In most states, you cannot name a funeral home as a burial insurance beneficiary. However, if you would rather the payout of your policy be given directly to the funeral home, then preneed insurance is available for this reason. But, do keep in mind that preneed insurance may not be the best option and here’s why.
Burial vs. Preneed Policies
Funerals are expensive, costing up to $10,000 with burial or cremation. When it comes to planning, you will want to do as much as possible to save your family from making arrangements themselves. In that case, you will look to funeral homes. That way, you can prepare ahead of time and have everything ready with minimal work on the part of your family.
The question is, then, how do you pay the funeral home? Because they are so pricey, you will likely want to purchase a life insurance policy to cover it. Burial insurance can cover funeral costs and more depending on your age and the policy you purchase. When you pass away, the payout, or death benefit, is issued to your beneficiaries.
With a burial policy (except in a few exempt states), you cannot name a funeral home as a beneficiary. Instead, you can name your loved ones, who can then apply the money to your funeral when the time comes.
There is, however, a type of burial insurance that is purchased through a funeral home, with the payout issued directly to them instead of a named beneficiary. With a preneed policy, the funeral home is technically a beneficiary.
Why Preneed Is Not Your Best Option
Though both burial and preneed insurance are meant to cover funeral expenses, there are many key differences you need to consider.
Burial insurance:
- Has death benefits as much as $50,000, but typically between $10,000 and $25,000.
- Requires payouts be issued to beneficiaries. This can be one or more people and typically includes secondary and even tertiary beneficiaries to ensure that your money ends up in hands you trust.
- Can be purchased up to age 85 and sometimes older, with minimal to no consideration of your current and preexisting health.
- Covers funeral costs and other small, final expenses, such as medical bills, estate taxes, credit debt, and other minuscule costs that fit within your payout.
Preneed insurance:
- Has death benefits that only cover your funeral expenses. They range from $2,000 to $10,000 depending on the cost of your arrangements.
- Requires that the entire death benefit be paid to the funeral home rather than to loved ones. This is the main caveat of preneed insurance—if inflation lowers the price of your chosen arrangements, you do not get that money back. Of course, if prices increase, that also means you do not have to pay more than your agreement. Inflation is not the only factor of change, however.
- Does not account for personal or funeral home changes. If the funeral home alters the price of any of its items or services, you will not see any of those changes reflected in your monthly payments. And, if you or your loved ones decide that they want to change something in the arrangements, you will not see decreases reflected in your monthly payments. You will not be able to increase any of the services’ costs unless you pay out-of-pocket.
- Covers your funeral costs, but nothing more. You and your loved ones will not have access to the money and no flexibility for how to use it. Burial insurance, on the other hand, can be used for other small final expenses if it fits within your policy.
Planning and Paying for Your Funeral with Burial Insurance
If preneed is not a good option, how can you ensure that your funeral is planned and paid for? With burial insurance, you will still be able to make arrangements with a funeral home. Instead of paying the funeral home directly, however, you will make your premium payments to the insurance company.
To plan your funeral ahead of time, here are a few factors you will want to consider, all of which will likely be brought up when speaking with a prospective funeral home:
- Whether you want to be buried or cremated. Cremation costs less than burial because you do not have to purchase a casket. If you choose a burial, you will also have to choose said casket.
- Specify the location of and type of service you would like. This can be a religious service held in a church, a military service at a memorial site, or anything available you would like. Your preferences matter and there are plenty of ways to ensure your loved ones feel comforted and close to you.
- You can also select very specific details, down to your style of makeup and clothes, jewelry, hairdressing, flowers, and more.
How to Ensure Your Beneficiaries Cover Your Funeral Costs
There are ways to ensure that your beneficiaries cover your funeral expenses with the burial policy as you intended. The first and most obvious way is to simply choose trustworthy people—in a majority of cases, you will choose your child, relative, or close friend, someone you inherently have confidence in.
Even still, you may be concerned that your beneficiary will misuse the death benefit and leave your funeral unfunded. If you inform the funeral home of your intentions and who you have chosen to pay for their services, this will keep the beneficiary accountable for the expenses.
You may also get a Durable Power of Attorney for Health Care (DPOAHC) that allows you to choose the exact person (i.e., your beneficiary) to see out your death benefit to your wishes. As long as the individual is aware of this contract, you can rest assured that your expenses will be taken care of in the way you intended.
Get the Info You Need to Make an Informed Decision
Quite a bit of work, financial planning, and stress go into funeral planning. You may want to name a funeral home as your beneficiary, but doing so with a preneed plan leaves a lot of variables and lacks the flexibility of a burial insurance policy.
So, when it comes to planning, finding, and purchasing a burial policy, you know who to call. Senior Life Services is here for you when you need us most. Give us a call today at 800-548-3249.
