What You Need to Know about Pre-Need Insurance Plan
- INTRODUCTION
- PAYING FOR A FUNERAL
- WHAT IS PRE-NEED INSURANCE?
- THE DIFFERENCE BETWEEN PRE-NEED INSURANCE AND FINANCIAL SERVICE INSURANCE
- WHO SHOULD GET PRE-NEED INSURANCE?
- THE PROS AND CONS OF GETTING PRE-NEED INSURANCE
- PROS
- DECISION-MAKING
- GUARANTEED PRICES
- REPLACING ITEMS
- MEDICAL REQUIREMENTS
- CONS
- NO FLEXIBILITY
- HEALTH CONDITION
- NON-TRANSFERABLE AND NON-REFUNDABLE
- ARRANGEMENT CHANGES
- HOW TO GET PRE-NEED INSURANCE?
- DO YOUR RESEARCH
- ASK THE RIGHT QUESTIONS
- GET PRICE QUOTES
Introduction
Making funeral arrangements is never easy, but they are an unfortunate necessity for all people. That is why it’s a great idea to plan for your funeral. This not only relieves your family’s emotional burden but also saves them money on unforeseen expenses.
However, in our current reality, this is not the usual case. People tend to put off their funeral plans until they get older, making statements like “I’m too young for that” or “I’ll probably get one when I’m old enough.” We must remember, though, that life isn’t like our favorite shows and films full of happy endings.
We must face the fact that life is short and full of unexpected turns. You’ll never know what might happen at any given time, and you must make sure to cherish every moment. However, that doesn’t mean you can’t think ahead. You may not be able to control what happens around you, but you can plan your funeral to make things easier for your loved ones when the time comes.
This is where life insurance comes in. This policy can help ensure that your loved ones are financially supported when you pass away. It allows the beneficiaries to afford various expenses such as rent, food, bills, unpaid loans, and others.
Paying for a Funeral
People arrange for funeral costs in a variety of ways. Some start by putting money away in savings plans or low-risk investment accounts. The issue with this approach is that it requires a considerable amount of discipline to regularly put some money away and leave the fund untouched after they have been accumulated.
Others will also have a life insurance policy and want to direct a portion of the death payout against funeral expenses. However, depending on your age, life insurance can be a term contract that expires after a certain period.
If you do not have permanent life insurance, you will find yourself unprepared if your current policy expires. There are several types of life insurance to choose from, depending on the level of coverage, the duration of the policy, and how risky you are to insure based on your age, lifestyle, and hobbies.
One kind of life insurance that you can get is pre-need life insurance.
What is Pre-Need Insurance?
Pre-need insurance is also known as death insurance, funeral insurance, or pre-need funeral contract. It is a form of permanent life insurance covering the expense of funeral care and burial or cremation. A pre-need insurance policy is bought directly from a funeral home. It also allows you to decide all of your funeral plans, including grave plot, ceremony, casket, burial, and so on.
The expenses are determined by the funeral home you select; each funeral home charges a separate fee for its services. There are contractual services and non-guaranteed services in these arrangements. Rates for guaranteed services are set, while prices for non-guaranteed services will vary depending on inflation or changes in consumer prices for such services.
Once done, the funeral home quotes you a fee, and you pay it in advance, either in a lump sum or through an installment basis. This is a smart move for people who want to ensure that their funerals are exactly as they want them and with a way to pay for them.
The Difference Between Pre-Need Insurance and Financial Service Insurance
Both pre-need and final expense insurance has very narrow scopes, which are the final expenses. Despite their shared purpose, their approaches to acquiring and handling policies are vastly different.
Pre-need insurance is billed directly to the funeral home, while final expense insurance is charged directly to the recipient of your choosing. Their distinction is based on their adaptability.
Pre-need insurance is a good option if you want to decide where your funeral will be held and how it will look. However, if you’re still uncertain about the venue and presentation, final expense protection will keep the options open while still covering funeral expenses.
Additionally, keep in mind that pre-need insurance is better for those who do not apply for term life insurance. It is also the best choice for people who prioritize pre-planning and pre-paying their funeral plans. Financial service insurance, on the other hand, is ideal for elderly or less financially stable individuals who may not qualify for a cheaper term life policy or do not have funds for their funeral.
You should also consider these factors when deciding whether to purchase pre-need or financial service insurance.
- Term – Pre-need and final expense insurance do not have an expiration date.
- Death Benefit – When you pass away, the pre-need insurance payment to your beneficiary will be based on the cost of the funeral service and burial or cremation expenses. In contrast, final expense insurance has a guaranteed death payout.
- Age restrictions – Final expense insurance has an age limit of 45 years or more, whereas pre-need insurance does not have one.
