You’ll probably be surprised how affordable final need policies are. With so many affordable options out there, it really doesn’t make sense to leave your family members wondering how they’re going to lay you to rest. wondering how they’re going to lay you to rest. In addition if your parents are still alive, living on limited income and can’t afford even the slightest additional expense, it makes more sense for the children to pull their resources and purchase a policy. It makes far more sense than struggling to come up with the money when they eventually pass.

If you have children, it also makes sense to plan for the unexpected. While children typically outlive their parents, everyone knows someone who has had to bury a child. For $50, or even less per year, you can purchase a policy that will pay out enough to bury your child, if “God forbid,” something should happen. At even the higher $50 per year, if you were to carry insurance on your child until they’re 25 and hopefully out on their own, your total outlay would have been just $1250. That’s far less than you would have paid if they had died unexpectedly.

Life Insurance The basic premise for life insurance is the younger the person is when they’re insured, the less expensive the policy is. That’s why purchasing a small life insurance policy for your minor children is such an inexpensive and wise financial choice, especially if you have limited financial reserves.

Many people shopping for insurance become confused by the wide range of plans. We will try to straighten the policies out here and give you the pros and cons of each option.

Most forms of funeral coverage are backed by an insurance policy. In fact, many people just use their life insurance policy to pay for their insurance. Most funeral homes will take an assignment of a life insurance policy as payment. If you assign the policy to them, the insurance company pays the funeral home out of the policy and any balance comes to the designated policy beneficiaries.

“You may not be able to afford to purchase a big policy and leave your children a large inheritance but by all means, don’t leave them any debt,” said Cliff Cross a local independent agent who sells all-types of insurance. “At minimum at all times, you should try to maintain at least a small policy to cover the costs of your funeral.”

Life insurance policies are typically whole life or term policies. Whole life policies usually cost more per month, but over time, they develop a cash value that can be cashed in ahead of the persons passing. Term policies are much less expensive, but if you cancel them, you don’t get any cash back. In addition, most term policies terminate at a specific age (e.g. 78 or 80-years-old) or after a specific period of time, 10, 15 or 20 years or expire when a person reaches a certain age.

Differences Between Funeral Insurance and Life Insurance?

Life insurance is an excellent means of providing financial security for your survivors even if you do not have assets to leave them. To meet these objectives, most life insurance policies have a minimum purchase of $25,000 or more, which is more than needed for most funerals.

Funeral insurance policies bridge this payment gap because they are specifically designed to cover only your final expenses and, as such, can be purchased in amounts under $25,000. One important feature funeral insurance policies have in common—they are available in much smaller dollar amounts than traditional life insurance. Also, there are typically fewer requirements (e.g., no medical exams) to qualify for funeral insurance policies.

Funeral insurance policies are available from various insurance companies and can be purchased through funeral service providers and their agents, as well as from insurance agents. The terms of these policies not only vary from company to company but also from state to state due to differing state regulations for funeral insurance.

There are basically two types of funeral insurance—“preneed funeral insurance” and “final expense insurance.” The best choice for you depends on your particular circumstances and objectives. Here’s how both options work.

Preneed Funeral Insurance

Preneed funeral insurance is linked to a funeral home, cremation service provider, or other funeral service provider of your choosing. The first step is to choose a provider. Say you’ve picked out a funeral home and made pre-arrangements there by selecting goods and services that total $13,500. If the funeral home offers pre-need insurance, you could purchase a policy right there for $13,500.

Preneed funeral insurance is whole life insurance that accumulates cash value as premiums are paid and has an investment component with a built-in growth rate. Payment plans may be a single lump sum payment or installment plans over 1, 3, 5, 7, or 10 years. Once you have paid the premiums in full, the policy remains in force throughout your life.

Preneed funeral insurance is designed to specifically cover your funeral costs, not other final expenses. The premiums are paid to the insurance company, which acts as a third party between you and the funeral provider. This protects you from losing your investment should a funeral provider go out of business at any time prior to your death. Another protection is that preneed policies have provisions for changing the funeral service provider linked to your policy. Making such a change does involve filing certain paperwork.

Preneed Funeral Insurance and Price Guarantees

Depending on your funeral service provider, your preneed funeral insurance policy may be used to lock in current prices as protection against inflation. To guarantee the price of your preneed contract, your preneed insurance policy will be assigned to your funeral service provider. The eventual payout of your policy will go directly to the funeral service provider, who will accept it as payment in full of your preneed contract, regardless of prices at that time.

Pre-need insurance saves your family effort. The funeral director makes the claim, receives the money, and carries out your wishes.

If your preneed contract is not guaranteed, your beneficiary will receive the payout that may or may not be sufficient to cover the prevailing prices of your funeral goods and services at that time. A price guarantee is good to have when funeral prices rise at a rate greater than the policy growth rate. However, not all funeral service providers are willing to accept this risk and give you a guarantee.

Final Expense Insurance

Final expense insurance, also known as “burial” or “funeral” insurance, is a life insurance policy with a low face value, such as $5,000 to $50,000, that you buy directly from an insurance company. You can name any beneficiary, typically a family member, who would make the claim and receive the money upon your death. That beneficiary would then be responsible for using the money to carry out your wishes.

The beneficiary legally could decide to use the money any way they want, so make sure you trust your beneficiary. Also, if your benefit amount exceeds the cost of your funeral, the beneficiary keeps the difference. For example, if you have a final expense policy for $15,000 and your services and burial end up costing $12,000, your beneficiary would pay the bill and keep the extra $3,000.

Final expense policies are either term life or whole life. They are generally either “simplified issue” policies, for which you’re asked several medical questions but don’t have to take a medical exam, or “guaranteed issue,” where the policy is issued to anyone who applies with no medical questions asked.

People who have a serious health problem may receive a policy with a “graded death benefit,” which means the coverage amount increases over time and your beneficiaries won’t receive the full face value if you die within the first few years of the policy.

Remember any life insurance policy can be used to pay for a funeral. You can buy any term or whole life policy and instruct your beneficiary to use a portion or all of the death benefit for your funeral. The beneficiary legally could decide to use the money any way they want, so make sure you trust your beneficiary. Also, if your benefit amount exceeds the cost of your funeral, the beneficiary keeps the difference. For example, if you have a final expense policy for $15,000 and your services and burial end up costing $12,000, your beneficiary would pay the bill and keep the extra $3,000.

Final expense policies are either term life or whole life. They are generally either “simplified issue” policies, for which you’re asked several medical questions but don’t have to take a medical exam, or “guaranteed issue,” where the policy is issued to anyone who applies with no medical questions asked.

People who have a serious health problem may receive a policy with a “graded death benefit,” which means the coverage amount increases over time and your beneficiaries won’t receive the full face value if you die within the first few years of the policy.

Remember any life insurance policy can be used to pay for a funeral. You can buy any term or whole life policy and instruct your beneficiary to use a portion or all of the death benefit for your funeral.

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