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Today’s Topic Of Discussion Is The Ultimate Guide To Purchasing A Cremation Policy
Most likely you are here watching this video because you’re looking for more information on how cremation policies work and you’re just trying to do your due diligence to figure out what kind of cremation policy would work best for someone in your particular circumstances.
NOTE: Would you prefer me to present this information to you in video format? Watch the video below for the complete presentation on how to find a cremation policy. Enjoy!
Here’s An Overview Of Today’s Topic:
- Define A Cremation Policy
- Why People Buy Cremation Policies To Begin With
- What Is Cost Of Cremation
- Full Service
- Direct Cremation
- Who Offers Cremation Policy
- How Life Insurance Can Be Used In Cremation Pre-planning
- Final Expense Policies
- Multi-Year Paid Up Policies
- Single-Pay Policies
- Final Thoughts On Which Cremation Plan Works Best
- Burial Insurance Rates, Age 40 to 90*
- Next Steps
What exactly is a cremation policy?
Cremation policy is an agreement between the client, that’s you and the servicing organization to provide the elements of a cremation at a pre-determined price.
For example, you walk into the most commonly used a funeral home, you decide on what it is that you exactly want and that cremation service prices are drawn up. In exchange for locking those prices in, you purchase a cremation policy to cover your final expenses and the fact that you were to pass away at the benefit of having locked in prices with whatever funeral service that you’re using.
Typically a cremation policy is funded using two different methods.
The first method is to use a cash payment. Cash payment going to be paid over time. This cash payment can be paid right up front. The second option is to use a life insurance product that provides some level of permanent protection when you pass away at an affordable premium no matter when death occurs.
Cremation policies typically provide peace of mind to individuals and their family knowing the expenses are covered and planning has been taken care of well in advance.
A lot of people take cremation policies, and perhaps you’re in the same boat because you’ve lived through a death and you see the kind of toll it took on your family and you want to make sure that you plan in advance what exactly you want so that your bereaved don’t come in and try to figure out, with very little evidence, what you wanted and how you wanted your final funeral arrangements to go.
People are really motivated by cremation policy because they like to spell out what it is that they want in advance and truly they also want to make sure it’s funded – a part of the problems that occur at death for many families who don’t have a lot of money and it’s up to them to come up with the finances and, in many cases, to take care of final expenses.
This sort of thing causes an endless levels of drama. If you have several kids and nobody can agree on how much each should pay, it can leave an everlasting familial problems. Planning ahead of time is actually a very good thing.
Why people buy cremation policy?
There was a couple of different reasons why people find it an important.
I think the number one reason is peace of mind.
It’s just having those particular issues wrapped up ahead of time so that you don’t have to worry about them; everything is just where it should be. You don’t have to be in a position where you may not have some sort of plan and you have to let your loved ones figure out what you want.
A part of that is also maintaining control of final wishes. Sometimes you have family members where they cannot envision cremating their mother or cremating their father. I’ve talked to my clients about this.
It is almost religious in opposition to what their desires are. Whereas a person of your age wants to be cremated and has specific reasons for it. By all accounts, after all, it’s your body so you should do however it is you please, taking care of those final expenses.
If you don’t plan that, you may have to just be at their mercy of somebody who doesn’t want what you want.
Planning ahead of time, really counters the concern where you may be in a circumstance where you don’t get your final wishes. Planning always gives you more control. It removes the burden of decision making from loved ones.
The flip side is that the loved ones who are in opposition to your desires are the ones that shoulder the burden. They don’t know what to do with you because they never really broached the subject.
A lot of family members are coy when it comes to your final demise and what it is that you want. It’s a conversation no child wants to have with their parent. Although it is something that should happen in many cases, it never does happen. .
Death has a way of taking us suddenly. It’s best to plan well in advance that this burden can be removed from the kids because they don’t want you to put them in a position where they regret making a decision that they didn’t have to. Perhaps they wanted to bury you but they just couldn’t afford it, or maybe they just didn’t see the reason to spend all that money and now they second guess themselves because this conversation was never had.
Planning comes through as being the most resourceful path to go down to to make sure that these details are taken care of and that all goes with the assurance of having the plan paid for in advance.
Money circumstances change for people. Just because you’ve reached retirement and you’ve saved prudently doesn’t mean there won’t be another economic downturn and that may adjust in affect your decisions on what you will and won’t purchase.
