Is There an Insurance That Just Pays for Funerals?

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Final expense insurance can help families cope with their loss.
Final expense insurance can help families cope with their loss. (Image: Thai funeral image by Adrian Hillman from Fotolia.com)

With the rising costs of funerals and their related expenses, you may be concerned about your family having enough money to pay for your funeral when the time comes. One way to cover the cost of a funeral is to purchase final expense insurance. This is a form of life insurance that's designed to pay for final expenses without consideration for other expenses, such as debt, that the deceased might leave behind.

Identification

Final expense insurance is designed to cover basic funeral costs. It's typically sold in low face amounts, sometimes as low as $5,000. This type of insurance is often referred to as burial insurance because it's often used to pay for the cost of a funeral and any related expenses. However, the beneficiary, who's the person the policyholder designates to receive the proceeds, can use the money in any way she sees fit.

Types

Final expense coverage generally consists of one of two types. Term insurance is a policy that doesn't build cash value and lasts only for a specific time, such as when the policyholder reaches the age of 75 or 80. At that point, the coverage expires if the policyholder is still alive. Another option is a whole life policy, which stays in force for the rest of the policyholder's life as long as the premiums are paid. Although whole life is more expensive than term life, it builds cash value that the policyholder can access while he's still alive.

Function

Final expense insurance is often purchased in conjunction with a "pre-need" arrangement when couples purchase their burial plot and plan their funerals in advance. This eliminates the need to make funeral arrangements during the grieving process at the time of death. It can also relieve the emotional and financial burden on family members such as sons and daughters who may otherwise find themselves needing to pay for the funeral of a parent.

Need

Before you purchase final expense insurance, evaluate your current life insurance program to see if it's something you may need. Final expense insurance is often purchased by senior citizens who have no other life insurance in place. However, if you already have ample life insurance and if your home is paid off and you have little debt, final expense insurance may be an unnecessary additional expense.

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