When I set out to write about funeral insurance, I was hesitant. I don’t sell it and thought I really didn’t know much about it. But as I researched funeral insurance, I realized I knew more than I thought I did.
Since I started selling life insurance, I’ve been frustrated at times by the fact that people don’t consider buying permanent life insurance—whole life or universal life—when they could save their loved ones a lot of hardship by doing so. If they were to die and had such a life insurance plan, their loved ones would have the available funds to carry out their final wishes.
According to the National Funeral Directors Association, the average funeral cost is now $6,560. Do you have that kind of cash available? If you don’t have life insurance to pay for final expenses, insurance earmarked for a funeral or burial can help direct the money according to your wishes.
State laws allow funeral home directors to sell pre-need insurance to those who want to plan their funerals. The funeral director writes the policy, files the claim, receives the policy benefit amount, and carries out your wishes per the arrangements made in advance. Before you sign anything, review with the director what happens if you change your mind or decide to use a different funeral home. Pre-need insurance laws vary by state. For example, New York does not allow the sale of pre-need.
You also have the option to make prearrangements with a funeral director and establish a trust that is funded with cash. The money is held in trust until your death and is then dispersed to the funeral director. Keep in mind that the cash you deposit into the trust may not be sufficient, depending on inflation. In that case, your loved ones would have to make up the difference. Check your state laws for further details.
If you’re considering buying funeral insurance, here’s a checklist that will help:
- Confirm that your state allows for pre-need insurance.
- Verify the license of the agent, funeral director, or company before doing business with them.
- Obtain a written price list of goods and services from the funeral home. The Federal Trade Commission requires that funeral homes provide this.
- Discuss your options with your family and your lawyer to make sure they are consistent with your will and estate planning.
- Complete all documents before signing them.
- Confirm that funeral arrangements can be moved to any funeral home in the event that you move.
- Keep an easily accessible file that outlines the location of the grave site, including section, row, and plot number.
- If you are able to purchase a pre-need policy, confirm that it specifies the type of outer burial container and marker you have purchased.
- Find out if opening, closing, and marker installation costs are included (the costs of digging and filling a grave aren’t generally included in the cost of the plot).
- Check to see if there are extra fees for purchasing a casket and a marker from a dealer other than the funeral home and cemetery.
- Ask what happens if the cemetery changes owners, goes out of business, or runs out of burial space.
- Make sure you receive an annual statement for your account.
- Ask what happens if you cancel your policy and what you’re entitled to in terms of a refund.
If you want more flexibility and control, I recommend buying a permanent life insurance policy so you can be assured that money will be provided to your family to cover the expenses of your final wishes.