Final expense and pre-need insurance both cover funeral costs and arrangements. However, final expense death benefits are larger and more flexible than pre-need. Here’s a deeper look into each policy and which is better suited for you.
What is Final Expense?
Final expense is a type of whole life insurance policy meant to cover a variety of costs. The death benefit is issued to beneficiaries chosen by the policyholder, who then use the funds the way the policyholder had intended.
Common uses of a final expense policy include funeral arrangements, medical bills, credit card payments, estate taxes, and more—you can use it for pretty much anything that fits within your death benefit. For final expense, this is anywhere between $2,000 and $50,000.
What is Pre-Need?
The use of pre-need insurance, however, is limited only to your funeral costs. You make arrangements with the funeral home, then set up premiums to have it covered when the time comes. Although it is more of a payment plan than an insurance policy, think of it as final expense but with the funeral home as your sole beneficiary. They get the entire policy to put towards the agreed-upon funeral costs.
The Death Benefit Difference
One difference between final expense and pre-need policies is the death benefit and its uses—final expense can be as much as $50,000, while pre-need is limited to the cost of your funeral, which likely will not exceed $12,000. Most final expense policies are less than the potential $50,000, but if that is available and something you are interested in, it is at least an option.
Final expense policies are significantly more flexible. Most people use it to cover their funeral costs, but you do not have to if you decide against it. Leftover money can then be used to cover anything else, either for the policyholder or the beneficiary depending on your agreements.
The Benefits of Beneficiaries
With final expense insurance, you get to choose who receives the death benefit. This will typically be trusted loved ones who you can discuss and arrange the policy with. On the other hand, pre-need still lets you choose a beneficiary, but in the form of a funeral home.
With a funeral home as your beneficiary, your loved ones cannot make significant changes without either paying additional money out-of-pocket, or losing money to the funeral home. If the cost of your arrangements are reduced in any way, they will not see that money returned to them.
The Final Verdict
With a better, more flexible death benefit and your own beneficiaries with full control of the funds, final expense is the overall better insurance solution. Both can serve the same purpose—to cover funeral costs. However, only one is more stable, more trustworthy, and simply better overall.
Have questions about final expense? Give us a call today at 1-877-674-0236.