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Life Insurance Versus Pre-Need Funeral Insurance [Rates Revealed]

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Are you interested in getting a policy to pay for your funeral-related expenses?

Are you wondering what the difference is between pre-need funeral insurance and life insurance?

Want to know which option would suit you best?

If so, you’ve arrived at the right article, whether your looking for a policy on yourself or a parent.

Today, we’ll be discussing…

The Difference Between Life Insurance And Pre-Need Funeral Insurance

…So let’s dive in!

NOTE: Would you prefer me to present this information to you in video format? Watch the video below for the complete presentation. Enjoy!

Here’s An Overview Of Today’s Topic:

The Basics Of Life Insurance

I like starting my educational posts with the basics before working into more complex topics.

And since we’re discussing life insurance, let’s define what that means.

Life insurance pays a cash benefit to the beneficiary of your choice upon your death.

And why would someone need money when you die?

Let’s talk about the most common reasons people purchase life insurance.

1. Pay Off Debts

Every wonder what happens if the breadwinner in your family unexpectedly dies?

It’s likely handling basic expenses will become a problem without his income. And a common expense most Americans have is making the monthly mortgage.

This life insurance plan comes to life. Buying life insurance to act as a “mortgage protection” policy may pay off the remainder of your mortgage balance upon your death.

In turn, your family eliminates the worry of losing the home to foreclosure.

2. Income Replacement Policy

An income replacement policy pays a sizeable lump-sum benefit to a surviving spouse with the purpose of replacing what income you would have earned alive.

For example, a retired couple requires a combined income to sustain their lifestyle.

Image the husband passes away and half or more of the monthly income his wife receives leaves with him.

Would the widow suffer financially? She may lose her home, possibly eliminate expenses, and all-around cut back.

This is where life insurance comes in. A lump-sum payout to the surviving widow provides breathing room to get back on her feet.

3. Final Expense Protection

As the primary topic of our article, people like you use life insurance to fund funeral-related expenses.

Funerals aren’t cheap. The average burial has risen from $6000 to the upper-$8000 in 2017.

And with many seniors having little to no savings, a life insurance policy is a useful tool to pay off an expense everyone will face one day.

Top 10 Reasons Why People Buy Burial Insurance

1.Rates are affordable
Working with a specialized broker like us at Buy Life Insurance for Burial means you have access to a number of providers. This passes the savings on to you, as we are able to shop for the best value policy to meet your budget.

2.You love your family
If you are concerned about leaving your loved ones with the final expense of your burial or cremation, burial insurance is a great solution. It saves family from having to dip into savings or even go into debt to cover your final expenses.

3.Peace of mind
Peace of mind is really the primary advantage of burial insurance. Once in place, you know no matter when you pass away, your final expenses will be taken care of.

4.Cannot outlive
Unlike a lot of other plans out there such as term life insurance, a burial insurance policy is designed to never cancel, regardless of your age or health.

5.Cash value
The cash value element of burial insurance is an important factor to some. After significant time has passed and premiums have been paid, you can borrow in you are allowed to borrow a portion of the money you put into the plan for whatever reason, such as an emergency expense or something like that.

6.Protect savings
If you have savings set aside for a specific purpose, most likely you don’t want that money to go toward your final expenses. Burial life insurance allows you to keep your funds separate so that you can better manage your finances.

7.Escalating final expense costs
The cost of burial and cremation continues to go up. If you are concerned about having enough funds to cover your final expenses, burial insurance is a great solution. A burial insurance plan does a great job of covering those expenses and helps you offset any sort of inflationary effect.

8.No exam
One of the greatest things about a burial insurance plan is that you do not have to have an exam to get coverage. Usually a simple application, as well as your health history, is all that is required for a review.

9.Rates never increase
If you buy a whole life insurance based policy, your rates are guaranteed to never go up due to age or health. This is especially important to those who are on a fixed income and are fearful of rate increases.

10.Custom tailored policy
A broker can tailor your insurance policy to meet your specific goals and budget. This is especially important for burial coverage, as it’s a policy that you will want to keep for the long term.

