Of course there are several ways to pay for final expenses.
The decision on which method to use is based on a few factors, two main ones
being your finances and your health.

What are final
expenses?

The answer can be different from one person to the next. For
some, final expenses are just the costs of burial and taking care of a few
small debts. For others, final expenses can include basic burial cost and
flying relatives to the funeral and paying off large debts. Final expenses
rarely include leaving enough money for a surviving spouse. That would fall
under another part of planning. Regardless of which method you choose, believe
me, planning ahead will relieve your family from very significant t stress. We
have had some clients who wanted to make sure that enough money was available
to not only pay for a few debts but also to fly in relatives, bring in a band,
photographer…. or some other fancy addition.

Planning ahead

Preplanning is very simple and should be followed by
everyone. It does not necessarily involve any payments and will head off
possible arguments between family members as to what your wishes were for a
funeral. With preplanning, you meet with a funeral director and make all
arrangements as to the type of funeral you desire. Of course, this should be reviewed
occasionally as your needs change. Preplanning does not require that you pay
for anything so no money is exchanged between you and the funeral home.

Lock in the rate

Once you know what type funeral you want, it is important to
know in advance what the final cost will be. Some funeral homes, will allow you
lock in a price. Note that the price is usually good for only a certain amount
time and can be adjusted for inflation. So, if you are in your early 40s and
are locking in a price, unless you pay for the whole thing ahead of time, your final
quote may rise with time.

Paying for the
funeral costs ahead of time.

One method some people use is a pre-pay method. In other
words, an individual pays the funeral home in advance for all costs of the
funeral that was preplanned. The rate is guaranteed not to change regardless of
when the funeral takes place. Although this method does take care of all costs
and brings some peace of mind, we feel that a prepay plan may not necessarily
be the best choice. Your prepaid funeral is only as good as the funeral home
you have selected. What happens if they go under (no pun intended)? Can you
recover your pre-payment? Does the funeral home offer a backup plan? These are
important questions.

Using a final expense
life insurance

Also called a burial policy, final expense life insurance
can be a relatively inexpensive way to take care of final expenses. Instead of
having to come up with the full amount of the funeral cost upfront, with a
final expense life insurance, you just pay a monthly premium to an insurance
company and, when you pass away, the insurance company will pay your
beneficiary (usually tax free) a death benefit that you preselected when you
applied for the plan. One big advantage of this plan is that you are not locked
in to one particular funeral home. You can also decide in advance if you want
the entire face amount of the burial life insurance policy to go towards your
funeral. For example if you have a $10,000 final expense policy, the final cost
for your funeral may only be $6,000. Your beneficiary can use the remaining
money ($4,000) for other things. Also, if you move to another state, your final
expense life insurance goes with you. This gives you a lot of flexibility.

One drawback of the final expense life insurance plan, is
that not everyone gets approved or not everyone gets affordable rates. In that
case, the prepay plan may work best or next option may even be better.

Putting money away in
an savings plan

This last method has the same advantage as the final expense
life insurance. It gives you a lot of flexibility. With this method, the biggest
danger is if you die soon after you start the savings plan (relative to the
amount you save in the early years). If you die “too early” your funeral savings
plan may be severely underfunded. If time is on your side, one big advantage of
this plan over all other plans is that if you live many years after you start the
plan; you will most likely end up with a much larger amount of savings than if you
used the pre-pay method or the final expense life insurance.

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ABOUT THE AUTHOR

Philippe Deray – About the Author:

Philippe Deray is President and CEO of MCD Financial
Services and MCD Life. Our web site address is http://www.mcdlife.com/life_insurance/seniors_life_insurance/final_expense_life_insurance

Our focus is Life Insurance for Seniors

With many years of experience in the insurance business, we
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