Having a plan, having a policy that funds that are paying outright cash for it goes back to peace of mind, making sure this thing is paid for in advance and no corners have to be cut and making sure your wishes are maintained as you want.
What is the cost of a cremation?
In this section we’re going to talk about the cost of cremation and this cost can vary wildly based on what your final wishes actually are.
The National Funeral Directors Association keeps a tab on what the average funeral and cremation costs are and we’re going to go into a breakdown on a direct cremation as well as a full service cremation you can better understand what really kind of financial outlay you’re looking at and what it’s going to have to eventually result in.
Let’s talk about what the average costs are as well as the items that are included in a cremation. The NFDA website shows the 2017 numbers, which is a collection of the typical customary aspects of a cremation according to the NFDA and what you’re going to end up paying for each element.
It’s important that you understand that the costs you’re seeing on the website is for full service funeral. Some people will opt to have what’s called a direct cremation. What I have found in my experience with the direct cremation is that you won’t have a lot of these basic service fees calculated. There won’t be an embalming fee in most circumstances. Usually people who have a direct cremation don’t even have a viewing.
What ends up happening is the actual cremation fee is the $350 plus a cremation urn usually comes to around a $1000 – $1,500 depending on what part of the country you live in. If all you’re looking for is a very basic cremation without any sort of service, realistically you’re looking around $1000 to $1,500.
If you’re looking for a mid range program, maybe there is an urn but there is no cremation casket and therefore there wouldn’t be an embalming involved.
Instead of the $6,000 number, you’re looking between $3,000 and $5,000. If you’re going to go to the most service available, then these numbers are what I would consider to be average.
One of the things about this particular cost analysis is they don’t break down what is realistic among people who are actually being cremated.
The sole reason people are being cremated is not to pay a number like this much because they feel it’s wasteful. They feel funeral businesses are a sham and they want the least done for the least amount. This number is a bit, in my opinion, inflated. It’s more likely that you’ll spend between $3,000 and $5,000. If you’re going to have a basic service then you would if you were in a position to where you were spending, or if you’re spending a $1,000 to $1500 if you were having just the basic cremation.
I’ll share my experience about my grandfather. My grandfather was a member of a cremation society in Michigan and he was cremated. He had an urn and a wake at the rotary club, which he was a proud member for decades. The entire cost of the service was less than $3,000. He was a military veterans from the Korean War. He had the military service procession at the Rotary Club along with bagpipes.
Very fitting ending, I would say. It was not an experience that was a very expensive. My grandfather grew up in time where money didn’t grow on trees and he was taught the art of frugal spending and he just could not justify why one would consider a burial because of the high costs. That’s why he decided to go the route of a cremation.
My point in sharing this with you is that a lot of this will come down to what you want and how much involvement you’ll have, but understand more realistically than really this particular survey shows you’re looking at about a $3,000 to $5,000 cost on an average, depending on what part of the country you live in.
Who offers cremation?
What we’re going to talk about in this section are the particular types of programs that are available to you and how you can get a cremation policy effects.
There are three ways.
- Primarily the most common way is through a funeral home.
- Second common way is there a cremation society and
- Third is through a life insurance company.
Let’s talk about all of the pros and cons of each.
Planning Your Cremation At A Funeral Home
Let’s say you want to go to the local funeral home. You’ve had a relationship with them, maybe they’ve taken care of family members and friends prior. It’s very likely that they can do the same thing in process of planning for cremation.
What funeral homes do is they offer a traditional way to prearrange a cremation and a funeral. You simply go in, you look at the items that you decide what you want, you create a line item list, signature off on it locks the prices in place.
Many of these funeral homes now because of consumer demand, just read a statistic the other day that over half of Americans that pass requesting cremation and what is slated to continue to be is that trend will grow to being 75 percent, but I believe it’s year 2030 to 2040. The desire to be buried as dwindling year by year.
A lot of funeral homes have in-house crematory services and when you get one of these policies, they’re typically funded through a premium life insurance plan that lasts for several years, up to 10 years and locks the rates in for the different items with the cremation and service and many times it’s actually portable.
If you’re a snowbird or you live in Michigan or you travel to Florida back and forth, there’s corresponding sponsoring funeral homes that will honor that and still give you the service no matter where it is that you end up.
