What is funeral insurance, and do I need it?

What is funeral insurance, and do I need it?

Question:

What is funeral insurance, and do I need it?

Answer:

Funeral insurance is a way to spare your loved ones the financial burden of having to pay for your final expenses. However, not all funeral insurance policies are alike. Different types of funeral insurance are available, and policies can vary widely. In general, they work by you purchasing a policy that will cover your final expenses, usually a few thousand dollars. You pay the premiums (either in a lump sum or spread out over a certain number of years), and when you die, the death benefit is used to pay for your funeral.

Funeral insurance policies are often sold through a funeral director acting as an agent on behalf of an insurance company. However, some of the larger national funeral home chains are beginning to sell funeral insurance.

If you’re concerned that funds won’t be available to pay for your funeral costs, or that these costs would be a large burden to your family, a funeral insurance policy might be appropriate for you. However, before you decide, explore the possibility of purchasing a small term life insurance policy as an alternative. If you have sufficient assets to pay for your own funeral, you probably don’t need funeral insurance.

Currently, there is no federal law regulating funeral insurance, and state regulations vary. And many individuals–especially the elderly–have been victimized by funeral insurance scams. As a result, it may be wise to consult a professional advisor to find out if funeral insurance fits into your overall estate plan.