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Recent consumer studies show that a majority of consumers believe advance funeral planning is a good thing to do. One of the benefits cited is the ability to provide funding for the funeral ahead of time so that surviving family members do not have to bear the expense burden when that difficult but inevitable time arrives.
Depending on where one resides, funeral home owners often provide a price guarantee which means they will accept proceeds from a trust or insurance policy as full payment for the funeral at the time of death. Like anything else, funeral costs increase every year so this could be a big savings for a family struggling with the loss of a loved one, especially if survivors are financially strapped.
So, how can a consumer obtain a price guarantee on a prearranged funeral? It all depends on the funding method.
There are a number of ways to set aside funds to provide money for funeral-associated costs. In this article we will explain three of them: Final Expense insurance, Pre-need Insurance and Pre-need Funeral Trust.
Final Expense Insurance
Final expense insurance, sometimes referred to as burial insurance, is typically a term or whole life insurance policy that ranges in face value between $5,000 and $50,000 for which a consumer may name any beneficiary. Typically this beneficiary is a family member who would receive the benefit to carry out your wishes.
A final expense policy is not tied to a funeral contract. This means the beneficiary would use the insurance proceeds to pay for an informal funeral plan that might be on file with a funeral home. Often, however, there is no record of the decedents wishes and the survivors are left to decide what to do. Consequently, the beneficiary may choose to use all of the insurance proceeds for final expenses or in the alternative, use very little and keep the difference.
If there is an informal funeral plan on file with a funeral home and no goods and services contract tied to the insurance plan, the beneficiary and others involved in planning the funeral will be charged current prices for funeral goods and services. For this matter, ANY life insurance proceeds may be used to help pay for funeral costs. Thus, final expense insurance provides something the decedent specifically intended to be used to help pay funeral costs so that other life insurance policies may be used for other needs.
Funding Specific Goods and Services
Consumers have two basic choices for funding an advance funeral plan tied to specific goods and services desired at the time of death: A pre-need funeral trust or pre-need insurance.
About Funeral Trusts:
Funeral trusts may be established by depositing money into an interest-bearing trust account. At the time of death, the proceeds are disbursed and applied to the cost of the funeral. If there are excess proceeds available, they are disbursed to the deceaseds estate unless the pre-need contract states otherwise. If there are not sufficient funds to cover funeral costs and the firm did not specify a price guarantee at the time arrangements were made, your estate or family may be responsible for paying the balance.
Some characteristics of a funeral trust include:
About Pre-need Insurance:
Pre-need insurance is different from final expense insurance in that it is tied to a contract to provide funeral goods and services. In many cases the funeral home will provide a price guarantee, meaning the firm will accept the available insurance proceeds as complete payment regardless if the current price of goods and services exceeds the available benefit. Most insurance companies offer several payment plans including making a single premium payment and time payment durations of 3, 5, 7, and 10 years. A significant benefit in addition to the price guarantee offered by most funeral homes is, if you die before the policy is fully paid-up, you can receive the full benefit of the insurance policy.
Some characteristics of pre-need insurance include:
Summary
It is important to ask questions and fully understand the funeral funding options available to you. Do not be afraid of asking questions of your funeral director or pre-need representative. A funded prearranged funeral is an important part of your complete end-of-life plan. Your survivors will be able to focus on the memories of your life as opposed to the many tasks and expenses involved in your care after death.
Dean Lambert is the VP-Marketing Homesteaders Life Company.
For more information on Homesteaders Life Company visit their website: www.homesteaderslife.com
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