The pros of this is you get the pre-planning element with working with the funeral home. You can sit down and look exactly what you want, how you want it done. There’s a long-term community involvement aspect to this.
When you deal with the funeral home, many times these ones have been around have been around for decades, if not more than a hundred years. Trust is important when it comes to taking care of your final requirements and wishes. I think there’s an element of a nice aspect to go into a funeral home that has been there forever and does a good job serving the community.
The kinds of this particular setup is that pre-need planning can be expensive relative to other options. I’ve seen pre-need plans out price the final expense plans by two to three times and in many cases it’s just not a use of a good use of money over the long term, especially if you pay between 5 and 10 years. Also, you tie up all this money into a particular policy.
Some people like the idea of planning and they like to have funding for it, but they don’t want to have the whole death benefit go directly to the funeral home. You have to set it up for the funeral home if you get a funeral home policy. That’s the only one of the few drawbacks with the of plans that are available.
Planning your cremation through a cremation society
It is very similar to a funeral home set up. A lot of these societies were set up a prior to the popularity of burial or funeral. Many of them are national or state level and scope. You’ve got to funeral society or Cremation Society of Michigan or Cremation Society of Tennessee, or you’ve got to plan like Neptune Society – a company that offers services nationally.
They say it’s the same process. That’s pros being you’re part of a community of people who have like-minded beliefs. There is a membership affinity to it.
The cons are you may not want to pay a lump sum payment for the entire thing, you may not want to part with that much money. If you do that, that can be pricey. Even if you pay over a period of years, it can be a little bit out of the ordinary as far as pricing can go.
Planning cremation with life insurance policy
When you plan your cremation around a life insurance policy, it’s unique from the other types of arrangements we discussed.
The idea is very simple. You talk to an agent like myself, you look for a small policy usually somewhere between $3,000 to $10,000, less or more we can do that as well.
Then you dedicate a portion of that policy towards the payment of the cremation at the time of death. I mean usually what happens is when you die, as long as everything is set up correctly, your beneficiary receives whatever amount of coverage you had and then it’s their job to take what portion of that towards the funeral home to pay for those cremation expenses.
The pros of this is that it is the least expensive option. Final expense plans are uniquely designed so that we can get a lot of coverage for a fraction of the price that you would get through a membership society program or for funeral home pre plan.
The other thing too is a lot of those plans through those other organizations have limitations and coverage. They’re not as flexible. If you’ve got health ailments, you might find that you can’t qualify for much to begin with and if you do, it’s going to make you wait for a number of years before the full coverage takes effect.
The final expense insurance companies, especially if we work with someone like myself, a broker, we shop around and try and find the best price and coverage and many times it can get people approved for full first day coverage that otherwise couldn’t.
The drawbacks to this kind of plan is there really isn’t any inherent planning like you would get at a funeral home or a membership society. This is important. If you get a plan like this, there’s certainly advantages to a life insurance plan taking care of your cremation expenses.
But you’ve got to take the time to go plan ahead and typically with the local funeral home or with your loved ones and describe in writing what it is that you want and how you want it covered so that everybody knows well in advance what to expect. That’s one of the biggest advantage with cremation policies as they do this planning inherently within the insurance policy that funds it.
If you get a policy like this from myself, the planning part is up to you. At least she got the money and that does help tremendously. But if you want to pay in a certain way and have things happen a certain way, then you have to plan it out in your own time.
3 options for cremation plans using life insurance
There’s three options that you can partake in.
- Lifepay final expense policy.
- Multi-year Paid up Life Insurance Policy.
- Single Pay Life Insurance.
A life pay insurance policy basically works like it sounds. First of all, the benefits of these is that you can never have a premium increase. Coverage can’t cancel due to age or health and in many cases if you can medically approve your cover from the first day and again, like mentioned previously, the premiums are very competitive.
What are the drawbacks with the life pay policy is you got to pay for life?
If you are 65 when you take this out and you died 100, you paid for 35 years, you cannot stop paying. You’re going to have to keep paying if you want that amount of coverage in place.
Let’s take a look at some samples you can kind of compare what kind of rates you’d be looking at. We’re going to look at a 65 and a 75 year old male and female nonsmoker rate. Just with the idea of giving you an idea of what this will run for. In this screen I pulled up a $5,000 for a 65 year old non-smoking male for first day full coverage.
