final expense insurance is not the same as pre-need insurance

Final Expense Insurance vs. Pre-Need Insurance

Final expense insurance and pre-need insurance are often discussed together because they focus on the same area: final expenses. They are the two main options available for planning your funeral ahead of time. However, they’re not the same plans. 

What Is Pre-Need Insurance?

People use pre-need insurance to cover the costs of funeral services, plus burial or cremation. It essentially gives your family a pre-arranged funeral, making things easier on them. 

You work directly with a funeral home, which makes it unique to other kinds of insurance. They’ll price costs, including services, cemetery plot, casket, burial, and so on. Then, your insurance plan pays for those expenses. Costs may vary from home to home.

Since the funeral home is the beneficiary of a pre-need policy, they’ll receive the money directly to cover their services.

What’s the Difference Between the Two?

Pre-need insurance (also called pre-paid funeral plans) are bought from a particular funeral home. You pay a preset amount directly to the home. 

Meanwhile, final expense insurance operates like other types of life insurance — you select the beneficiary. The death benefit goes to your family, and they can use it to cover funeral costs or any last medical bills or post-funeral costs.

Note: With a final expense policy, it’s possible to pay the funeral home directly. Your family will get whatever is remaining after the funeral home pays their expenses. It’s called “making an assignment.” 

Final Expense vs. Pre-Need: Comparison Table

As a visual aid, here’s how pre-need and final expense plans differ:

Final ExpensePre-Need 
Very flexible – can be used anywhere in the worldVery limited – can often be used only at the funeral home
Additional benefits typically available in the form of policy ridersAdditional benefits aren’t typically offered
Money is paid directly to the beneficiaryMoney is paid directly to the funeral home
Families may price-shop funeral services for the best dealFuneral home sets prices; no price-shopping is available
Policy benefit may be divided among multiple people or organizationsPolicy benefit is only for the funeral home
Usually builds cash value; can be withdrawn as a policy loan May or may not build cash value

While they offer more flexibility than pre-need plans, not all final expense policies are the same. 

What Else Should I Know?

Older or less healthy folks may benefit more from final expense insurance because these policies: 1) will probably be more affordable, and 2) still have a flexible death benefit. 

Guaranteed Services and Non-Guaranteed Services

Some folks live long after arranging their pre-need plan, which may cause the funeral costs to rise. Whether or not your family has to pay the difference depends on if the expenses were guaranteed or non-guaranteed services. 

The funeral home will always cover the cost of guaranteed services, no matter your plan’s value. However, a beneficiary may need to atone for non-guaranteed services. 

Are Pre-Need Plans Worth It?

Pre-need insurance is often not worth it because of its restricted use — the benefits are tied to the specific funeral home you choose. Most pre-need plans are non-transferable and non-refundable. You also pay a lot for a small coverage amount. Plus, if your selected funeral home goes bankrupt, you may be ill-fated. 

Apply for a Final Expense Policy 

Most final expense policies create cash value, are easy to apply for, and are under $20,000. Since 1984, Final Expense Direct has been helping families get the peace of mind they deserve. Call 1 (877) 674-0236 to speak with a licensed agent. 


Final Expense Direct’s utmost concern is the safety of our clients, their families, and our employees and agents. Our hearts, thoughts, and prayers go out to all that the Coronavirus outbreak has touched and those whose lives have been disrupted. While 98% of our workforce is working remotely, we are here if you need assistance. If you are a client, please contact Customer Support at 800-538-3610, Ext 2, with any questions in regards to your policy. You may also contact us via email at We will continue to monitor this situation and keep you updated.