What You Should Know About Funeral Insurance

Throughout your life, you’ve been taught to minimize risks and threats to your financial well-being.  That’s why you have possibly purchased different types of insurance, from car, to health, to homeowners, and life insurance to protect you and your loved ones.

But, there is another type of important insurance that can ease the shock and the burden of a big expense that every family will face sooner or later.

What is funeral insurance?

It is exactly what you would think: it is life insurance that is intended to cover funeral expenses so that you don’t leave that specific financial burden to your family.  This type of insurance is also known as burial insurance or final expense insurance.

Most of the time, coverage for the cost of a funeral is taken care of with life insurance.  However, it can also be purchased through a pre-need funeral plan that is sold by a licensed pre-need specialist.

Many people choose to buy separate funeral insurance plans to take care of what could easily be costs as high as $10,000, not including a burial plot or headstone, according to the National Funeral Directors Association.  Cremation is less expensive, but even so, it can cost as much as $6,000 depending on a variety of factors.

What does funeral insurance cover?

Typically, and depending on the individual policy, funeral insurance is purchased to cover a wide variety of services and expenses, including:

• Funeral home services provided by funeral director
• Memorial services provided by a funeral home which can be at another location
• Cremation services
• Cremation jewelry
• Casket
• Cemetery plot and related expense
• Hearse transportation
• Headstone
• Urn
• Remaining medical bills
• Other bills such as credit cards and bank loans
• Costs related to your last wishes, such as travel to a location to scatter ashes or transport of your body to a specific cemetery or region (such as a hometown or country)

Funeral insurance can also be used for other related costs as determined by your beneficiary.  You can also designate how the remaining funds should be used, such as being donated to a charity or helping with college costs.  Some funeral insurance companies also provide additional benefits with your policy to address this issue in the form of a core estate planning benefit.

For example, some insurance companies will provide a free simple will that will allow your estate to save money on legal fees.

How is funeral insurance different from life insurance?

The primary difference between funeral insurance plans and life insurance is that life insurance   provides for the long-term needs of family members, helping them to more smoothly transition as they grieve and adapt to a new normal without an important person who is no longer in their lives.

Funeral insurance is a much smaller policy amount and has a clearly defined, short-term use.  It lessens the initial emotional and financial shock that family members may feel as they deal with the immediate loss of a loved one.  When funeral insurance is part of an estate plan, it removes the impact of having to use long-term life insurance funds for a short-term event.

Life insurance premium costs can be higher than funeral insurance costs, primarily because life insurance is typically sold in higher amounts starting at $100,000 and going well into the millions.  Funeral insurance costs are based on much smaller policy amounts, typically starting at $5,000 and going up to $25,000.

Some people opt for final expense life insurance instead.  Final expense life insurance can be used to cover medical costs and other end-of-life expenses, including funeral and burial costs.  Final expense life insurance is a type of permanent life insurance that does not expire.  Term life insurance runs for a specified amount of time before it ceases coverage.  It is best to not assume term life insurance will cover funeral expenses.

Some funeral homes will accept the assignment of a final expense life insurance policy and some will not.  Some funeral homes require payment up front and will not wait until the final expense life insurance policy pays out.  It is best to take this into consideration when considering a final expense insurance.

You can work with a final expense insurance broker, or if you have a funeral home already in mind as part of an estate planning process, check with them directly.

As it is with all forms of insurance, it is best to shop around for the best final expense life insurance quotes.  Try to find an independent agent that offers comparison shopping for a final expense insurance program

Are there different types of funeral insurance?

Yes. There are several types of funeral insurance plans you can qualify for, based on the results of a short health history assessment.

Immediate Pay Funeral Insurance

This coverage pays the full amount of the benefit immediately upon approval.  For example, if you purchase a $12,000 policy, your family will have access to the full $12,000 to be used for funeral expenses when you pass away.

Level benefit funeral insurance plans are typically the lowest cost and based on no disqualifying health issues.  But not everyone qualifies, so there are other options that are available.

Graded Benefit Funeral Insurance

If certain pre-existing health conditions are discovered during the health history assessment, then a person will be offered the opportunity to purchase a graded benefit plan.

Graded plans do not pay the full amount immediately.  Benefit amounts ramp up over time.  For example, if you pass away during Year 1 that your policy is in effect, your beneficiary might, for example, receive 30% of your policy amount. If you pass away during Year 2 that your policy is in effect, your beneficiary might receive 70% of your policy amount.

