As folks begin contemplating paying for their own final expenses, I often get asked about the difference between a final expense life insurance plan purchased through an insurance company and a pre-need plan purchased through a funeral home.
Which option you choose depends on a few important personal factors and preferences.
A pre-need plan is purchased from a funeral home. One great benefit of this type of plan is that you can pay in one lump sum or in installments; and ‘lock in’ your burial/funeral expenses. You get to fully plan the way in which you will be remembered and laid to rest – relieving your grief stricken loved ones of that responsibility.
Also, for those needing to spend-down their assets in order to qualify for Medicaid, a pre-need contract placed in an irrevocable trust is an asset that cannot be taken away nor counted when qualifying for Medicaid benefits.
Finally, sometimes, your health is too poor or you are past the age to qualify for a traditional whole life policy. In this instance, when you want to be sure that all of your arrangements get taken care of, a pre-need contract is a great option.
An Alternative - Final Expense Plans
An alternative solution is a whole life policy, often marketed by insurance companies as Final Expense plans. With this option, you can still pre-arrange with a funeral home without prepaying in order to determine your estimated costs. Just remember, pre-arranging will not allow you to lock in your price.
A final expense plan is an insurance policy that gets paid directly to your beneficiary(ies) instead of directly to the funeral home (However, you can designate the funeral home as one of your beneficiaries.). You can increase your death benefit to cover things other than funeral services and burial or cremation; such as outstanding medical expenses or even credit card bills. Of course, you’ll want to be sure you designate a trusted family member or friend who will use the money properly for your funeral and other final expenses.
These plans allow you to be in control of your policy and flexible as life situations change. If you want to cancel your policy, change your beneficiary or borrow from the cash value; you are able to do that with a final expense life insurance policy. However, to be cost effective, these plans are most often medically underwritten and are not offered past the age of 85.
Whichever option you choose; preparing for your final expenses is a wonderful gift to provide your loved ones. Oftentimes, they may not know your wishes, and making quick decisions during the death of a family member or close friend can be difficult and overwhelming. Either one of these plans brings about comfort and peace to those you love.
Upchurch Insurance Services works with several companies offering final expense life insurance and can also make referrals to reputable funeral home directors in Indiana for pre-need plans.