Managing Money In A Crisis
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Should I get life or funeral insurance?
Get peace of mind, knowing your loved ones are provided for after you pass away.
Both life insurance and funeral insurance provide a lump-sum benefit in the event of death or terminal illness, but both products still offer different benefits that can impact your decision of what option will work best for you. We’ve outlined what each covers and what can be right for you depending on your situation.
Life insurance vs. funeral insurance:
In order to make a more informed decision about which form of coverage is best for you and your loved ones, consider the following pros and cons:
Life insurance
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Funeral insurance
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Are burial insurance and funeral insurance the same thing?
Yes, this is the same thing. However, this kind of insurance has two different types of policies:
- Preneed insurance. This is also known as prepaid funeral insurance, which you purchase from a funeral home. Once purchased, you make arrangements and you pay it off all at once or over time. After death, the insurance will cover only funeral expenses.
- Final expense insurance. This is a policy you purchase from an insurance company. In this case, after death, your beneficiary gets the funds and can use them to cover other expenses as well as funeral expenses, including medical bills or legal fees.
Do I need funeral insurance if I have life insurance?
Most life insurance policy benefits are enough to cover the expense of a funeral. If you feel the amount you’re currently covered for isn’t enough, you can add additional coverage to your life insurance policy.
What if I’m over the age of 50?
It’s important for people over 50 and senior citizens to consider whether life insurance or burial insurance is the better option. You should assess your current financial situation, as well as your loved ones circumstances in order to make a more informed decision. Reaching out to an adviser is also a good start for figuring out what will be best for you and your family.
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How does funeral insurance work?
The basic purpose of burial insurance is taking care of all funeral expenses. The following reasons make funeral insurance a useful product:
Key benefits
- Simple. Since it will only cover for your funeral expenses, there aren’t other factors to understand.
- Inexpensive. Typical funeral insurance cover is between $5,000 and $15,000, making it one of the most affordable insurance products on the market.
- No medical exam. Since funeral insurance is paid upon death, there’s almost always no pre-existing medical conditions or medical exams upon application.
- Prompt payout. Once the insured dies, you can process your claim and receive the benefit payment to financially take care of the funeral.
Is funeral insurance for me?
- If funeral expenses are your only worry when you die, then this is the ideal insurance product for you.
- If you’re ineligible for life insurance, then funeral insurance may be suitable for you.
- If you’re expecting a cash lump sum for your family to be used for any purpose, funeral insurance is not the right product — you should consider taking out a life insurance policy instead.
How does life insurance work?
Depending on the type of life insurance policy you take out, you can be covered for death, accidents and illnesses. The key difference between life insurance and funeral insurance is that you get a lump sum benefit that you can use for whatever you’d like.
Key benefits
The benefits of life insurance include:
- An infusion of cash. The biggest benefit of life insurance is that you get a lump sum of cash after the insured’s passing. This can help you cover more than just the funeral expenses.
- Tax treatment. In most cases, death benefits are tax-free, and you could avoid paying tax on the cash amount you withdraw up to the premium you paid for the insurance.
- Flexibility. Typically, you can adjust paying premiums according to your financial situation, including skipping a payment, reducing it or increasing it. Also, some providers may offer a discount if you take a joint policy with your spouse.
- Peace of mind. You could be at ease, knowing your loved ones will be taken care of in case something happens to you.
Why should I consider either type of coverage?
Whether you get funeral or life insurance, here are some of the benefits you can get from it.
- Eliminate financial burdens for loved ones. By taking care of your future expenses, including your funeral and mortgage payments, your family can focus more on important things instead of worrying about their finances.
- Peace of mind. Everybody agrees that one of the reasons people worry is money problems. With adequate insurance, you can be certain that any extra expenses that come with your death are covered.
- You help your family adjust faster. Aside from the emotional side, death can also affect the family’s finances, especially if the person is the breadwinner. When you have insurance — whether it’s funeral or life — your loved ones will be able to grieve properly without worrying about paying whatever debts or financial obligations you might leave behind.
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Bottom line
Just remember that before you sign your name on the dotted line, read the fine print carefully so there will be no unpleasant surprises or false expectations when you make a claim because of some misunderstanding.
Before committing to a single policy make sure to compare providers.
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