Smart seniors plan for allocating funds for medical bills, legal fees, taxes, and funeral expenses. The 2 options most popular in the market are funeral plans and final expense insurance.

What is a funeral plan?

A funeral plan means pre-paying for funeral arrangements over time rather than a lump-sum payment at death.

It covers any and all funeral arrangements you choose – casket or urn, plot, ceremony, flowers, music, visitation, burial, cremation, etc. It allows you to personally choose what you want from an array of products and services provided by a funeral home.

The funeral plan is fixed in price, based on the choices you make, and paid in installment over time. When the time comes, your relatives will simply avail of the funeral plan and will have nothing to worry about.

Pros and cons of a funeral plan

For individuals who don’t mind planning their funeral with specific details, this can be a good option. The benefits are tied with a specific funeral home and not transferrable if you move to another location. The payments are made directly to a funeral home and kept in trust.

One of the biggest advantages of a funeral plan is the fixed cost. There is also an end date which means that once the plan is completely paid off, and this can be many years before death, surviving family members will not have to pay or worry about anything else regarding the funeral services.

Of course, not everyone wants to plan their own funeral. Others also want a little more flexibility. In this instance, a final expense insurance policy may be a better alternative.

Pros and cons of final expense insurance

With a final expense insurance policy, your beneficiary receives a lump sum that can be used to pay for anything. You can make arrangements about how the money is to be paid or leave it to the discretion of your loved one.  It works pretty much like a standard life insurance policy but is cheaper and has a smaller insurance benefit.

Both funeral plans and final expense insurance can pay for funeral costs in the event of your death. Final expense insurance may provide a smaller cash benefit and is paid directly to your beneficiary. The funds can be used in any way and is left to the discretion of the beneficiary. Thus, it is more flexible than a funeral plan.

However, the payout of a final expense insurance policy is not immediate at death. Your family will submit the death certificate to the insurer and the length of time for a payout can vary from one insurer to another. Thus, the proceeds cannot immediately be used to pay for a funeral and loved ones may have to advance the funds and get reimbursed from the insurance proceeds.