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Funeral insurance 101: How to plan for your end-of-life

Along with age comes wisdom and the acceptance that life and our time on earth is finite. As we enter our golden years, many of us reflect on our lives and our legacy. With this reflection also comes a profound realization: end-of-life costs. Funerals, caskets and services all come with a large price tag. If not planned, these costs can surprise and burden your loved ones. 

Even the simplest funerals can cost you thousands of dollars. One of the final gifts you can give your loved ones is final expense insurance. This coverage covers all of the funeral bills that your family may incur on your passing. You can avoid putting this unnecessary financial stress on your family by ensuring that you have funeral insurance in place.

While many people are more familiar with life insurance, you may be unaware of what final expense policies entail. Let’s dig in.  

What is funeral insurance, anyway?

Funeral insurance is a subset of life insurance. The difference is in the details. life insurance provides your family with financial support following the loss of the deceased’s income, whereas funeral insurance is more specific. Unlike life insurance, funeral insurance covers the “final expenses” such as the funeral service, casket/urns and cremation costs, travel fees for family flying in from abroad and more. 

There are specific funeral insurance plans you can purchase. Each of these types of insurance will dictate how your beneficiaries will spend the benefit following your passing. For example, your loved ones can use a burial insurance plan to pay for your end-of-life expenses, while a guaranteed issue life insurance plan gives them more flexibility on how they spend the money. 

In other words, a burial insurance plan will only allow your family or beneficiaries to spend on your end of life plans and final wishes.  

Many elderly people who are at the end-of-life tend to not get funeral insurance because they believe they won’t qualify. However, there are many options for those who are older or in poor health, including simplified and guaranteed issue policies (for example) for those that don’t qualify for traditional life insurance. If you’re a senior looking for insurance, remember that you have options. Everyone can get the coverage they need.

Funeral insurance vs. life insurance

Often you buy life insurance to support your family with replacement income after you die. It’s a way to take care of those closest to you who will be financially affected by your passing.

Funeral insurance provides assistance and benefits to cover any end-of-life expenses, including cremation fees, caskets or urns, and even costs to fly in family members from out of town.

The coverage on a funeral insurance policy can range anywhere from $10,000 to $50,000, tailor it to match your final wishes. 

If you already own a funeral insurance policy, you can name anyone you wish as a beneficiary. This person is typically the family member who will use the benefit payout to take care of any funeral costs. 

If you don’t have a family member to depend on to carry out your wishes, then your beneficiary can be someone else you trust.

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How much funeral insurance coverage do you need?

Many variables can impact the overall cost of a funeral including:

  • choosing a casket or an urn 
  • burial vs. cremation
  • the choice of flowers
  • having a viewing
  • broadcasting the service via Zoom during the pandemic, and more. 

To get as accurate of a cost breakdown as possible, start first by planning your final wishes. If you need help understanding where to start, check out Eirene’s free resources on how to plan and choose your preferred end-of-life arrangements.

Once you understand how you’d like to be memorialized, you can get a better idea of what coverage you’ll need. 

The difference between pre-need and funeral insurance

When researching funeral insurance for you or your loved ones, you’ll come across many types of coverage. To determine the best option for you, it’s vital to understand the difference between pre-need and final expense policies.

Pre-need Policies

Typically, you buy pre-need policies from a funeral home. To make your final arrangements while still alive. These expenses can include standard funeral home services, merchandise such as caskets, urns and flowers, and other burial or cremation costs.

Upon your death, your pre-need policy is paid to the funeral home you chose during pre-arrangement. Note: a pre-need policy doesn’t need to be paid in full in one go. You have payment options that can be spread out over several years.

Funeral Insurance Plans

Alternatively, you have the choice of a funeral insurance plan, which you can purchase through an insurance company for a fixed amount of coverage. 

This type of policy differs from pre-need because the beneficiary can be anyone of your choosing. Your death benefits can range from as little as $10,000 all the way up to $50,000. You can use the benefit for anything, from funeral costs to unpaid loans. 

Since funeral insurance policies are not associated with a specific funeral home, they can usually provide more flexibility for your family. The beneficiary has the autonomy to use the money as they feel necessary without third-party approval.

Funeral insurance offers many benefits over pre-need policies because you’re not tied to one particular funeral home, so there are no worries about them going out of business. You also have the option to shop around and find the best funeral merchandise and offerings that suit you and your budget. 

Benefits of funeral insurance

With the increasing costs of funeral expenses in Canada, it’s hard to know if your inevitable passing will financially burden  your beneficiaries

Funeral insurance gives you peace of mind.  With thoughtful planning, the additional stress of paying for your passing and organizing a funeral can be alleviated.

Here are some benefits of funeral insurance:

  • Monthly premiums allow an accessible and affordable way to pay for your final arrangements
  • Most insurance providers will pay out your benefits within 24 hours of the claim
  • Both you and your beneficiaries know precisely what the money will be used for and can plan accordingly

The bottom line 

Planning for your end-of-life isn’t as tiresome as it might sound. Gone are the days that require you to step into an office to buy life insurance, set up a will, or purchase cremation services. All of this planning can now be arranged online in very little time. Today’s digital world is making it more comfortable, affordable and more transparent than ever for Canadians to prepare for whatever comes their way. 

So, here’s the harsh reality: the only thing keeping your loved ones from being financially protected following your passing is you. Prioritizing your family and taking the time to review your existing plans and coverage can help you rest easy knowing your family/beneficiaries won’t be overwhelmed.

Eirene is a startup dedicated to making end-of-life and cremation easier to navigate, transparent and more affordable for Canadians. Check out more resources on navigating the end of life here