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 |  | Final Expenses Insurance: $15-$30 a Month |  | Funeral Trust: $10,000-$12,000 |  | Pre-Need or Burial Insurance: $10,000-$25,000 |
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A funeral trust or funeral insurance can provide peace of mind based on the idea that surviving family members won't be overwhelmed by a huge bill for funeral and burial costs. The customer pays in advance for the services, and that money is distributed to the funeral provider after they die. The Legal Assistance Resource Center of Connecticut offers a pamphlet about prepaid funeral contracts[1] .
Typical costs: | - With a funeral trust, an account is opened in the customer's name. The account can be funded with a single initial payment (for the full amount of the prepaid funeral contract, typically $10,000 or $12,000, or a plan can be established to pay into the account over a longer period of time. There can be administrative charges of $100-$200 or more to set up a funeral trust, and some trusts have annual maintenance fees of $50-$150.
- Also called pre-need or burial insurance, funeral insurance is a form of term life insurance. The average coverage is $10,000-$15,000 and most companies won't cover more than $25,000 in funeral costs. It is usually purchased from a funeral home or mortuary. Funeral insurance premiums are generally paid as an initial lump sum (for the total amount being pre-paid) or with a three-, five- or 10-year payment plan.
- Final expenses insurance is a form of term life insurance purchased directly from an insurance agent. The beneficiary uses the insurance money to pay any funeral expenses, but there is no prepaid plan with a specific funeral home, and no specific services or products are guaranteed to be provided. These policies have monthly premiums and an expiration date. If the insured person lives past a certain age (95 to 100) the policy expires and no money will be paid out. Monthly premiums vary based on circumstances and the amount involved. According to an agent who sells these policies, a 70- to 75-year-old non-smoking woman in good health might expect to pay a set rate of $15-$30 a month for a $10,000 policy
Related articles: Will, Trust, Estate Planning, Funeral
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What should be included: | - Typically a prepaid funeral contract is set up with a specific funeral home, mortuary or other provider, which places the money in a funeral trust or buys a funeral insurance policy. A prepaid funeral contract is not considered a financial asset in terms of qualifying for Medicaid health insurance. The prepaid fund remains intact even if the individual's other accounts must be liquidated to qualify for Medicaid coverage, although there can be a maximum amount allowed. For Medicaid planning purposes, generally a prepaid funeral plan must be irrevocable, meaning the money cannot be withdrawn until after death.
- A prepaid funeral contract can be guaranteed, meaning the services and merchandise listed will be provided at the time of death without additional costs for those items (although there may be substitutions). Under a non-guaranteed contract, the funds are set aside to cover funeral costs, but with no specific products or services selected in advance. Prepaid funeral plans are not covered by federal law, and state regulations vary significantly. There can be problems if the funeral home or mortuary goes bankrupt or changes ownership; if surviving family members are unaware of the prepayment plan/method and make their own arrangements; or if the person buying the plan moves out of the area. FuneralPlanning101.com provides an overview[2] .
- The company or organization managing a funeral trust can invest the money. A major trust set up by funeral directors in Illinois[3] lost millions of dollars.
- With funeral insurance, usually a specific funeral services provider is named as the beneficiary, and the policy also specifies who receives any excess money above the actual funeral costs (and who is responsible for paying the difference if expenses are more than the policy amount). Insurance.com provides a brief overview[4] .
- Some prepaid plans allow for transfer to another funeral home or mortuary (especially if the customer moves out of the area), or allow for at least a partial refund, but other plans are nontransferable and nonrefundable, meaning customers cannot change their minds or switch to a different funeral home.
Additional costs: | - Surviving family members may face additional fees. For example, most prepaid plans include embalming, but if the body was damaged or an autopsy was required, there may be additional charges of $100-$500 for cosmetic restoration
- If the customer dies outside the service area, there will be extra fees for transporting the body. In addition to actual shipping costs, funeral homes or mortuaries typically charge $900-$2,200 to prepare and forward a casketed body to another facility, and the receiving funeral home may charge $850-$2,200 for receiving a forwarded body.
Shopping for prepaid funerals: | - Insure.com provides tips for buying funeral insurance[5] .
- There should be a written prepaid funeral contract in plain language, explaining what is included; what services or items are guaranteed; who pays taxes on any interest generated; and what happens if a specified item isn't available at the time of death. The National Funeral Directors Association provides a list of consumer rights[6] for funeral preplanning.
- Search for local funeral homes or mortuaries with the National Funeral Directors Association or the Selected Independent Funeral Homes[7] , or at TheFuneralSite.com. Or contact an insurance agent directly for information about final expenses insurance.
- Forethought Life Insurance Co. is one of the largest providers of preneed insurance. It offers both funeral insurance[8] and funeral trusts[9] .
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External Resources: | - ctlawhelp.org/prepaid-funeral-contracts-burial-plots
- www.funeralplanning101.com/pre-planning-funeral/funeral-pre-paying.aspx
- illinoisissuesblog.blogspot.com/2009/07/people-look-for-answers-in-funeral.html
- www.insurance.com/life-insurance/faq/funeral-insurance.aspx
- www.insure.com/articles/lifeinsurance/funeral-insurance.html
- nfda.org/index.php/planning-a-funeral/preplanning/30
- www.selectedfuneralhomes.org/
- www.forethought.com/legacy.html
- www.forethought.com/legacy.html
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