Funeral Insurance

Answer:

These days, more and more people are choosing to plan their own funerals. Some feel a sense of relief knowing that their grieving families won't have to make difficult decisions when the time comes, while others want to ensure that their funeral will be exactly the way they want it. To aid in this effort, insurance companies offer a product called "preneed" insurance (also known as funeral or burial insurance). These policies are often sold through funeral directors, who may act as agents of an insurance company and/or receive a commission on each policy they sell.

Although no typical preneed insurance plan exists, preneed insurance is generally a whole life insurance or annuity contract designed to cover the cost of a funeral, taking inflation into account. You choose the products and services you want (up to a certain maximum), and the insurance company writes a policy that will cover the cost. Most insurers require you to make a lump-sum payment to purchase the policy, and the full death benefit is available immediately. Some insurers, however, allow you to pay several premiums over time (depending on your age and health) and may pay a partial benefit should you die. You may be able to name anyone you want as beneficiary, or you may be required to name the funeral home as beneficiary.

As with any sizable purchase, you will need to exercise caution when shopping for a preneed policy—make sure you fully understand what you are buying. It's up to each state to decide how to regulate preneed insurance, so make sure you know your rights in the state in which you live. You may want to involve an attorney in the buying process as well, so that any policy you buy fits in with your overall estate plan.