Different companies have different payout schedules, so if you have health issues, make sure you understand what those amounts are and when they kick in.

Modified Benefit Funeral Insurance

These funeral insurance plans are like graded benefit plans, except that the payout schedule is different.  They are offered when a health assessment reveals a higher risk condition, resulting in a less aggressive payout schedule.

For example, during Year 1, a modified benefit plan may offer to return your premiums plus 10% interest.  Year 2 may offer the return of your premiums plus 12% interest.  Only in Year 3 would you realize the full payout of your policy amount.

If you are offered a modified benefit policy, you should continue to shop around because you might qualify for a graded benefit policy with another company.

Guaranteed Issue Funeral Insurance

With a guaranteed issue policy, there are no health questions, and everyone is approved.  These are generally reserved for people who cannot get any other kind of funeral insurance policy.  The payout for this type of insurance is even more restricted during the first two to three years of the policy.

For example, during Year 1, a guaranteed issue policy may pay a return of premiums plus 5% interest.  Year 2 would pay a return of premiums to date plus 7% interest.  Year 3 would pay a return of premiums plus 10% interest.  And not until Year 4 would a full 100% payout be in effect.

Again, offerings will differ by company, so work with your independent agent to find the best funeral insurance if you are considering a guaranteed issue policy.

Another form of guaranteed issue life insurance is accidental death insurance.  This is a great way many people will increase their overall death benefit.  They will commonly purchase a policy to cover their funeral expenses and add an additional accidental death policy to increase their benefit as much as $250,000 with no health questions.

Will I need to get a medical exam before I can get funeral insurance?

In most cases, before you can be issued a policy you will need to have a medical exam to identify any health issues that could impact the type of policy you qualify for.

This holds true except for guaranteed issue funeral insurance plans.  With this type of insurance, you do not have to answer any health questions and everyone who applies is approved.  The downside is that your benefit coverage is extremely limited during the first few years of coverage.  This no-medical exam life insurance is generally reserved for people who do not qualify for any other kind of life insurance.

Funeral insurance medical exams are much the same as they are for life insurance.  An exam will consist of a verbal questionnaire and standard sample collections such as urine and/or blood. Most times, these exams can be performed in a person’s home.  The whole process should take about 30 minutes.

How much funeral insurance do I need?

The real question is how much do you anticipate that your funeral and related expenses are going to cost?   Keep in mind that typical funeral costs can run well over $10,000 for a burial, and as much as $6,000 for a cremation.  Some of the factors that influence what that exact cost will be can include:

• Do you want to be buried or cremated?
• Is your plot paid for?
• What kind of headstone do you want?
• What type of casket do you want?
• Do you want to be embalmed (not required in all states)?
• What kind of service do you want?
• What services do you want the funeral director to provide?
• Where will the service be held and how large will it be?
• Will transportation costs be an issue?
• Will there be any personal, legal or inheritance issues to be decided?

Before you make a final decision, it’s best to talk to a licensed insurance agent who is familiar with all the elements of a funeral service and what each individual element might cost.  You can also do research on your own which should answer many of your questions.

The Funeral Rule is a law that mandates providers of funeral services or products make available an itemized list of all products and services they offer, as well as prices, before they attempt to sell them to you.  This list is called a General Price List, or GPL, and will help you avoid paying extra for services or products that you might not want or need.  When shopping for funeral service items, be sure to ask your funeral home or service provider for a GPL to help you compare prices and determine the most accurate budget for your needs.

What are the different ways to buy funeral insurance?

There are three primary ways to purchase funeral insurance plans.  Here are the pros and cons of each:

Purchasing funeral insurance online

Pros:

• Easy, quick approval if you qualify
• Quotes can be initiated any time of the day or night.

Cons:

• Must have some level of computer experience.
• Can be hard to find answers if you have unusual questions.

Shopping for funeral insurance online is easy, especially since quote comparison tools exist that allow you to see a side-by-side comparison of costs.

In fact, PolicyZip’s Funeral Insurance Comparison Tool can get you started in less than 60 seconds by answering a few simple questions.  It will help you find the best funeral insurance companies for your situation and provide you with several affordable funeral insurance alternatives.

In order to get funeral insurance quotes, you will need to enter the following information at a minimum.

1. Date of birth
2. Gender
3. State you live in
4. Amount of coverage you want.
5. Pre-existing health conditions if you have any.

