Burial insurance comes in various forms: paying a funeral home a preset amount, buying a life insurance policy, or self-funding. What is essential to know is two main distinctions between final expense life insurance and preneed funeral insurance.
Final Expense Insurance is designed to cover the bills that your loved ones will face after your death. These costs will include medical bills and funeral expenses. Since final expense insurance is a whole life insurance policy, they earn interest in the form of a savings type account called cash value. They are a popular choice for seniors that want to get something fast, easy, and affordable. I am a fan of these plans because the death benefit is income tax-free, exempt from creditors, and has no restrictions on death benefit.
Preneed Funeral Insurance is purchased and paid directly to the funeral home of your choosing. Individuals can make payments over time or pay in one preset lump sum. Make sure to note if you own a pre-need plan or shopping for one, ask if the program is Guaranteed or Non-Guaranteed. Non guaranteed does not cover price increases, such as; casket prices raising, your family will become responsible for the price increase. Guaranteed services include any increases in cost and will be covered by the funeral home. That is an essential factor to consider as inflation can rack up the price fast.
In summary: Final expense life insurance is less rigid and does not solely have to be used for funeral costs. Preened insurance can have financial risks that do not come with final expense insurance. For example: if a funeral home goes out of business, your preneed policy will likely disappear. If you are having questions about which option is best for you, please do not hesitate to reach out to an Inszu specialist today.