We often think of life insurance as an option for income replacement in the event of your death; a policy for your loved ones to be able to maintain their standard of living once you are gone. But what if you are nearing or in retirement and no longer have those concerns? The one big final expense in your future is the cost of your burial. Have you set aside the funds for your family to cover the actual cost of your death?
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A new InsuranceQuotes.com report breaks down the basics of funeral insurance, offering crucial information and advice for consumers. Laura Adams, senior insurance analyst at InsuranceQuotes.com discussed with FOX Business what you need to know if you are looking for insurance to cover your final expense: your death.
Boomer: What is funeral insurance and what are the different options?
Adams: Funeral insurance is also known as burial insurance, pre-funded burial, and final expense insurance. It pays the cost of your final arrangements after death, such as a burial or cremation. It’s a type of life insurance that covers various funeral expenses so you don’t leave that financial obligation to your family or friends. It helps make a difficult time a little easier for those responsible for your funeral.
You name a beneficiary, such as a loved one or funeral home, who will receive your policy payout after your death. Another option is to enter into a preneed agreement with a funeral service provider, which allows you to pay a set amount over time in advance of your final arrangements.
Boomer: Who makes a good candidate for a funeral policy and who doesn’t?
Adams: Funeral insurance is designed for anyone who doesn’t have money set aside to pay for their final expenses. Most people don’t realize how expensive funeral arrangements can be.
The average cost of a typical funeral in 2017 is between $7,000 and $10,000. That doesn’t even include a burial plot or headstone. Cremation is less expensive, but still costs more than $6,000 on average, according to the National Funeral Directors Association.
While term or permanent life insurance policies are often used to pay funeral expenses, you may not qualify based on your health status or age. Unlike life insurance, with a funeral policy you can be approved without a medical exam or having to answer health questions. Also, you can buy funeral insurance in smaller amounts than with a typical life policy, such as $5,000 or $10,000.
Boomer: What are the average costs of a funeral policy and what does it cover?
Adams: The cost of funeral insurance varies depending on the amount of coverage you choose and your age. It covers every expense related to your final arrangements, up to the policy limit. In general, a funeral policy is more expensive than a term life insurance policy. So, it’s a good idea to shop both types of policies and compare quotes before making a decision.