After you submit your information, you will be given options to choose from and you will have the opportunity to complete a trial application.  You will need to confirm the options you selected with an independent agent over the phone.

Once you have completed these steps, if everything checks out, you can get instant approval from the insurance company you chose directly over the phone without ever having to leave your home.

Purchasing funeral insurance by mail

Pros:

• Simple to sign up
• Generally, does not require any health questions
• Guaranteed acceptance.

Cons:

• “No health questions” means you are being issued a guaranteed issue policy which is the most expensive and may not be necessary if you are in good health.
• This type of policy has limited benefits available for the first three years the policy is in force.
• The amount of insurance is typically capped at $10,000 to $15,000.

As a rule of thumb, the more health questions you are willing to answer, the cheaper your funeral insurance is likely to be.

Purchasing funeral insurance through a licensed agent

Pros:

• Can readily answer all your questions.
• Will do the best job of matching you to the right policy for your situation.
• Provides you with the most personal touch.
• There are also no caps to the amount of insurance you can buy going this route, assuming you qualify.

Cons:  none

As it is with buying other types of insurance, developing a relationship with an agent will ensure your questions are answered thoroughly and completely.

Are there different types of agents who sell funeral insurance?

Yes.  There are three types of agents who sell funeral insurance plans.

Independent funeral insurance agent

An independent funeral insurance agent represents many types of insurance companies and can save you money by finding the cheapest funeral insurance policy.  The independent agent will be able to supply you with a price comparison of your best options.

Captive Funeral Insurance Agent

A captive funeral insurance agent works for one company and can sell funeral insurance offered by only that company.  They won’t be able to help you compare prices from other companies, so you won’t know if their price is competitive. People who work with a captive agent often have other insurance products with that agent, such as home and auto insurance.

Licensed Funeral Director

A licensed funeral director may sell funeral insurance, but most often their emphasis is on selling pre-need plans.  Pre-need plans are simply ways for customers to pay for their funeral in advance.  The primary benefit for the customer is their chosen funeral plans will not cost more than what they have paid for, even if the funeral is held many years later. Make sure you know the difference between a pre-need plan and funeral insurance if you decide to talk to a funeral director about making a purchase through them.

How do I buy a funeral insurance plan for my parents?

Broaching the subject of funeral planning can be a tricky proposition for some families. If your parents do not currently have funeral insurance, are you and your surviving family members prepared to pay up to $20,000 for the costs associated with a funeral?

Here are some things to consider as you start the process:

• How much debt do your parents have? Understanding their overall financial exposure after they pass will give you a better idea of what may be required to cover their funeral expenses adequately.
• Work with your parents to complete a final wishes planner or an online funeral planner to understand their wishes.
• Purchase a funeral insurance plan through an insurance comparison website, independent agent, or local funeral home.
• File your parents’ funeral insurance policy in a safe place and review periodically to ensure the insurance amount is sufficient.

The younger your parents are when you purchase funeral insurance, the cheaper the costs will be.  However, some families may not have had the opportunity to plan while their parents were young.  The good news is that funeral insurance is still available if parents are older when you decide to act.

What things should I consider when buying funeral insurance for my parents if they are elderly?

If you decide to buy funeral insurance for your parents when they are older, it will cost more, but there are steps you can take to reduce the funeral costs and therefore the funeral insurance premiums.

Consider a different headstone. Maybe a bench headstone is too expensive and a simpler design such as flush or lawn-level marker will provide the same level of respect for your parents.  Costs of headstones can vary by thousands of dollars and a simple change can drop the amount of burial insurance needed.

Purchase a plot in advance. Often families have plots pre-purchased.  If this is the case, using the plot will reduce your costs.

Consider cremation. Cremation is becoming more common as the costs of burials continue to rise.  You can still have a memorable service paired with a cremation that will reduce the burial insurance costs for parents.

Here’s what you can reasonably expect if you are looking to purchase funeral insurance for parents at various older milestones in their lives:

Funeral insurance for seniors between 60 and 69 years old

When your parents turn 60, there are still many affordable options for level benefit, graded benefit or guaranteed issue funeral insurance plans depending on the health of your parents.

Here’s a look at what you might spend each month for funeral insurance when you parents are between 60 and 69 years old.  Premiums are based on a $12,000 policy for a non-smoking male.

