Preneed funeral insurance is a type of insurance intended to help your loved ones prepare financially for the end of your life. While it may seem morbid to prepare for such an event, a funeral can be an expensive endeavor. Learn more below about Preneed Funeral Insurance and whether it is right for you.
Preneed Funeral Insurance
Preneed funeral insurance is a type of insurance that helps your loved ones cover the cost of your funeral. These plans are also called “prepaid” funeral plans for clear reasons: you buy this policy and pay for it before you pass. To purchase a preneed insurance plan, you first approach a specific funeral home. You then price out your funeral and pay for the costs in advance. Sometimes these costs are divided into guaranteed and nonguaranteed services. A guaranteed service is one in which the price is set when you pay for the insurance. For example, if the facilities fee is guaranteed at $750, you will only have to pay $750 even if it’s decades later and the price has risen. For non guaranteed services, your loved ones will have to pay the difference if the cost rises over time.
Pros and Cons of Preneed Insurance
Preneed funeral insurance has a number of pros and cons. The major advantages of preneed insurance are:
- You get to be in control
- The prices are often guaranteed, and
- Some items can be replaced if they aren’t available in the future
There are also cons. The major cons of a preneed insurance policy revolve around its lack of flexibility. Pre Need plans can only be used on the funeral. Many of them cannot move with you, meaning that if you leave that area and move to a different state, your funeral policy is no longer valid with a new funeral home. Many pre need policies are non refundable. Another con is that some pre need policies have graded death benefits, meaning that if you die within a certain period of time, you won’t receive the death benefit. The last con is that if the funeral home goes out of business, you may not receive your money back depending on the contract.
Costs of a Funeral
To know whether or not preneed funeral insurance is worth it, you should first understand the cost of funerals. Funerals can cost quite a bit of money. The exact amount depends on many factors, like burial vs. cremation, the casket, the funeral home, flowers, reception, etc. The National Funeral Directors Association cite these common fees:
- Non Declinable basic services fee: $2,195
- Removal/transfer of remains to funeral home: $350
- Embalming: $750
- Other preparation of the body: $255
- Use of facilities for viewing: $425
- Use of facilities for funeral ceremony: $500
- Hearse: $340
- Service car/van: $150
- Printed materials: $175
- Metal burial casket: $2,500
A casket can cost $2,000-$5,000 on average or be as high as $10,000 depending on the material. Because caskets are so costly, sometimes a cremation can be less expensive.
Cremation Funeral Costs
For a cremation, you have the choice of a casket and urn or no casket and urn. Without a cremation casket and urn, the total cost of a funeral with cremation is around $5,150. With the casket and urn, the cost is $6,645 on average. For a cremation funeral, the National Funeral Directors Association cite these common fees:
- Non Declinable basic services fee: $2,195
- Removal/transfer of remains to funeral home: $100-$300
- Embalming: $750
- Other preparation of the body: $255
- Use of facilities for viewing: $425
- Use of facilities for funeral ceremony: $500
- Hearse: $340
- Service car/van: $150
- Printed materials: $175
- Cremation fee if using a third party: $350
- Cremation casket: $1,200
- Cremation urn: $295
Miscellaneous Funeral Costs
Miscellaneous costs associated with funerals can add up as well. These include the cost of flowers, the obituary, the grave plot, the gravestone, the church service donation, and the reception cost. The costs on average are:
- Flowers: funeral flowers are $500-$700, burial wreaths $100-$200 each.
- Obituaries: $200-$500
- Grave Plot: $1,000-$4,000 depending on area + opening and closing of grave for $1,000
- Monument/Marker: Upright: $2,000-$5,000 for an upright marker, $1,000 if lying flat
- Church Service Donation: $50-$200.
- Reception: $400-700 with additional cost depending on the venue.
Final Expense Insurance
Another option for covering funeral costs is a final expense insurance policy. A final expense insurance policy is like a smaller life insurance policy. Purchased from a private insurance company, this policy allows your loved ones to cover any costs they need to cover at the end of your life.
Final expense policies typically range from $2,000 to $50,000. They work like any other life insurance policy. You purchase a plan from an insurance company, pay a monthly premium for the rest of your life, and then your loved ones get the death benefit – the policy amount – after you pass. Unlike preneed funeral plans, your loved ones can use the final expense policy death benefit for anything. While many people use the death benefit to pay for the policyholder’s funeral, they can also use it however they say fit. This could be for other debts, like mortgages or private loans, or for something fun for the family, like a vacation. Final expense insurance is very flexible.
Comparing the Two
Preneed funeral policies and final expense insurance policies are two very different ways to prepare for end of life expenses. A preneed funeral policy is bought directly from one specific funeral home. A final expense insurance policy is purchased from an insurance company. A funeral policy is the cost of the funeral paid in advance. A final expense policy is a flexible insurance policy that can be used for any expenses the beneficiaries want.
Have More Questions? Contact Us
For more questions on the differences between a preneed funeral policy and final expense insurance, contact Senior Life Services today.
