Today, many tools on the market will help you plan for retirement, financially protect your family, and leave money for loved ones if something were to happen.
None of us know when our health will decline, this makes having a plan for our end-of-life expenses so important. There are so many financial products on the market it is easy to get overwhelmed.
This makes us question if these products are even worth pursuing.
Is Funeral Insurance A Good Idea?
Funeral Insurance is a great option for anyone looking to secure affordable coverage that never expires. This policy type allows seniors to not leave a financial burden behind while allowing their loved ones to lay them to rest respectfully.
To know if funeral life insurance is the right choice for you, learning the plan basics and exploring other options is the place to start.
Funeral Insurance Basics
This product is a type of whole life coverage. Two main factors make up the difference between funeral insurance and a traditional whole life product.
Simplified Issue Underwriting: You will never be asked to take a medical exam. This makes the application process much faster, with fewer hoops to jump through. All that is required is a 30-minute application that can be done over the phone from the comfort of your home.
Affordable Coverage: This product type has low coverage amount options. It allows for a much more reasonable monthly premium compared to what a larger traditional whole life insurance plan would cost.
Three main benefits come with a whole life plan.
Price Lock: Your price will never increase. As any senior on a fixed income knows that understanding your monthly costs down to the penny is absolutely critical when budgeting each month. With this product, you will receive peace of mind knowing your premiums will never increase.
Coverage Lock: When purchasing a policy meant for your end-of-life expenses, it is important that the plan is available during the time it is intended for. Some plans on the market actually terminate once you reach a certain age. Fortunately, this product is not one of them.
Builds Cash Value: For every monthly premium payment made, a portion goes towards the cash value account. Over time this account will grow, and seniors will have the opportunity to borrow against the plan if they choose.
The Payout can be Used for Anything
No rules or guidelines dictate what the beneficiary has to use the death benefit for, but there is a list of typical items purchased with the lump-sum distribution.
- Funeral Expenses
- Leaving an Inheritance
- Legal Expenses
- Medical Bills
- Charity Donations
- Remaining Balance on a Mortgage
- Credit Cards
- Post-Mortem Expenses
- Remaining Car Loan Balances
- Other End-of-Life Expenses
After adding all these expenses up, the final bill can be well over $20,000.
There are four tiers of plans within funeral insurance for seniors. There is at least one option that everyone will qualify for within these tiers.
Level: This plan is meant for the healthiest of seniors, offering immediate coverage and the lowest premium costs.
Graded: This plan comes with midpoint pricing and a favorable two-year waiting period plan structure. If you have had past surgeries or a recent medical diagnosis, this plan might be right for you.
Modified: This offers a standard two-year waiting period and higher premiums. Some companies offer this product type, but in most circumstances, you would be in the best position using a guaranteed issue plan due to the policy’s details and price.
Guaranteed Issue: Asking no medical questions and respectable premiums, this plan is meant for seniors with chronic or terminal medical conditions. Also, this plan is beneficial for someone who does not want to answer health questions. There is a two-year waiting period attached to the policy.
Cost And Quotes
When researching if this product is a good option for you, a major factor in this decision is the price. The average policy costs $50-$90 per month. However, this can drastically differ depending on multiple variables.
How is the Price Calculated?
The price will depend on the four key factors below.
Age: Once the policy is issued, the price will never change. However, the longer seniors wait to lock in coverage, the more the price will increase. The older you are at the time of application, the more expensive the premiums will be.
Gender: Males will pay more than females for the same coverage. This is due to many reasons, but the most prevalent is that women on average live four years longer than men.
Health: Your health carries the most weight when it comes to price. This is because the more complex your medical history is, the more liability is on the carrier. The way they lower their risk is by charging more for the policy and instituting a waiting period.
Policy Amount: The more coverage you take out, the higher the monthly premiums will be.
What is the Average Cost of Funeral Insurance?
The charts below show the range that seniors can expect to pay in correlation to their age and policy amount.
The healthier the applicant’s medical history is, the lower the price they can expect to pay.
