Funeral costs, all over the world, are on the rise.
Planning for funeral expenses helps loved ones with time and peace of mind in the rough patch. It prepares you for sudden mishappenings, complications and helps to deal with them.
Finance is an essential part of any funeral. As sensitive as it can be, funeral planning and expenses must be discussed and dealt with at some point in everyone’s life.
Situations such as these are inevitable, and planning by considering insurances for final expenses saves complications and takes off an extra burden on your dear ones during tough times. One must have knowledge of how to manage the costs of the funeral of any family member.
The necessity to plan for funeral expenses
Planning for funeral expenses takes the financial burden off from our dear ones. It imparts security and a sense of control and minimizes scam risks during emotional instability.
Moreover, there are several ways to make monetary arrangements for a funeral like an insurance policy, savings, etc. which will be discussed here in detail. One must know what the final expense insurance policy is, before investing.
1. Funeral plans
Funeral plans are generally prepaid in nature. This allows one to pay a funeral home to arrange the necessary things when the time comes.
One can choose how much to spend, and what type of funeral they wish it to be. Bitter as it can be, sitting down with family and chalking out a plan is essential as they might want things in a certain way.
Costs vary for different funeral homes. Once you choose it, there will be a contractor to help out with the plan. For the final expenses, it is essential to select a great funeral home.
Make sure the costs do not change with inflation, one with an extensive network so that it is not a problem if one moves, has a professional attitude, is financially stable, and open with details.
There are generally two types of plans — funeral trust and pre-need arrangements.
Depending on the kind of plan, funeral trusts can offer a place for financial growth, a type of investment. It is essential that one talks to a funeral consultant before signing any document.
A pre-need funeral plan is also a viable option, which allows the policymaker to put in an amount of money with the funeral home of your choice in several installments or a lump sum. This money intern goes to a specific insurance company and gets paid when the time comes. Different places have different laws for funeral service.
However, they also come with risks of their own, which, if understood, will help one make a wiser choice. For example, making sure that the home you chose should not get bankrupt shortly, or their policies won’t fail under complicated circumstances or overcharge with shady conditions.
2. Whole Life Insurance
Permanent whole life insurance covers the entire life of the policymaker, including coverage for final expenses. There are several benefits to this — it offers a death benefit, a savings factor, and a maturity benefit. Many policies also allow withdrawals, therefore acting as a liquid resource for different circumstances.
Whole life insurance is different from a term life policy. The former covers the complete life, while the latter covers for a preset number of years. According to Robert Schmidt of Burial Insurance Pro “burial insurance or final expense insurance is simply a term given to smaller amounts of whole life insurance. Many families simply need a low amount of coverage to address final expenses and funeral costs.”
A whole life policy mainly enables the smooth passing on of property to the heirs. When this policy matures, one gets the lump sum, with a bonus. They also enjoy survival benefits, tax benefits, and loan benefits, and other benefits as well.
Although whole life insurance comes with a lot of advantages, it has its share of cons as well. Because this policy offers lifelong benefits, they cost more than ordinary life insurances.
Also, they are pretty rigid. That is, the coverage cannot be changed easily according to your need. Besides, though the cash accumulation factor is advantageous, it takes a long time to accumulate in the first place.
3. Payable On Death Account
This is a structure created between a bank or a financial institution and its client, which enables their account or deposits to pass on to their nominees after their death. This system is more straightforward than other ways to pay for final expenses. This system is also called Totten trust.
A Totten trust is also called as a payable on the death account. It is known for a bank account when the person who opens the account names a beneficiary. After the person who initiates the accounts dies by any cause, the money in the account transfers directly to the person named as the beneficiary.
Anyone can set up a POD account. They should notify the bank of the nominee, and the nominee, in turn, will have to submit a few paperwork. Transfer of account and property gives rise to a lot of complications, paperwork, laws, but a Payable on Death account saves from those convolutions, especially probate courts.
A few things to note about payable on death accounts are that each year the market prices increase, and therefore, the value of your account depreciates. They are also vulnerable to issues like bankruptcy, divorce, and court cases.
4. Funeral Loans
Funeral loans are a type of personal loan that the bank or any other credit institution gives to help pay for a funeral. At times, this fund is directly transferred to the selected funeral home.
Like any other loan or insurance for final expenses, funeral loans are subject to interest and a period.
Although funeral loans are not the best way to pay for final expenses, some of its advantages include immediate availability, less paperwork, can be paid as per financial conditions, no penalty if paid off early.
Its disadvantages include high interest, mainly because they are granted without security. They are, at times, hard to get because they are based on creditworthiness.
Crowdfunding can be the ‘lender of last resort.’ It means, people from across the internet can fund your cause with small amounts, which can turn out into a lump sum and enable you to do rites decently. It can turn out to be a very efficient source of funds during need.
There are many crowdfunding platforms available, many specially made for funeral funds. Many platforms charge a part of the amount raised for their fees, but some are free.
It becomes challenging to get people to donate in a cause from which they will get no benefit, but still, it is a reliable source in dire need.
Final words: Average funeral costs
It is not a time to run around and fill the paperwork and argue with mediators. Instead, it is time to stand by your family through tough times without having to worry about these.
The schemes and the plans mentioned above allow you with vital and better protection. One must research in detail to find loopholes in the clauses. As a result, you should hire the best consultant to plan everything. The family must come together to make things work as each part of the process has sentimental value.
Every insurance for final expenses, every scheme, will have its own drawbacks. Therefore, it is essential to choose one which will not cause any regret in the long run.
Many reputable insurance providers such as Lincoln Heritage, Mutual of Omaha, Transamerica, and Colonial Penn provide policies at reasonable prices.
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Emma Gill is a passionate writer and guest blogger. Writing helps her to improve her knowledge, skills, and understanding of the specific industry. She loves writing and sharing her knowledge mostly in the health industry. She believes health is the real wealth & wants to spread her belief across the world. Apart from writing, she loves traveling and cooking.