- Medical requirements – There are no medical requirements for pre-need or financial service insurance.
- Beneficiary – Pre-need insurance beneficiaries are the funeral home of your choice, while final expense insurance beneficiaries are either the funeral home or your loved ones.
Who Should Get Pre-Need Insurance?
Pre-need life insurance is ideal for those who do not have life insurance but wish to assist their families with end-of-life expenses. This form of insurance also takes away the uncertainty for those who believe that their family members would suffer mentally or financially when arranging their funeral.
Unlike standard life insurance, physical health is not a deciding factor in the approval process of pre-need insurance. Although it seems to be more convenient and less expensive, it frequently has certification standards that may be difficult to meet. Pre-need life insurance can be a suitable option for someone whose well-being prohibits them from having a term life insurance policy.
Pre-need insurance has no qualifications or provisions other than the cost for the plan. This is because you are not buying a conventional life insurance contract with a cash bonus. Instead, you are merely paying for a company’s services before you need them. As a result, pre-need funeral home rates can differ more between businesses than buyers.
The Pros and Cons of Getting Pre-Need Insurance
Pre-need insurance, like all insurance programs, has advantages and disadvantages that you should consider. The following are some of the essential benefits and drawbacks of this insurance policy.
PROS:
1. Decision-Making
With pre-need insurance, you can make your own decisions regarding your funeral plans. This saves your family the hassle of having to choose immediately or negotiate expenses later on. Aside from that, the pre-need insurance payout would be directed to the funeral home. This will alleviate stress and uncertainty from your loved ones.
2. Guaranteed Prices
You don’t have to be concerned about the prices of your chosen arrangements rising or falling because pre-need insurance guarantees all prices. If the rates increase, your family will not be required to make up the difference. However, if the prices drop, you are locked in at the original price.
3. Replacing Items
Assume you’ve been eyeing an item, such as a casket, for your funeral arrangements for quite some time. Unfortunately, that particular casket is no longer available during the actual funeral. Pre-need insurance allows that item to be replaced with one of similar style, quality, and value.
4. No Medical Requirements
The absence of a medical requirement sets pre-need insurance apart from other types of life insurance. Unlike most policies, pre-need insurance often has no other qualifications or conditions aside from the cost for the contract. This is because you are not buying a standard life insurance policy with a bonus. Instead, you are just paying for the services of this insurance before they are needed.
CONS:
1. No Flexibility
Your requirements for funeral services will change over time, and after you have signed the contract, it will be impossible to change your decision. Another consideration is the payout. The pre-need insurance payout goes straight to the funeral home, leaving the family with no option to use the funds on other expenses.
2. Health Condition
Often, you don’t need any medical requirements when applying for pre-need insurance. However, the coverage that you will be using, as well as its effectiveness and expense, will be determined by your health status. In addition, if you pass away within the first few years of the policy, the beneficiaries will not receive the full death benefit.
3. Non-Transferable and Non-Refundable
Your pre-need insurance policy can forbid you from transferring your plans to a different funeral home or entity. This means that you may not receive a refund if you cancel. The pre-need insurance policy must also be paid in full at the time of death. If you do not meet this requirement, the death benefit will not be guaranteed.
4. Arrangement Changes
When your survivor implements certain changes, such as new services or products, your existing pre-need insurance policies will become null and void. If this occurs, your family may be forced to pay higher funeral costs. Aside from that, a lot can happen between the moment you buy pre-need insurance and when you need it. Read your contract thoroughly to find out what happens if the funeral home of your preference goes out of business unexpectedly.
How to Get a Pre-Need Insurance Plan?
Acquiring pre-need insurance is not the same as purchasing policies from an insurance broker. Nonetheless, the procedure is straightforward. These are the steps to follow when buying pre-need insurance.
1. Do your research
There are funeral homes that provide pre-need services and can handle special demands for burial or service. They can also administer funeral plans after the insured person passes away. Aside from doing your research, please ensure that the funeral homes you are considering are fully licensed to avoid wasting your time, money, and other resources.
2. Ask the right questions
When you’ve already compiled a directory of funeral homes you’d like to apply for pre-need insurance, contact them during business hours. You must also ask specific questions with funeral home directors. This encompasses pricing, service types, cancellation policies, and the adjustment process for the funeral plans.
3. Get price quotes
Obtaining pricing information on your pre-need insurance policy is important. Each funeral home has its own range of insurance prices, so it is advisable to get price quotes for at least three options. This allows you to see and compare which one gives the best value for your money.
4. Choose a funeral home
After determining how much your funeral will cost based on the quotations and facilities of funeral homes, you can now choose the one that matches your financial capability. After that, contact your preferred funeral home to begin the final contract arrangement process.
