Financial and insurance needs and costs change as people reach retirement. Future insurance planning at this stage of life may be more focused on final expenses such as burial and funeral costs. Those that do not wish their families to pay for these expenses may consider preneed insurance. How do burial, funeral and final expenses insurance plans work and what are the pros and cons?
What are Final Expenses & Preneed Insurance Plans and How do They Work?
These plans are designed to help individuals plan ahead and to fund funeral and burial expenses. They often work on the same principles as regular life insurance coverage in that they pay out on the death of the policy holder. The payment made, however, is solely given to deal with these specific costs. Plans may be paid for in a one-off lump sum in advance or via regular premium payments depending on location and the plan offered.
The actual plans on offer may also vary depending on location. In the United States, for example, an individual may set up a plan tailored to the funeral/burial they want in some detail and costs may be based on the options to be covered. In the UK, on the other hand, these plans are often offered in package based deals. The individual chooses a package that contains the best options for them and may or may not be given the chance to add on other elements if they wish.
What are the Advantages and Disadvantages of Burial and Funeral Life Insurance Policies?
This kind of coverage suits some people simply because it allows them to plan their funeral in advance and to take care of the costs. Some prefer to deal with this before they die so that expenses do not need to be met out of their estates. Those with little to leave behind may also prefer to pay up-front to avoid placing an unnecessary financial burden on their families.
It is important to understand what any final expenses insurance plan offers and what it doesn’t. In the United States, for example, moving out of state may mean that a policy is no longer valid and a refund may be needed. In some cases some insurance companies will not refund full costs if plans are cancelled or changed. Paying upfront for costs may also not guarantee that all expenses will be met if the plan does not take inflation into account with locked in prices.
Things to Consider Before Taking Out Burial and Funeral Coverage
Scams in this part of the insurance sector have led to calls in some parts of the United States to change preneed regulations so it may be worth checking on state laws before taking out a plan. Making sure to read all terms and conditions and to find out what would happen on cancellation is also important.
In the UK some older consumers will use over-50 guaranteed life insurance as an alternative to funeral and burial insurance. These plans often come with some funeral benefits which may be useful. During retirement years it may generally be worth considering whether life insurance is necessary.
It may well be cheaper in some cases to take out a simple life insurance policy to pay for estimated final expenses rather than a funeral/burial plan. Using an online insurance plan comparison site can help compare costs to see if this will be a cheaper solution.
Source: MSN Money
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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