If you have to drop coverage due to inadequate coverage or unaffordable rates, the policy is not meeting your ultimate goal to cover final expenses. That’s why it’s so important to get a customized plan that you can keep for the duration of your life.


What is Pre-Need Life insurance?

Let’s talk about how pre-need life insurance works.

Pre-need is a special type of life insurance sold through the funeral home.

Its purpose is to ONLY pay the full cost of the funeral and related services.

Pre-Need Policies Fight Inflation

The biggest selling point with pre-need policies is its ability to lock in most funeral-related costs.

If you’ve never had any involvement with a funeral, there’s quite a few expenses.

Here’s a short list of some of the most common expenses related to a funeral:

  • Service fee paid to the funeral home
  • Transfer of remains to funeral home
  • Embalming
  • Preparation of the body
  • Use of facility for viewing, service
  • Hearse
  • Service vehicle
  • Memorial package
  • Flowers
  • Casket
  • Vault
  • Headstone
  • Urn (if cremated)

And like food, gasoline, and health care expenses, all funeral expenses are subject to price increases over time. Pre-need policies allow you to lock in current-day pricing when you purchase the product.

Pre-Need Is Insurance

Just as important as locking in funeral costs, pre-need is insurance against the unexpected.

If you die before the pre-need policy is paid in full, if you have a first-day full coverage pre-need policy, the policy will pay the funeral balance. Pre-need insurance gives you peace of mind knowing that you are covered.

Flexible Premium Payments

Pre-need policies provide premium flexibility for those with tight budgets. 

If you have the means, you can pay a one-time payment to fund your pre-need policy. Otherwise, you can extend payments over several years, or up to 10 years, depending on your budget.

And once you complete the required pre-need insurance payments, your policy is paid off. You now own the policy. And at any time you pass away, the pre-need policy kicks in and does it’s job.

Life Insurance For Final Expenses: Pros And Cons

By now you’re asking yourself…

“Should I use a life insurance policy policy to fund funeral expenses? Or go with a pre-need plan?”

Let’s start with discussing the benefits of purchasing a life insurance plan to handle your funeral expenses.

1. Life insurance provides full control

With a life insurance plan, you have full control. Specifically, you have full control over who YOU want to receive your life insurance proceeds when you pass away. 

If you want a loved one like a daughter or a spouse as beneficiary, that’s fine. You name them as the recipient of the benefits. And when you pass away, your beneficiary receives the payout.

This stands in stark contrast to pre-need life insurance.

The funeral home REQUIRES you to name them as the beneficiary. Obviously, this makes sense, after all. The purpose of pre-need is to pay off your funeral costs, and naming your funeral home as the beneficiary is a foregone conclusion.

But what if you have a need for life insurance in addition to paying funeral costs? Maybe income replacement or mortgage payment protection insurance is important, too.

This additional need is why many opt to purchase a larger “final expense” policy to pay for ALL of these final expenses.

2. More Coverage With Life Insurance

Comparing dollar-for-dollar, you will receive MORE benefit with life insurance than with a pre-need policy.

Naturally, the reverse is true, too. Comparing two equal-coverage policies, a life insurance policy almost always costs less than a pre-need policy.

I’ve seen life insurance policies cost 50% to 70% less than an equal-value pre-need plan.

Here’s the bottom line…

For a budget conscious person, a life insurance plan makes more sense. You get almost identical benefits as a pre-need plan offers at a fraction of the cost.

3. Underwriting Concerns

One tough thing about pre-need is its less-flexible underwriting compared to final expense burial insurance.

This is a big concern for some.

Have you ever experienced health issues? Diabetes, heart disease, cancer?

Many people looking at either pre-need insurance or life insurance have experienced health problems at some time in their past.

The good news is life insurance companies provide more underwriting flexibility than most pre-need plans for folks with health history issues. 

And what’s surprising is how many health conditions are approved for first-day full coverage with life insurance and not pre-need insurance. 

