How long will it take for the service to be delivered?
You may need to know how long it will take the insurance company and the funeral home to start repairing your body for burial.
Typically, no one would like their bodies delayed for burial, yet they had made all payments. Ask how long it will take for your body to be prepared, the gravestone to be made and availed at the burial place, and any other questions concerning delivery of all funeral and burial tools.
Can you make changes to an already existing policy:
People’s preferences change over time, and you may need to have your pre-need plan advanced.
For example, you may have found a different set of flowers that you love or a casket or urn different from what you had proposed in the agreement. You need to know if you can change such aspects of the policy agreement before buying it.
Can you terminate the contract?
Knowing whether or not you can have your policy canceled is also very important.
You may be in dire need of some money and consider canceling an insurance policy so you get back the money you had earlier paid, or you just feel uncomfortable with the plan and want to cancel it. If the policy can be canceled, it will be advantageous to you.
However, if the cancellation of a policy is not allowed, you can opt for another insurance plan that allows policyholders to cancel their policies.
What if the funeral home fails to deliver the service?
Ask your insurance company what actions they take in case services are not rendered in the event of your death.
This will help you to advise your family accordingly in case the funeral home fails to deliver. If there are actions taken in such a case, you should be familiarised with such actions to avoid committing payment.
Purchasing pre-need funeral insurance can help alleviate the unneeded stress on your family loved ones when you pass away.
While truly nobody knows when they will pass away, pre-planning your final arrangements doesn’t by any way bring you close to death. If you’re considering defraying your end-of-life expenses, hopefully, you will find this post helpful.