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Prepaid Funeral Plans Pros and Cons
What are the prepaid funeral plans pros and cons? Are they more helpful than life insurance or not? We’ll go over what you get with a prepaid funeral plan, and explain why life insurance is a more versatile choice to handle your final arrangements.
Prepaid Funeral Plans: What You Get
To get a prepaid funeral plan, you’ll need to work with a funeral home director. They will provide a list of services that you can choose to include in your funeral. The most basic package will include everything you need for burial.
- If you choose to be cremated, a basic package will include the cremation process, an urn for ashes, a burial niche, and a marker.
- If you choose to be buried, a basic package will include the burial process, casket, a plot, and a headstone or marker.
The next step is to add components for the funeral. It’s not required, but it does give your family and friends a chance to gather together and say their goodbyes. You and the funeral home director will choose the elements you want to include for the event, including:
- Obituary
- Visitation/viewing opportunity for your loved ones in the funeral home
- Graveside service
- Funeral location
- Transportation for your loved ones from the graveside to the funeral
- Any video or photo documentation of the graveside service or funeral
There will be different price points to choose from for your funeral, depending on how large or luxurious you want the event to be. Based on your choices, the funeral home will tally up the cost. A simple burial may cost only $1,000 - $2,000, but a lavish funeral may cost up to $10,000. You’ll then have the option of paying all at once, or making payments for a specified period of time.
While evaluating the prepaid funeral plans pros and cons below, keep in mind that life insurance is also an option that may provide your loved ones with more benefits and flexibility.
Prepaid Funeral Plans: Pros
- Peace of mind. When we’re talking about prepaid funeral plans pros and cons, the biggest pro is the peace of mind you get from having your arrangements completed. By planning ahead, you’ve taken that worry away from your loved ones, who would otherwise be responsible for planning and paying for your funeral and burial during their time of grief.
- Your choices are honored. If you have particular wishes, selecting a prepaid funeral plan can help make sure those wishes are carried out. You don’t have to hope that your family remembers what you asked for, or that they honor your requests.
- Save your loved ones money. The most obvious benefit is the cost savings to your loved ones. If you’ve paid in full, you’ve saved them from the grief and distress of getting a bill from the funeral parlor. Depending on the funeral home, you may also be able to lock in the prices of some items, like urns/caskets and burial plots, that may go up in price later.
Prepaid Funeral Plans: Cons
- Your cash is tied up. Whether you pay all at once or over time, that cash is gone – you don’t have it available for other expenses or emergencies that may crop up. If you’re in poor health, for example, you may need that money for your co-pays, co-insurance, and medications.
- Financing charges for payment plans. If you don’t pay all at once, the funeral home will charge you to finance your payments over time. That increases the cost of every option you selected. Isn’t there a better way?
- Cancellation fees if you change your mind. The choices you make are locked in, since everything is pre-planned and priced accordingly. For example, let’s say you want to keep things very simple and select a cremation, urn, and burial location. If you’ve prepaid for these choices and opted to skip the funeral, what happens if you change your mind later? Similarly, let’s say you prepaid for a funeral and burial in a particular cemetery in the state where you currently live. What happens if you move between now and time you pass away? To make major changes or cancellations, you’ll have to pay a fee and/or administrative costs.
- Additional items may not be included. There are probably some things you’ll want to have that won’t be covered by your prepaid plan. This may include clergy services, music, a printed program, catering, flowers, or pallbearers. This will all depend on the funeral home and how much they’re willing and able to provide.
Prepaid Funeral Plans vs. Life Insurance
Since you’re looking up prepaid funeral plans pros and cons, you’re probably considering whether to buy one. We’re big fans of the idea of planning ahead for your funeral and burial. However, we don’t think prepaid funeral plans are the best way to go. Instead, we recommend life insurance for additional flexibility.
There’s even a specific type of life insurance specifically created to pay for your final expenses. You may see this referred to as guaranteed issue life insurance or final expense life insurance. They both refer to the same type of policy, one you can get even if you have health issues.
So what’s the difference between a prepaid funeral plan and life insurance?
Prepaid funeral plans are an arrangement between you and a particular funeral home for very specific services. Life insurance is a contract between you and an insurance company, where you get to specify who gets the death benefit. That income-tax-free cash payout can be used for anything, which makes it a more versatile way to handle your final expenses. As you’re evaluating the prepaid funeral plans pros and cons, this is an incredibly important point to keep in mind.
Here are some of the benefits you get with a life insurance policy:
- Flexibility. The 100% income-tax-free death benefit can be used for anything. There are no limits or exclusions. If you leave behind medical bills that are more pressing than funeral arrangements, for example, your beneficiary could pay off the most important bills first, and use any amount left over to pay for the less pressing arrangements. That kind of flexibility is valuable since you never know in advance whether you’ll leave medical bills behind, and if so, how much they’re going to be. You may also leave other bills behind, like rent/mortgage, utilities, and your final income tax bill, usually due the year after you pass away. Pre-paying for your funeral won’t cover these kinds of additional expenses…but the life insurance death benefit will.
- Avoid financing charges. If you select a payment plan when making arrangements with the funeral home, you’re probably going to incur financing charges. That means you’re actually paying for the services you want. Life insurance has no financing charge. Your rate is flat and will never increase – it’s locked in when you buy your policy. You know exactly what you’re paying and exactly what your beneficiary(ies) will get.
- Select multiple beneficiaries. You can name one or more beneficiaries for your life insurance policy, including your estate or a trust. This is helpful if your policy is intended to cover more than just your funeral arrangements. For example, you may have a $20,000 policy, but your funeral arrangements are expected to cost $10,000. You could have one beneficiary receive $10,000 and be in charge of planning your funeral, and another beneficiary receive the remaining $10,000 as a final gift. You don’t have to split up the death benefit, but it’s an option available to you that puts you in control.
Rather talk to a real person about life insurance? Let us help! Call us at (800) 521-7873 and let us answer your questions and give you a quote for guaranteed issue over the phone!
How Guaranteed Issue Life Insurance Works
Guaranteed issue is designed for seniors, including those with health issues who would probably be rejected for traditional coverage. There’s no lengthy application process – it’s designed to fast, easy, and straightforward.
- Ages 45-85
- No medical exam required
- Brief medical questionnaire – answer a few questions to make sure you’re eligible. Exclusion factors may include living in a nursing home, or being diagnosed with advanced dementia.
- Multiple insurance providers available, including Corebridge (formerly AIG), Mutual of Omaha, and New York Life
- Coverage ranges from $2,000 - $25,000
- Initial waiting period of 1-2 years with limited benefits (premiums paid + a percentage of interest)
If you’re looking up prepaid funeral plans pros and cons online, you probably haven’t bought one yet. We recommend life insurance instead. Only life insurance gives your loved ones the flexibility they need to handle any additional bills that come their way after you pass away. From final medical expenses to utility bills and your last income tax payment, they’ll need cash to handle these things quickly and move on with their grieving process. A prepaid funeral plan can’t help them with these expenses. If you truly want to leave your loved ones a final gift, consider life insurance.
Rather talk to a real person about life insurance? Let us help! Call us at (800) 521-7873 and let us answer your questions and give you a quote for guaranteed issue over the phone!
