Final expense insurance pays cash to a person you pick, who can spend it on anything. A preneed plan is tied to one funeral home and pays for the services you chose ahead of time.
Final expense insurance is a small life insurance policy. Washington says it is often $5,000 to $25,000. Your beneficiary gets the money and can use it for the funeral, medical bills, debt or anything else.
A preneed plan is a deal with a funeral home for a future funeral. The money goes to the funeral provider. In Washington, these plans can lock in funeral costs at today's prices.
Preneed plans are paid for in two main ways. A trust can hold your cash. Or a life insurance policy can pay the funeral home. Colorado says cash should be put in trust.
Know your exit rules. In New Jersey, most prepaid deals can be cancelled and moved to a different funeral home. Plans set up for Medicaid usually cannot be cancelled.
Both types are easy to get, often with few health questions. The trade off is lower benefits. Washington notes you can pay more in premiums than the policy pays out.
- Who gets the money: a person or a funeral home
- Can it be used for things other than the funeral
- Are prices locked in
- Can you cancel or move it
- What if the funeral home closes
More questions
Which is better for me?
Pick final expense if you want your family to have flexible cash. Pick preneed if you want the plan and price set with one funeral home.
What should I ask a funeral home before I prepay?
Ask what happens if you cancel and what happens if they go out of business. Get a receipt for every payment.
Do I have rights when I plan a funeral?
Yes. The FTC Funeral Rule lets you get prices by phone, get a written price list and buy only the items you want.
Words to know
- Beneficiary
- The person you name to get the death benefit when you die. You can name more than one.
- Final expense
- A small policy, also called a burial policy, that covers or prepays funeral costs.
- Premium
- The amount you pay an insurance company for your policy.
- Preneed
- Insurance that lets you pay for your funeral ahead of time. It pays the funeral provider you choose and can lock in today's prices.
