Funeral Insurance
Funeral Insurance
Funeral insurance, also known as final expense insurance or burial insurance, safeguards your family’s financial future by covering the steep cost of funeral arrangements and burial costs. A funeral insurance policy can provide peace of mind, especially for policyholders who worry about imposing additional stress on loved ones during an already challenging time.
In this guide, we outline the basics of funeral insurance in Canada, including how it works, the policy types, and the benefits of having funeral cover.
What is Funeral Insurance?
Funeral insurance is almost like a form of permanent life insurance designed specifically to handle end-of-life expenses. The main features of funeral insurance include the following:
- Coverage: Funeral insurance pays for the cost of a funeral or cremation and any associated costs. Funeral costs can range from $5000 to $50,000, depending on how extensive the arrangements are. Cremations are a bit cheaper, costing around $1000 to $10,000.
- Speedy payout: Funeral insurance offers expedited payouts, usually disbursing the funds within 24 hours of your claim.
- Extra help: It can be hard to focus in the aftermath of a loved one’s death, and many insurers offer guidance to help family members make funeral arrangements during this stressful time.
- No medical exam: Other insurance policies, such as life insurance, often require a medical exam before purchase. However, funeral insurance does not have this requirement, which makes it much easier to acquire.
Policy types
You can purchase funeral insurance either directly from a funeral home or from an insurer. Funeral homes offer a more limited pre-need policy, where you can purchase services and merchandise ahead of time. On the other hand, funeral insurance policies have broader coverage and more flexibility in terms of how the funding is spent.
What Are The Benefits Of Funeral Insurance?
Funeral insurance allows policyholders to plan ahead and preemptively manage funeral costs. This can be especially helpful for estate planning to ensure that the estate can be passed on to relatives and beneficiaries without having to deduct funeral costs. Having funeral insurance ahead of time also ensures that if a death is very unexpected, nobody has to delve into emergency funds or scramble to pay for funeral arrangements at the last minute. The main benefits of funeral insurance include the following:
- Covers funeral costs: Family members and loved ones won’t have to cover the funeral cost out of their own pockets and can mourn without stressing about finances.
- Financial planning: Knowing that funds are allocated for funeral costs can help with other end-of-life planning, such as estate allocation and life insurance payouts.
- Affordable: Funeral insurance is one of the cheapest end-of-life insurance types available. Some individuals use life insurance to cover funeral costs on top of the death benefit sum, but this can be too expensive for some. Funeral insurance offers a way to protect your family from an unnecessary financial burden while still being cheap and accessible.
Funeral insurance is easy to get and cheap to maintain, with plans ranging from $10/month to $100/month. Most importantly, however, they provide much-needed peace of mind for everyone involved.
Choosing The Right Funeral Insurance Plan
Planning your end-of-life expenses is not something to take lightly. Choosing a funeral insurance plan can seem overwhelming and even frightening. To help, consider the following practical steps to narrow down on a good funeral insurance policy:
- What would need to be covered? This will depend on how the policyholder prefers their end-of-life rites to be carried out. A cremation needs different arrangements than a burial. Consider the cost of flowers, caskets, urns, memorial services, burial grounds, and possibly broadcasting services for those who cannot attend in person. These should give you an idea of the cover cost.
- Consider potential out-of-pocket expenses: Some expenses to look out for include the cost of travel (for core family members) and the cost of phone calls.
- Compare local costs: If you know of funeral homes in the area, consider comparing their services and costs for a better idea of how much coverage you need. They can also offer insights to help you plan ahead.
- Consider age: Policies tend to get more expensive with age, so do a little comparison to see which insurer offers the best deals per age group.
- Pre-existing health conditions: While most funeral insurance doesn’t usually require medical tests if you have a serious pre-existing condition, some insurers will include an underwriting process.
- Standalone or rider: If you have life insurance, you may be able to purchase funeral cover as a rider. However, if you don’t have life insurance, you can choose a standalone policy for the same purpose.
By taking the time to consider these practical arrangements early on, your beneficiaries will have less to worry about when the time comes.
Other Funeral Cover Options
Perhaps funeral insurance isn’t the right option for you, or the additional cost doesn’t seem worth the monthly premium. Luckily, there are a few alternatives available:
- Term Life Insurance: For some, term life insurance may offer a more cost-effective solution for covering funeral expenses. For example, a $100,000 coverage on a 30-year term life policy might only cost a woman $16.19 per month and a man $21.21 per month.
- CPP Death Benefit: In Canada, the government provides a one-time CPP death benefit of up to $2,500, which can be applied towards funeral costs. To access it, you need to have contributed to the Canada Pension Plan (CPP) for at least three years.
- Additional Supports: Veterans’ benefits and services for Indigenous peoples are also available in Canada, which can help fund burials.
If all else fails, having an emergency fund set aside can help your loved ones cope with a funeral if anything happens to you.
Conclusion
Signing up for a funeral insurance policy is not just a practical financial consideration but a compassionate gesture towards those we hold dear. Although it can be distressing to plan for a funeral, having these plans in place now can save everyone stress and heartache along the line.
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