The price range is about mid twenties to $30 a month. There are some rates for a 65 year old non-smoking females for $5,000 coverage, upper teens to about mid twenties.
Now we’re looking at 75 year old non-smoking males, of course, a little bit older now. We’re looking at low forties to low fifties for 5,000. And then same thing for females, we’re looking at somewhere between low thirties to upper thirties for $5,000 for a 75 year old non-smoking female.
They are very much the same kind of policies – same benefits. Never goes up in price covers, never cancels. If you medically qualify, you may be approved for first day full coverage.
The only difference is that once you reach 10 year or 20 year point, you’re done paying for it and you get to continue to keep the life insurance. It’s like paying off a mortgage. Once your mortgage is paid off, you don’t get kicked out of your house, selling it. Same idea here. You own the life insurance, even after you pay it off.
Drawbacks are it’s going to cost you a little bit more, because you’re paying it off and you don’t have to potentially face future premiums beyond the 10 to 20 year period. And one of those show you some quick sample you can see what the price difference would be and how it works.
What you’re looking at here is a 65 year old, $5,000 non-smoking male rate. Several different companies from about a 40 to $60 a month. And here’s a $5,000 plan for a female nonsmoker, 65, mid thirties to mid fifties.
For a male age, 75 non smoker for a 10 year paid up plan to 20 year paid up plans, actually got sevens and tens. You’re looking at somewhere between upper fifties to right at $80 a month. Then for a non-smoking female, 75 for $5,000 of coverage, you’re looking for mid fifties to mid to upper seventies.
Let’s talk about this again, same benefits as the multi pay paid up in life pay plans. The only difference is really just make one lump sum payment. You’ll never have to make another payment again. You’re covered for a multiple of that amount of coverage. This is a pretty interesting product and very useful. When you’ve got somebody who doesn’t want to make payments and has a dedicated amount they can put into something like this.
The drawback of this plan is, as it’s a lump-sum payment, you’ve got to tie that money into the plan and it’s put into the life insurance policy.
Let me show you some samples real quick. What you’re looking here is a spreadsheet of a paid up plan option, it’s a little hard to understand, but I’m going to kind of describe to you as best as I can using a calculator, what you’re looking at. If you look here, you’ll see these 65 year old nonsmoker, male rate is $68,850.
Let’s say you wanted 5,000 in coverage, what you would actually end up playing $3,440 for a $5,000 death benefit. You get nearly benefit of $1,560 more out of it in coverage for the lump sum. You’ve turned $3,440 in the $5,000 in coverage. And you can do that at leaving larger multiples are less multiples.
For example, females would be a, if we do the math, you’d be looking at basically a $3,100 payment for $5,000 benefit.
And as you can see, it goes up the scale, of course, as you get older, the, the return is less, but if you like the idea of getting an advantage here where you don’t have to necessarily pay more to get coverage. This is a really cool product. That’s super-helpful.
My final thoughts here on what cremation plans actually work best are that these are all really good options.
It’s not necessary that there’s one option, whether it’s the funeral home or the cremation society or just the life insurance plan dedicated to cremation. That’s actually a better than another.
It’s just whatever’s best for you based on what you want to accomplish. And as well as what your budgetary concerns are. My experience dealing with people on a fixed income cost is the biggest determinant of whether one uses the pre-need cremation society or funeral plan or a final expense policy.
A lot of businesses come to me because they’ve seen some of this and they just can’t potentially fit into the budget or they don’t want to pay a lump sum payment for it. And either way, if your goal is to completely plan ahead for each item and have a dedicated policy, truly the society or funeral home plan is going to work best for you.
I don’t have any caveat saying that if money is not much of a concern, but your biggest concern is pre planning. That’s the best way. If you’re more of the type that’s a little sensitive on budget or maybe you want to stay in control of who receives the money, you want something more than just a cremation plan than a life insurance policy is a great idea.
With a final expense plan you can get enough to take care of the cremation and then you could have extra for whether it’s replacing income for your spouse, leaving a legacy of love to have daughter or son or a grandchild.
We’re just making sure any final arrangements are taken care of that or just not considered a life insurance plan. A standalone plan has a lot more flexibility than what you’ll get through cremation society or a funeral home.
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