Is funeral insurance a smart investment? The following is a post from staff writer Crystal at Budgeting in the Fun Stuff, where she writes about finding the balance between paying your bills, saving for your future and budgeting in the fun stuff along the way.
Since a lot of people may be wondering whether or not funeral insurance is a good deal or a rip-off, I have taken a look. Although the answer varies depending on your situation, here are a few reasons why funeral insurance can be a good thing.
Funeral Insurance Provides a Fast Cash Payout
Let’s say you don’t have enough life insurance. The family still needs money. It can take a while to get access to the assets of an estate, which can make it almost impossible to pay the funeral home for services. One of the best things about funeral insurance is that the payout is immediate and it will take care of all of the costs associated with a funeral. This includes the costs of a casket, grave plot, hearse, flowers and cremation. That money can really help your beneficiaries.
Funeral Insurance Prevents Financial Hardship for Loved Ones
Funerals can place a lot of financial pressure and strain on a family. The average funeral costs $10,000 or more once you add in the costs of a service and burial. Most people sadly do not have this kind of money on hand. You don’t want your family to have to get a loan in order to get money for a burial. Funeral insurance can take care of all or part of your final expenses, which will make it a lot easier on family members who are still coping with grief.
Funeral Insurance Is Useful if You Purchase an Affordable Policy
Funeral insurance makes sense to purchase as long as you select a policy that has affordable premium payments. You do not want to pay thousands of dollars into a policy that has a minimal payout and does not provide adequate coverage in the event of death. You might be better off simply funding a savings account for these expenses and giving your beneficiary immediate access.
Funeral Insurance Should Offer a Cancellation Option
The insurance policy that you purchase should have a cancellation policy that allows you to receive a refund of payments paid into the policy if you decide to cancel. There will probably be a cancellation fee, but you do not want to lose all of your money because you decided that you no longer want funeral insurance.
My Personal Take on Funeral Insurance
If you do not have enough cash set aside to cover your funeral in case you die, I see funeral insurance as something that could help. But I personally would suggest that the policy be cancelled as soon as the cash is set aside.
My husband and I do not have funeral insurance but we do have enough cash on hand to cover a basic ceremony as well as six months of living expenses to help each other during those really hard months after the death of a loved one. We actually don’t discuss it much anymore since it is depressing, but I have made sure that all of our login info is secure but easily accessible by my husband if I do die first. I wanted to make sure he could access all of our finances no matter what.
In short, funeral insurance may be a good deal for anybody without sufficient cash reserves for their estate since it provides help during a time of crisis.
What is your view on funeral insurance?
Ronald Dodge says
June 29, 2011 at 2:37 PMFuneral insurance in many ways is like life insurance as this article pointed out. Another thing I like to point out, which both is viewed in the same manner, I would only purchase such thing if the cash flow management worksheet would allow for a such thing and we really still needed to have that protection in place.
As to if it’s a good policy or not, I would have to look at it in the same manner as life insurance and most other insurance products. The insurance products like to emphasize saying such things are absolute necessary. I am like, let’s take a step back for a bit cause like with health insurance (Especially through COBRA), does the benefits on the insurance after the risk assessment test has been done outweigh the cost of the plan? Over the last 10 years, I have found the health insurance plans (even those through employers) to not even be worth it. One such example. Last year as self pay, my total cost for my family of 7 was between $1,200 and $1,300 which included one medication as maintenance medication for one of my kids. Yes, this was pretty low. On the other hand, this year, if I am to go with the COBRA aspect, my annual cost just for the premiums alone, not even counting any of the other costs would run me about $9,700. Why would I pay such an amount as compared to the $1,300 as self pay. I could put the difference of $8,400 into a savings account to cover for any sort of emergency medical costs. If I do that annually, I would easily built up such an emergency fund for such a deal so quickly. Therefore, I ask, why should I go with a such plan?
For that matter, that $9,700 is just the premiums. It doesn’t count the payments going out the door dealing with such medical services, which of the $1,300 as self pay, I would still end up paying about $800 with the health insurance plan. As such, I would really end up paying out about $10,500 per year with the insurance plan as opposed to just the $1,300 without the insurance plan.
Some may say just one incident of a heart attack is $10,000 (I don’t doubt this fact). Yes, but we are in no real danger of that and if we have no medical emergencies, well that’s $9,200 pocketed by going self pay. Do you truly think you going to have medical emergencies that’s going to add up to $9,200 per year over the next 10 years? Do you think you will end up having $10,000 emergency medical expenses one time in 9 of the 10 years? Unless you are an elderly couple up in the years or in a very poor health household (It may only take one such person with a chronic issue), I hardly doubt it.
Though the risk assessment is somewhat different with life/funeral insurance, the concept is still basically the same. Basic point I’m making, with all insurances, I still view them as investments but only with a risk assessment twist to them. They aren’t investments as in the sense of making money, but in the sense does the benefits outweigh the costs after taking risks into account?
cashflowmantra says
June 27, 2011 at 3:00 AMI agree with your conclusion. Funeral insurance should only be used if absolutely necessary. I have enough available that my wife could get by until the life insurance proceeds came through.