Final Expense Insurance is sold by insurance agents not affiliated with funeral homes. It is similar to life insurance as it can be used to pay for your funeral in addition to other end-of-life expenses, such as debts, medical bills or travel costs.
There are two different types of policies you can purchase:
At the time of purchase, you can name any beneficiary. Upon your death, the proceeds go directly to that beneficiary.
Sounds good so far, right?
The downside of Final Expense Insurance is that it is not linked to actual funeral arrangements.
The beneficiary that you name is responsible for using the money from your policy to carry out your funeral wishes. However, since no funeral arrangements are included in the agreement, the beneficiary may not be clear about what those wishes are.
And, although insurance carriers will argue that final expense policies WILL cover funeral costs, there is really no guarantee that your beneficiary will use the money to do so as they can legally use that money for whatever they wish.
It is also important to read the fine print of any Final Expense Insurance Policy. This type of insurance is usually not refundable or transferable, and there is often a commission. This means that a portion of the proceeds from the policy will go directly to the insurance agent from which it was purchased.
Preneed Funeral Insurance
Preneed Funeral Insurance is much different. It is a type of insurance policy that pays the costs associated with your preplanned funeral.
Sold only by a funeral director who is also licensed to sell preneed insurance, this type of policy allows for direct payment of funeral expenses to the funeral home upon your death.
New Jersey funeral homes and funeral directors are prohibited from being named as the beneficiary of any insurance policy. Therefore, in addition to naming a beneficiary, you will be asked to make an assignment of insurance proceeds to the funeral home. This means that the proceeds will go to the funeral home to cover the cost of the funeral that you have arranged following death.
There is also flexibility for payment of these policies as they can be paid in one lump sum or over time.
We know what you’re thinking, and yes, you are correct. The prices of funeral goods and services do often change over time.
Say you make prearrangements today for your funeral and those selections total $12,000, so you purchase a policy for $12,000. Then, years later upon your death, those same funeral selections cost $13,000.
There are two ways in which this can be handled:
Option 1: your next-of-kin can take responsibility for paying the additional $1,000
Option 2: the arrangements can be changed by mutual agreement so that only $12,000 of goods and services are provided
Preneed Insurance not only secures that your money will cover actual funeral costs, but it protects your family members from the financial burden and stress of funeral planning.
For more information on each type of policy, as well as FDIC insured Trust Fund options, email us at KrowickiGornyMH@gmail.com
Published with permission from www.FuneralMatters.com