Funeral Insurance Quotes for 60-69 years old – $12,000 Value for a Male Non-Smoker

 

Age	Level Benefit	Graded Benefit	Guaranteed Issue
60	$47.24	$84.87	$72.96
61	$49.38	$89.86	$75.46
62	$51.36	$94.93	$77.80
63	$54.14	$99.12	$79.92
64	$58.61	$100.00	$82.34
65	$61.05	$103.00	$85.31
66	$64.97	$108.00	$88.43
67	$69.22	$114.00	$91.98
68	$73.29	$119.09	$96.90
69	$77.63	$125.00	$102.48

Funeral insurance for seniors between 75 and 79 years old

Turning 75 is a personal milestone, but it will also have an impact on funeral insurance premiums.  At this age, shopping for your options is important.  For example, one company might consider you for a graded policy if you are an insulin-dependent diabetic, and another company might consider you for level policy, which could have a significant effect on the monthly premium.

Here’s a look at what you might spend each month for funeral insurance when your parents are between 75 and 79 years old.  Premiums are based on a $12,000 policy for a non-smoking male.

Funeral Insurance Quotes for 75-79 years old – $12,000 Value for a Male Non-Smoker

Age	Level Benefit	Graded Benefit	Guaranteed Issue
75	$104.15	$175.00	$146.98
76	$111.17	$184.06	$156.20
77	$118.63	$201.70	$166.67
78	$125.74	$220.70	$178.29
79	$137.04	$239.00	$191.48

Funeral insurance for seniors between 80 and 89 years old

By the time a parent turns 80, getting funeral insurance can be a tough proposition.  Only a few companies offer policies for seniors who are 80 and older. For example, at age 80, the price nearly doubles from level to graded.  This is another example of where shopping the top burial insurance companies will ensure you aren’t over spending.

Funeral Insurance Quotes for 80-89 years old – $10,000 Value for a Male Non-Smoker

Age	Level Benefit	Graded Benefit	Guaranteed Issue
80	$121.41	$212.50	$173.14
82	$150.34	$242.53	$203.51
84	$170.08	$263.12	$236.90
86	$217.50	N/A	N/A
88	$260.83	N/A	N/A

Funeral insurance for seniors over 90 years old

 At 90 years and above, getting funeral insurance is extremely difficult, and the few options available will be expensive.  Some companies will offer coverage, but those that do typically cap coverage at $5,000.

If your parent is 90 or older, you should call one of PolicyZip’s independent agents to discuss your funeral insurance options.

What are the top life insurance companies that sell funeral insurance?

If you’ve started to shop around for funeral insurance, you may be feeling a bit overwhelmed by the prospect of choosing the policy and the company that is best for you and your circumstances.

There are more than 800 companies that sell life insurance, including many that also offer funeral insurance, so it can be a daunting process for such an important decision.  You need to find the right balance between a top-rated funeral insurance company and one that offers the lowest, or highly competitive, rates.

To narrow your search, consider buying a policy from any of the following companies that are considered among the best funeral insurance companies in the marketplace.

• AARP Life Insurance Company
• American Home Life Insurance Company
• American Continental Burial Insurance
• American General Funeral Insurance
• Assurity Life Insurance Company
• Baltimore Life Insurance Company
• Equitable Life Insurance
• Foresters Life Insurance
• Gerber Life Insurance Company
• Gleaner Life Insurance Company
• MetLife Funeral Insurance
• Mutual of Omaha Living Promise Final Expense
• New York Life Insurance Company Funeral Insurance
• Prosperity Life Final Expense
• Royal Neighbors of America
• Sentinel Security Final Expense Insurance
• Settlers Life Insurance Company
• Security National Final Expense Insurance
• USA Life Insurance Company
• Transamerica Life Insurance
• United Home Life
• Vantis Life Insurance Company

If you want to do more research, go here for a good overview of the top life insurance companies in America.  It has been compiled from an analysis by A.M. Best, a global company that reports insurer financial strength ratings for life, property and casualty insurance firms around the world.

How do I make funeral arrangements?

If you have funeral insurance, then your financial concerns have already been addressed and you can concentrate on actual funeral arrangements.  But even when financial issues have been alleviated, there is still a certain amount of stress when it comes to planning a funeral service.

Although every service is unique, here are some steps to make it as easy as possible.  These can be especially helpful if you have never been through the process before.

