Funeral Insurance

What is Funeral Insurance?

Funeral  Insurance is not actually a type of life insurance. It is simply just a name given to describe permanent life insurance with a death benefit coverage amount (the amount that pays out at death) typically between $10,000 and $50,000.

Many Canadians purchase a permanent life insurance product (either a whole life insurance policy or a universal life insurance policy) to use to pay for their funeral and additional costs associated with death such as taxes or unforeseen bills and expenses.

Depending on the age of when the life insurance policy is purchased, it can be quite advantageous compared to leaving your money in a low interest savings account.

Why do Canadians Purchase Funeral Life Insurance?

Canadians purchase permanent life insurance to provide coverage to pay for their funeral and final expenses so that the burden is not left upon their family. Not too mention, you could potentially save yourself and your family money by purchasing a permanent life insurance policy instead of using money from your savings account (or even worse, your dependents savings).

Also, some Canadians may not have sufficient amount of savings to cover their funeral costs and don’t want to leave the burden upon their family. This is where the benefit of purchasing a permanent life insurance policy shows its worth.

How Much Does Funeral Insurance Cost?

There are many different factors which will determine the premium of a permanent life insurance policy. The premium is the amount that you must pay to keep the life insurance policy in force. There are also different types of policies which can be purchased which will also affect the premium. The more benefits you have, the higher the cost of the policy will be.

We will go over in detail the different policy types and factors which play a role in determining the cost of the life insurance policy but we highly recommend that you contact us to discuss your needs to ensure that the policy that you purchase is the right one for you and your family.

Funeral Insurance vs. Plain Old Life Insurance

So, what is the difference between final expense and life insurance?  Life insurance is a broad term used to describe any legal agreement between a policyholder and an insurance provider which guarantees a lump sum payout in the event of the policyholder’s death. Life insurance can be used to indicate any number of different plans, from term and whole life insurance to non-standard policies like no medical insurance.

Final expense life insurance is a subtype of whole life insurance that carries a smaller death benefit. Final expense insurance was created to help more people afford whole life policies by reducing the lump sum payout, thereby decreasing premiums. The smaller payout is still far more than most funerals cost, but marketing officials decided that “Final Expense Life Insurance” was as catchy as it gets.

Funeral Insurance vs. Funeral Plans

While final expense life insurance is one way to make sure your funeral costs are covered, there are other options. As we’ve covered above, final expense insurance is not a short-term product, it is simply the name given to a kind of cost-effective whole life coverage.

If you’re not looking for a full blown life insurance policy and want a product that focuses exclusively on your final expenses, you might opt for a funeral plan. Funeral plans are offered across many funeral homes. They allow you to be an active participant in your funeral by planning the proceedings long before the event of your death. Funeral plans are incredibly popular as they allow individuals to pay for and plan their funerals without delegating the responsibility to other family members.

Why are funerals so expensive?

It’s estimated that a traditional funeral (ie. not a cremation) in Canada will cost between $5000 and $15000. Those are some steep price tags. Let’s have a look at why funeral costs are so high.

1. Choosing the kind of funeral you want

There are many different approaches to a funeral. For instance, do you want an open casket? For that matter, what kind of casket would you like to rest in? Will you be requiring pallbearers? Once you’ve settled on the kind of funeral you think will best celebrate your life, you will have to evaluate the costs.

Preparations such as makeup, embalming, and dressing all carry additional fees, making open-casket funerals much pricier than closed ones. Not all caskets are created equal. Metal-plated caskets tend to be the most expensive (you can even get them plated in 24K gold!), with cherry, oak and walnut wood coming in next. But if you’re looking to save, have no fear. You can purchase cardboard, wicker, or hemp caskets that will only set you back a few hundred dollars. Pallbearers are generally not an additional cost as most people elect family members or friends to do the job, but you can hire professionals if you’re intending a longer procession.

2. The funeral director

The funeral director is often one of the largest, but worthwhile costs of a funeral. The exact role of the funeral director will vary from one venue to the next. It can include anything from organizing a funeral from the ground up by finding a location, staff, and decor, to guiding through the process as you plan for yourself. Because funerals are often emotionally taxing, many people are grateful to outsource some of the responsibility. However, some funeral directors will be prone to overcharging, especially in smaller communities. Make sure you meet a few prospective funeral directors before settling on one.

3. Ornamentation and entertainment

Although the design, look, and feel of the funeral can all be arranged by a funeral director, each element does carry a price tag. The costs of catering, floral arrangements, and any choir or other musical entertainment can quickly add up.

But not to fear…

If you’re looking to save on final expenses, there are many more affordable options on the market. Increasing numbers of people are opting for direct cremation rather than a traditional service. A direct cremation will cost between $600 (no service) and $5000 (full service). Not only does this option save you and your family a substantial amount of money, it also allows mourners to hold private wakes in their own homes if they so choose. To learn about how to make a will you can read this article here.