Pre-Need Funeral Insurance

Although you might be trying to be financially responsible and have your “fiscal ducks in a row,” signing of for “pre-need” funeral insurance is not the way to go about it. 

Pre-need life insurance is an insurance policy whose benefits cover the cost of the predetermined expenses of a funeral, cremation or burial.  The expenses typically include standard funeral home services, funeral merchandise, church services and even burial services.  The purpose of this insurance is to set aside funds for your funeral, thus protecting your loved ones and your financial assets.

While this may like a good plan, there are downsides.  Pre-need funeral insurance costs a lot of money.  There are hidden fees, and your survivors could shell out a lot more cash when you die.  The plans are often nonrefundable, meaning you cannot change your mind or switch mortuaries. 

The New York State Funeral Directors Associate has criticized pre-need funeral insurance, stating that “There is great potential to do what is not best for the consumer because of the motivation to make commissions,” and “Preneed funeral insurance is sold in a way that leads our families to believe that it will completely pay all at-need costs even though that is rarely the case.”

Rather than getting pre-need funeral insurance, consider setting up a pre-need funeral trust.  This allows you to put money aside for funerals, and also offers advantages including portability, earned interest to aid with inflation, and no sales commissions. 

See Selena Maranjian, Think Twice About “Pre-Need” Funeral Insurance, The Motley Fool, Nov. 19, 2014.