Final expense insurance vs. preneed insurance: What's the difference?
What is final expense insurance?
Final expense insurance, also referred to as burial insurance or funeral insurance, helps cover final expenses by paying a cash lump sum after your death. The policy’s benefit is typically used to cover funeral-related services, but your beneficiaries could also use it to cover outstanding medical bills or outstanding debt.
In general, insurance for final expenses is built like standard whole life insurance. That means you’ll pay a certain premium for life based on the coverage amount you choose. To get a final expense policy, you usually only need to answer a few health-related questions. This helps make it a simple way to plan ahead for the future costs tied to your funeral arrangements and end-of-life services.
What is preneed insurance?
On the other hand, preneed insurance helps cover prearranged funeral plans. With a preneed policy, you’ll arrange and prepay for specific funeral-related services. These arrangements are then outlined in a contract with a specific funeral home.
After you pass, the policy benefit will be paid directly to the funeral home to cover the services you chose. This helps put a thorough funeral plan in action and ensures that your wishes are fulfilled.
While purchasing a preneed funeral plan, you’ll make a range of decisions related to your final arrangements. These decisions may include how your viewing will proceed, burial vs. cremation, flower arrangements, casket choice, décor and catering.
Prearranging your services helps you lock in current prices and avoid the risk of inflation. Your policy may also be paid for all at once or through a payment plan, meaning you may not need to pay premiums for life.
What are the key differences between final expense insurance and preneed insurance?
While determining whether a final expense plan or preneed policy is right for you, it’s important to remember the key differences between the two options. The most significant of these differences may be providing financial flexibility vs. creating a specific plan.
Final expense insurance gives your family the flexibility to cover expenses as they choose. This financial cushion could help you plan ahead for your funeral arrangements and any unpredictable expenses such as, medical bills. Keep in mind, your beneficiary may need to plan out your funeral arrangements. This could be burdensome during an already emotional time, and you won’t be able to guarantee that the total costs of the funeral will be covered.
Preneed insurance pays the policy benefit to the funeral home, so you can help ensure that the plan you created goes into action. The ability to lock in the current prices for your services also helps guarantee that the total cost of your arrangements will be covered. But because your loved ones don’t receive the benefit directly, they don’t get flexibility in how the money is spent.
Explore the table below to see more key differences.
Final expense insurance vs. preneed insurance
| Feature | Final expense insurance | Preneed insurance |
| The benefit is paid to | Your named beneficiary | Your selected funeral home |
| What it covers | Determined by your beneficiary | Prearranged funeral services |
| Helps protect against inflation | No | Yes, locks in current pricing |
| How is coverage paid for? | Lifelong premium payments | All at once or through a payment plan |
Which funeral insurance option is best for you?
Whether final expense or preneed insurance is right for you depends on a range of factors. As you come to your decision, it may be helpful to reflect on how you’d like to arrange your funeral, when you want to make those decisions and how you’d like to cover the related costs. With final expense insurance, you can plan ahead for your funeral costs by helping give your loved ones a financial cushion. Your loved ones will have the flexibility to spend the money how they need, and you won’t be required to make specific funeral plans while getting coverage. If you want to plan your funeral now, preneed plans allow you to solidify those arrangements in a contract. You’ll get full control over every detail of your funeral, help guarantee that those costs are covered and avoid the stress of making those plans in the future.
Conclusion
Planning ahead with funeral insurance helps relieve both financial uncertainty and emotional hardship for your loved ones during a difficult time. Finding the right policy can help you best serve your family’s needs. To learn more about which option is best for you, complete a funeral preplanning inquiry form from TruStage® today.
