Life Insurance and Funeral Trust Funds
If you are interested in preplanning a funeral or cremation service, there are several options to help cover paying for the service. In most cases, each of the options below will cover some or all of the expenses related to the prearranged service. For exact details, please make sure to consult with the funeral director during the arrangement process.
Depending on the type of contract, the cost of the service could change over time. With a guaranteed pre-need contract, the price is firm and does not change. However, if your contract is not guaranteed, the price could rise over time due to changes to inflation or the funeral home’s pricing.
You should also make sure to consult the funeral director about the terms of your contract before anything is finalized and made official. This includes everything from whether the price is guaranteed to what happens if there are any remaining funds after the service is paid for. Below, we have outlined several different options for covering the cost of a service. As always, if you have any questions or concerns about insurance and trusts, please feel free to contact us. A member of our staff will gladly speak with you and provide further information about the different options available to you.
Life Insurance
Depending on the face value of the policy, a life insurance policy will pay a fixed amount. Generally, the face amount is not the same as the amount of the services, merchandise and cemetery costs selected or required. Unless the pre-need contract is guaranteed, the actual costs may be greater than the policy proceeds at the time of need and additional funds may be needed from the survivors.
Funeral Insurance
A funeral insurance policy can be purchased in an amount to pay the costs of the services, merchandise and cemetery costs selected of required. If the prices are guaranteed, the survivors will not be charged more than the contracted amount. Before you purchase funeral insurance, you should know, in writing, exactly how much you will pay over the length of the contract and what will happen if you cannot, or do not, pay the premiums.
Funeral Trusts
A funeral trust can be purchased in an amount to pay the cost of the services, merchandise and cemetery costs selected or required. If the prices are guaranteed, the survivors will not be charged more than the contracted amount. Before you buy a funeral trust, you should know: if the prices are guaranteed, the terms of cancellation, if the funds increase in value, who will receive any remaining funds after the contract is fulfilled, and what happens if the death occurs before the trust is paid in full.
Savings Accounts
A savings account or bank-held trusts are accounts established with the savings in a loan or bank, to pay funeral expenses. These are generally not guaranteed cost contracts by the service and merchandise provider. You would need to notify the provider and your family of their existence. You have complete control of the funds.
Sources
- National Parks Service, "Burial Customs and Cemeteries in American History", accessed 2014
- Funerals & Flowers, "Death and Funeral Customs", 2013
