What is pre-need insurance?
Pre-need insurance is an insurance policy that deals specifically with burial costs. A pre-need policy is much like a final expense in every sense, when used for burial costs. Most pre-need agents are contracted with a funeral home. So, the client will get upfront pricing on items and services. Such as:
- Burial plot
- And etc.
Why would a pre-need insurance policy be good for me?
You can alleviate the burden and guesswork from your family by having a prearranged funeral. The funeral home will get paid directly, since they will be the beneficiary of the policy. The funeral costs are predetermined. A policy can be paid off in three, five or ten years.
What are the downsides to having a pre-need policy?
The policy is limited to a certain time period. Since the cost are predetermined in the policy, they do not account for inflation of the U.S. dollar or the rising cost of doing business. After this limitation period, the death benefit will begin to decrease. This will result in the family having to pay for any additional expenses.
Most pre-need policies are non-refundable or non-transferable. There are no guarantees associated with having the policy. If the funeral home goes out of business, you’ll be out of all that money paid into the policy.
What are the major differences between a final expense policy and that of a pre-need policy?
A final expense whole life policy accrues a cash value beginning at the policy’s third year. A pre-need policy doesn’t build any cash value.
A final expense policy allows the client to be in control of their policy, by allowing the client to change beneficiaries. The beneficiary for a pre-need policy will always be the funeral home.
A final expense policy can be cashed out to pay for college tuition or for buying a house. A pre-need policy doesn’t have a benefit like this.
A final expense policy allows for the beneficiary to use the money for they want. Like paying for medical expenses or any post death expenses.
The premiums for a final expense policy are far cheaper than that of a pre-need policy.
Is a pre-need policy right for you?
It’s your family, your life and your money. You decide.
Disclaimer: It is not the intention for this article to sell a particular product or to endorse a product or company.