Monthly Premium Range
|45||$23 – $34||$32 – $49||$42 – $64|
|50||$24 – $39||$35 – $57||$45 – $80|
|55||$28 – $47||$40 – $69||$52 – $103|
|60||$33 – $54||$48 – $80||$63 – $119|
|65||$41 – $66||$60 – $99||$79 – $146|
|70||$53 – $80||$78 – $120||$103 – $177|
|75||$72 – $116||$107 – $173||$142 – $254|
|80||$98 – $190||$146 – $283||$194 – $411|
|85||$136 – $220||$202 – $328||$269 – $436|
Monthly Premium Range
|45||$27 – $47||$39 – $68||$51 – $89|
|50||$31 – $56||$44 – $83||$58 – $110|
|55||$36 – $61||$52 – $91||$69 – $135|
|60||$44 – $68||$64 – $101||$84 – $149|
|65||$56 – $91||$83 – $135||$110 – $199|
|70||$75 – $106||$110 – $158||$146 – $233|
|75||$100 – $150||$148 – $223||$197 – $328|
|80||$140 – $232||$208 – $346||$276 – $461|
|85||$193 – $312||$288 – $467||$382 – $621|
Other Ways Plan For Funeral Costs
There are alternative funding options when preparing for your end-of-life costs. However, each comes with important policy factors that should be discussed with your loved ones and family.
Traditional Whole Life
This product is a permanent life insurance plan that has many different uses.
Whole Life Benefits: Offering standard whole life insurance benefits, you will be assured that your monthly price will never change, your coverage will never decrease or terminate, and the cash value will build.
Larger Policy Amounts: Since policy face amounts start at $50,000 – $100,000, the monthly premium will be much more expensive than a smaller policy designed for your end-of-life expenses.
Used to Shelter Wealth: If you speak with a financial advisor, they may recommend using this product as a wealth planning tool and a tax strategy.
Term Life Insurance
This plan type is right for certain situations. However, be cautious using it as your plan to pay for end-of-life expenses.
Coverage Expires: The coverage will eventually terminate. For example, if you take out a 20-year policy at the age of 60, your policy will expire when you turn 80 years old.
Price is Cheaper: Due to the policy offering temporary coverage, the monthly premiums are less expensive than whole life insurance coverage.
Does Not Build Cash Value: There is no cash value built with this policy, so it is ultimately like renting coverage each month.
Pre Need Insurance
This plan is specifically designed for your end-of-life expenses, in which you will work directly with a funeral home. There are a few main things to know about this coverage option.
Covers Funeral Expenses: This product is designed to cover the costs associated with a funeral home. Included are caskets, urns, etc.
Funeral Home is the Beneficiary: The mortuary will be the beneficiary, meaning the payout will go directly to them and limit the flexibility of what the money can be used for by loved ones.
One Funeral Home Only: Working directly with a mortuary may sound like a good idea, but there are a few reasons you may not want to pursue this option. Consider what might happen if this business is no longer operating when your health fails or if you change the city or state you would like to be laid to rest in.
Using this type of coverage will limit the flexibility you have in making some life decisions.
Savings or Investment Account
A savings or investment account can seem like a safe bet to save for pre-paid funeral costs, but there are still risks.
Passing Away Unexpectedly: You can have a great game plan to save for these associated costs, but no one knows when their health will decline. If you pass away sooner than planned, this can leave a crippling financial situation for loved ones if you have not yet saved enough.
Investment Instability: The investment market can be extremely volatile and not perform the way you hoped for.
Inflation: Like all currencies, the US dollar can fluctuate in value, and no one knows if your savings will outpace the rate of inflation.
Frequently Asked Questions
How Much is the Average Funeral?
In the United States, the average funeral service cost with viewing is $7,643 and $6,280 for cremation. This cost estimate can vary drastically depending on a wide variety of selected options.
Not included in these price estimates are the cost of headstone or plot of land.
Is it Better to Have Life Insurance for a Funeral Plan?
Having adequate life insurance coverage will guarantee that your family has the financial resources to cover funeral costs. Saving money every month is a good idea in theory, but it is impossible to predict when your health will decline and your saving efforts might come up short to pay for your funeral.
Can I Purchase for Someone Else?
A few rules need to be followed when looking into purchasing this product for senior parents or elderly grandparents. The applicant needs to be involved in the process. They will have to be able to answer the medical questions and sign their name on the application.
If they apply for a guaranteed issue plan with no medical questions, they will still need to be healthy enough to sign their name and understand what they agree to.
By getting life insurance, you are entering into a contract with the provider.
a. When asking is funeral insurance a good idea, it is important to clarify how your plan works and the benefits and features that come with it.
b. Understanding the costs associated along with your monthly budget will help you make an informed decision. The healthier you are, the lower you can expect to pay in monthly premiums.
c. There are other financial options on the market, but you should make sure the plan you use makes sense for your specific financial situation.
I’m the owner and founder of Willamette Life Insurance. Willamette Life specializes in Final Expense Insurance. We compare prices with different insurance carriers while finding the perfect match for your health and budget. This company was started to help educate the public on why Final Expense Insurance could be a great option for them and their family. We strive to be friendly, informative, and always have the client’s best interest as our top priority. Everything in this article is my own professional opinion and experiences I have had during my time in helping clients.