Can an Owner of a Life Insurance Policy Designate Its Use for Burial?
When you buy life insurance you generally take out the policy on your own life. However, when you name beneficiaries, you are not able to specify how the proceeds are to be used. The beneficiaries may use the death benefit to pay for your funeral costs, but they may also use the proceeds for some other purpose.
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Significance
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Life insurance contracts allow you to purchase a death benefit in exchange for a premium payment. The death benefit can be flexible or fixed for the life of the contract. This death benefit is always payable to a beneficiary that you name. You can also change the name of the beneficiary.
Types
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Term life insurance is the most basic type of life insurance policy. Whole life insurance offers higher premiums than term life but also offers guaranteed cash values and death benefits. Universal life insurance offers flexible premium payments and death benefits in addition to cash values.
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Benefits
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The benefit of term life insurance is that it is low cost. You can buy a lot of death benefit for a relatively low premium payment. Permanent insurance offers a cash reserve that functions as a savings that you can use for any purpose you want throughout your lifetime.
Misconceptions
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A common misconception is that the policy owner can dictate what happens to the death benefit. Generally, this is not the case. The owner can name beneficiaries. However, the beneficiaries are able to use the policy proceeds in any manner they choose.
Considerations
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If you want to control how your death benefit is given to your beneficiaries, you may be able to dictate how the death benefit is paid out. Some life insurance companies offer the option of death benefit payment options. In this way, the policy owner can have a say in whether the death benefit is paid in a lump sum distribution or in periodic payments.
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