Funerals are actually for the living, the well-wishers, the loved ones, friends, & family who grieve, say their goodbyes, and celebrate our life one last time before finally letting us go.
We usually tend to avoid the whole concept of making funeral arrangements for ourselves. We like to think that it’s not something worth looking into, but inadvertently so, we put our families at potential risk.
So, even if you do not want to think about your own death, it is crucial to plan ahead and take care of your funeral preparations to spare your loved ones the burden. In this article, we’ll be discussing prepaid and pre-planned funerals and why you should consider them.
Why Should You Prepay Your Funeral?
After your passing, your family will have to make a lot of decisions. They will have to make complex financial decisions, which they might not have any experience in and might end up in substantial financial debt by spending unnecessary money.
So, to make sure they don’t go through any of that, you can take up an insurance policy that will cover all the aspects of the funeral according to your choice. But you also have to be sure to choose the right one since their situations can change at any point.
This is where Insurance For Final Expense comes in. It is an independent intermediary agency that offers more than one carrier to their clients and helps them choose the best possible option according to the clients’ convenience. For further queries, you can visit insuranceforfinalexpense.com.
What is a Prepaid Funeral?
To go into a contract with a funeral home, paying them ahead of time to arrange a funeral according to your wishes in the event of your death is called prepaying a funeral.
There are various approaches to this; the choice depends on your preferences and financial capabilities. Typically, the expenses of a funeral range from $10,000 to $25,000; they have to be paid in installments to the funeral home.
Prepaid funeral plans are meant to remove the burdens from your family to arrange a funeral after your passing. It’s for people who don’t want their family to go through all the mental and financial hassles while grieving.
What is a Pre-planned Funeral?
To carefully plan and select the kind of funeral you want to have in the event of your death is called pre-planning a funeral. Starting from comparing prices of cemeteries & caskets to selecting the place where you want to have your memorial, all should be planned thoroughly to avoid any future financial trouble.
You have to make a decision on where and how you want to be buried or cremated; this way, your family won’t have to make any decision under challenging circumstances.
Having to find a cemetery and a funeral home and purchasing a plot in a matter of days is no easy task, especially when you’re in a bad phase. After getting all these in check, you can rest a bit easier, thinking at least you lessened a few problems for your family.
What Kinds of Prepaid Funeral Plans are There?
It’s not recommended to prepay your funeral expenses before planning properly since there might be potential risks involved. But some people still decide to prepay their funeral services. The funeral homes offer the following policies –
Whole Life Policy
In whole life policy, you pay a certain amount of money in installments like you would in a regular insurance policy for a lifetime. In the event of your death, your beneficiary receives the coverage money and makes funeral arrangements.
It’s not recommended to name the funeral home director as your beneficiary since there can be a breach of trust.
Burial Insurance Policy
This type of final expense insurance policy is purchased from an insurance company. It covers the cost of all related expenses, including medical bills, transportation, and funeral expenses in the event of your death.
Your beneficiary also gets to use the coverage money as they see fit. This type of life insurance policy is highly recommended by many people.
A revocable trust can be revoked, cashed out, or canceled at any given time by the policyholder.
To set up a revocable trust fund, you have to sign a contract with the funeral home to pay for your funeral arrangements in installments. The funeral director opens an interest-bearing account to deposit your installments. The trust can be cashed out, after your passing, to pay for your funeral.
An irrevocable trust fund is almost the same as the revocable trust fund. It allows you to prepay your funeral expenses in installments to the interest-bearing account, but once you transfer money into this trust, you no longer can cancel, cash out, or revoke the fund at any time.
The funds can only be transferred to a different funeral home and cashed out at the event of your death.
What Expenses Does a Prepaid Funeral Plan Cover?
A funeral plan usually covers everything you want for your funeral. You can customize the list of services that you wish to avail, starting from casket, flowers, transportation, to a funeral home, headstone, and cemetery plot.
The funeral director will fix a price based on the list of everything you want to include in the policy, and that will be the amount you will have to pay in installments or lump sum.
In general, most of the policies range from $10,000 to $25,000. In addition to the cost of the funeral, there might be some other fees, such as administration setup fees of $100 to $200 and some yearly maintenance fees of $50 to $150.
What Should You Consider Before Prepaying Your Funeral?
You have to be very cautious when getting into a contract with a funeral home. Even though funeral homes and their directors are not bad people, their situations can change over time. There have been many cases where the funeral homes were charged with violations of trust & misspending money.
So, before going into a contract with a funeral home, carefully consider asking these questions –
- How much is covered in the agreement?
- Is there any expiry date?
- How long will your beneficiary have to wait before a payout is given?
- Can you cancel or revoke your agreement at any point, and if so, will it be a full refund?
- Is there a “redemption clause”?
- Can you transfer your funds to another funeral home, and if so, is there any extra cost involved?
- What happens to your money if the funeral home goes bankrupt?
- What state laws are there for prepaid funeral services?
What Alternatives are There to Prepaid Funeral Plans?
Prepaying funerals is very risky and often pose a potent threat against the policyholders and their families. Most of the time, the benefits that they provide upon the death of the policyholders are far less than the installments previously paid.
Sometimes, they don’t cover funeral expenses if the policyholder dies within a few years. There are many loopholes in the contracts they provide. That’s why you should consider alternative options, such as –
Set Up a Payable on Death Account
Totten Trust, otherwise known as Payable on Death (POD) account, is a form of a trust fund that an account holder opens in a bank, deposits money, and instructs to pass on the account to his beneficiary in the event of his death.
With this account, you can choose your beneficiary, add or withdraw money according to your convenience, and make sure your beneficiary gets the funds after your death.
Use an Existing Life Insurance Policy
If you already have an existing whole life insurance policy, it would be the most suitable way to cover your funeral expenses. The death benefit will most likely cover all the expenses related to your funeral & burial. You can also go for a final expense or burial life insurance policy.
Making funeral arrangements for a loved one after their departure is a heavy burden to bear. At a time of grieving, when the family is already in an emotionally difficult position, it’s hard for them to focus on anything else.
So, prepaying your funeral expenses to give your family a breather from unexpected costs can put your mind at ease. But try to shift your focus from prepaying your funeral to pre-planning it. If you plan it right, you might just save yourself and your family a big chunk of money and time.