It’s not something that anyone wants to think about, but it’s probably something that should be planned ahead of time: your funeral. These days, funerals are very expensive, running into the thousands of dollars.
Family members are often burdened with covering these sky-high costs, and some even go into some debt as a result. If you want to have some peace of mind knowing that your funeral expenses are taken care of without placing more undue stress on your loved ones, then perhaps it may be worth considering a funeral insurance policy.
Funeral insurance is a type of insurance that covers your funeral expenses after you pass away. Your loved ones will receive a lump sum benefit up to a certain amount that can be used to pay for your funeral without having to use their own money or go into debt.
There are various funeral insurance plans available to choose from, depending on your desires and budget. Different plans will have different rules about how the benefit can be used after you die.
This type of insurance is more attractive to those who are getting older or do not have adequate savings to accommodate the high costs of a funeral. Even people who are elderly or have a pre-existing medical condition may still qualify for a funeral insurance policy, such as a guaranteed issue policy. There’s a plan for just about everyone.
A funeral insurance policy will provide your family with a lump sum of money that can be used to cover any of the following, depending on your exact plan:
A typical life insurance policy pays out a lump sum of money to the policy’s beneficiaries, who can then use part of that money to pay for funeral expenses. So how does a funeral insurance policy differ?
People buy a life insurance policy to ensure that their dependents are financially supported after they die, so they’re not left with major bills to pay and no income to pay them. Beneficiaries are typically paid out a lump sum of money, known as the “death benefit,” part of which can be used to cover funeral expenses.
A funeral insurance policy is much more specific and provides financial assistance to families to cover end-of-life expenses for the insured after they pass away. Anyone can be named a beneficiary on this type of policy, who will then be designated to use the benefit paid out to take care of funeral expenses.
Funerals are very expensive in Canada. In fact, the average cost for burial is between $5,000 and $10,000. That’s a hefty amount to pay, and can place a heavy financial burden on your family. With a funeral insurance policy in place, you won’t have to worry about how your funeral expenses will be covered.
Here are some perks of a funeral insurance policy:
You can rest easy knowing that your family members will not be stuck with a massive bill to take care of your funeral expenses.
In many cases, a medical exam is required to take out a life insurance policy. But such is typically not the case with a funeral insurance plan.
Most insurance providers offer a value promise, which means they’ll pay your family the insured amount stipulated in the policy.
If you pass away accidentally within 12 months of buying your policy, you will still receive the entire payout value.
Most insurers will pay out the benefit within 24 hours of your family members filing a claim.
You can create a policy that will outline exactly what you want the funds from the policy to cover.
A funeral insurance policy can help cover the cost of your funeral without overburdening your family to come up with the money to do so. But there are some drawbacks to this type of insurance to consider as well:
While older folks may be qualified to take out a funeral insurance policy, there is an entry age limit, which is usually between the ages of 65 and 80.
Depending on the situation, the premiums you pay could wind up adding up to more than the actual cost of a funeral.
Although a pre-existing medical condition should not deter you from taking out a funeral insurance policy, you may not be covered if you pass away from that medical issue within the first 12 months of securing your policy.
When shopping around for a funeral insurance policy, there are certain important features to look at:
The benefit that your family will be paid out should match the type of funeral that you wish to have.
Look for a funeral insurance policy that comes with premium caps if you’re concerned about not being able to afford repayments at some point.
Make sure you read the fine print on your policy and understand the exclusions. For instance, your family members may not be paid out if you pass away from a pre-existing condition within the first year of taking out your policy.
Taking care of the financial aspect of your funeral ahead of time can alleviate any unnecessary stress on your family members after you pass away. With a funeral insurance policy in place, you can take care of the expenses of your funeral and avoid putting any financial burden on your loved ones.
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Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.
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