1. When a death takes place in the home or at a workplace, contact emergency personnel and the person’s doctor. Police will need to be notified if the person died alone before the body can be moved.
2. When a death takes place in a hospital or a care facility, staff will notify you, the appropriate authorities, and the funeral home (if you have made that decision in advance).
3. If you have not selected a funeral home, do a little homework and understand the various funeral homes in your area that may be an option and the best fit for your needs.

Different funeral homes serve different markets and that can certainly impact price.  For example, Newcomer Funeral Homes has roughly 17 locations around the mid-west and appears to do a great deal of cremations. That would tell you that they serve a lower income demographic which is much more price driven.

Another example would be Heritage Funeral Homes which serves the Phoenix area.  They are well known for their burial services, so you would want to make sure you compare their general price list with other funeral homes to ensure you’re staying with in your budget.

Our last example would be Pellerin Funeral Homes, a local chain that only serves Louisiana.  Royal Funeral Homes are a good example of privately owned funeral homes that can provide the highest levels of personalized service when you want and need a high degree of attention to details for funeral arrangements.

The take away here is do a little homework and understand the various funeral homes in your area that may be an option and the best fit for your needs.

4. With the help of the funeral director, the next step is registering the death. Documentation will vary depending on the circumstances of the death, and the processes and documentation involved depend upon the circumstances.
5. Together with the funeral home, there will be many decisions to make:

• Burial or cremation
• Embalming
• Time and day for the service
• Person conducting the service
• Music for the service and/or burial
• Flowers
• Memorial contributions
• Logistical help for family and friends from out of town
• Considerations if the deceased was in the military
• Type of casket or urn
• Size of the service
• Who provides the eulogy
• Pall bearers
• Transportation
• Final internment

6. If the deceased was an active or retired member of the military, there are several things to consider. If you choose for the decedent to be buried at a national cemetery, administrators will be extremely helpful with all details.  They will arrange for flags, a military salute, and volunteers to assist with the service.  Volunteers at military funerals view it as an honor to assist and will go out of their way to say thank you for your loved one’s service to their country.

There are many steps in making funeral arrangements, but if you have certain elements in place and you know what to expect, you will get through this difficult time with the help of others who will provide compassionate assistance.  If you want more details on planning a funeral, the National Funeral Directors Association is a rich source of information.

What are some of the other ways to pay for funeral costs?

If you haven’t decided yet that a funeral insurance plan is the way to pay for funeral costs, there are some other options to offset the costs:

• Savings account. This assumes that someone in the family, or perhaps the decedent’s estate, has enough in a savings account to pay as much as $12,000 or more for a funeral.
• Social Security Death Benefit. A small lump sum death benefit is available.  To report a death, call 800-772-1213.
• Supplemental Security Income. Death benefits may be available to low-income SSI recipients.
• Military Death Benefit. If the decedent was serving or is an honorably discharged veteran, there are some limited benefits available through the Veteran’s Administration.  When this is combined with a no-cost, whole-body donor program, it includes free cremation and all arrangements will be included at no cost to the family.
• A Medical Savings Account may have funds that can be used for funeral expenses.
• If covered by Medicaid, contact the agency to see if any funds were put away for funeral expenses.
• Some states and counties offer indigent burial programs. Check with your county’s department of social services for more information; however, many times this type of burial is restricted to those who have no known next of kin or families who are in extreme poverty.

You can also avoid funeral costs by incurring very few, if any expenses.  Here are a few ideas to explore:

• Body donation to a local university medical school to support research and education.
• Body donation to a private organization to advance medical research.
• Direct cremation. This is the simplest form of cremation and offers a low cost, no frills option.  It can range from as little as $400 and up.
• Burial on family property. Many states allow this assuming it is within the zoning laws and health regulations.

Conclusion: is funeral insurance worth it?

Like most important life questions, this is not a simple “yes” or “no” answer.  Every family’s situation is different, and whether to purchase funeral insurance will depend on many factors.

If you don’t carry life insurance, or your savings are not enough to cover the cost of a funeral, then you are a good candidate for funeral insurance.  Likewise, if you are carrying a lot of debt or you don’t want to be a financial burden on your family when you pass, then funeral insurance makes sense.

Once you have made the decision to purchase funeral insurance, make sure you comparison shop between the best funeral insurance companies.  It’s also smart to work with an independent agent who is familiar with funeral insurance and who can answer all your questions and make sure you get the best possible policy for your situation.

We suggest letting a PolicyZip funeral insurance specialist help guide the way as you begin exploring your options.  To get started, simply fill out this form.