What is Covered in a Funeral Insurance Plan?

With the average cost of funerals reaching over $9,000, more people are turning to life insurance and funeral insurance plans to cover the costs.

While life insurance is primarily designed to cover a broad range of expenses that include the funeral, paying off debt, and providing income until the family can get back on its feet financially, funeral insurance is narrower in that it is designed to cover just the burial expenses.

The Basic Coverage

Coffin Usually Covered by Funeral Insurance PlanDepending on the type of funeral insurance plan that you choose, all of them are designed to cover the essential expenses associated with burial. The coverage generally includes the following items;

  • Coffin & Vault
  • Service
  • Plot
  • Headstone

The service may just gravesite or in the chapel depending on the size of the benefits. A vault provides protection for the coffin from insects and moisture and is often recommended by funeral homes.

For those seeking only to cover the cost of the funeral, choosing a basic plan is recommended. However, other expenses may be covered depending on the plan that is chosen.

Additional Expenses

You may also choose a funeral insurance plan that covers more than just burial expenses which include, but are not limited to the following;

  • Outstanding Medical Bills
  • Legal Expenses
  • Other Debt: credit cards, auto loans, and the like

While like a standard life insurance policy, a funeral insurance plan that covers additional expenses are usually smaller in nature. This is because the plan does not cover large payments, such as mortgages or providing several months of income to financially support the family.

Types of Funeral Insurance Plans

There are three basic types of funeral insurance plans from AARP, although each of them has variations that can be customized to your needs.

Burial: This is term life insurance with an average benefit ceiling of $10,000. Here, the benefits are paid to a beneficiary who can use the money in any way they see fit.

Preneed: This is usually linked to a funeral director or provider. Paid in installments over a 1 to 10-year period, the benefits will cover funeral expenses and remain in effect for the rest of your life.

Final Expense: This is a term or permanent policy that is not linked to a funeral service provider. It tends to be less expensive compared to preneed, but does have some limitations.

You should examine each type of policy and find the one that works best for your needs. Different insurance providers will have their own rates and benefit levels that can be compared here.

Keep in mind that of the various types of funeral insurance plans, there are three basic policies;

  • Term: Coverage for a particular period, generally 5 to 30 years
  • Permanent: Coverage for life, but more expensive
  • Guaranteed: Coverage no matter your health (suitable for cancer survivors) but the most expensive type

Choosing your funeral insurance plan should be based on your needs and budget so that you get the coverage that takes away the financial burden of burial expenses from your family.