Here’s a short list of potentially-acceptable health conditions with the life insurance companies we work with at Buy Life Insurance For Burial:

  • Cancer history
  • Heart disease history
  • Parkinson’s
  • Lupus
  • Diabetes (pills OR insulin)
  • Atrial fibrillation
  • Lung disease (COPD)
  • Mental health disorders (anxiety, PTSD)
  • Bi-polar, schizophrenia
  • And more!

Drawbacks of life insurance

While life insurance provides underwriting flexibility, more policyholder control, and better pricing flexibility than pre-need policies, there are some clear drawbacks you must consider.

No Pre-Planning

Buying life insurance to pay for your final expenses will not provide funeral home pre-planning.

A life insurance policy’s sole job is to pay the death claim to the beneficiary. The life insurance policy has no say over WHAT is done with the money your beneficiary receives.

If pre-planning is important to you, how do you overcome this challenge?

First, visit your funeral home. Many will allow you to pre-plan ahead of time without taking out a policy.

Funeral homes like this because:

  1. There now is a higher chance your family will do business with them because your plans are on file, and,
  2. They know you have life insurance coverage, thus have the means to pay the funeral expenses.

Not All Life Insurance Is Appropriate

Sure. You can potentially save and get more coverage with a life insurance plan.

But did you know that you could make a HUGE mistake and purchase the WRONG type of life insurance policy?

Here’s what I mean.

You see, not all life insurance is the same. Some like term life insurance are designed to cancel at a future date, meaning you may potentially outlive your coverage.

Other plans, like guaranteed acceptance life insurance force a two-year waiting period before you’re fully covered for natural death.

The main perpetrators are the “TV/Junk Mail Life Insurance” companies like Colonial Penn, AARP, Globe Life, and Trustage. Many people miss the fine print that sticks these frustrating coverage restrictions on their clients.

Pay For Life

While premiums are lower, final expense life insurance plans usually require you to pay until you die.

For example, if you take out of plan at 60 and die 90, you have to pay until you die.

There are exceptions like a “paid-up plan”

Similar to a pre-need policy’s limited payment schedule, a paid-up life insurance policy allows you to complete payments at a future date, usually 5 to 10 years. This option is great for folks who hate “forever payments.” 

Pre-Need Funeral Insurance – Pros And Cons

Let’s switch gears and discuss the pros and cons of pre-need funeral insurance.

1. Pre-Need Insurance = Pre-Planning

Arguably the biggest benefit to pre-need insurance is the ability to pre-plan your funeral arrangements.

Are you concerned with ensuring your funeral is handled EXACTLY according to your wishes?

Do you want your kids and family to do ZERO planning for your funeral service?

If so, pre-need is definitely something to consider.

2. Get Exactly What You Want At A Guaranteed Rate

Pre-need insurance policies allow you to list the exact items you want. In addition, your policy locks prices for each component.

If there was ever a large inflation in funeral prices prior to your death, no worries. Your pre-need plan eliminates the risk of escalating prices on most items in your funeral service.  

3. The Funeral Home Is The Beneficiary

With a pre-need plan, you name the funeral home as the beneficiary.

The funeral home receives the pre-need policy death benefit to fund the funeral service you arranged ahead of time. Many people like this because no family member has to intervene and argue about what percentage of the life insurance the funeral home will receive.

And avoiding drama is always a good thing, don’t you agree?

4. Pre-Need Policies Are Portable

Do you spend half your time in one part of the country, and half the time in another?

Or are you contemplating on moving permanently beyond a reasonable distance to your local funeral home?

If so, pre-need insurance offers portability. This means you can take your policy to another funeral home and get the same benefits.

This is a very important benefit for Snowbirds. I’m sure many of you live in warmer climates during the winter, and move back home during the summer.

And where we’ll end up dying… nobody knows!

So having the convenience of portability is useful, and you eliminate the worry of not having funeral expense coverage, especially since most funeral homes accept pre-need policies created at other funeral homes.

Disadvantages Of Pre-Need Insurance

As with all things in life, there are good and bad sides.

So let’s talk about drawbacks of pre-need policies.

1. Pre-Need Is Expensive

The biggest disadvantage is the high expense to purchase pre-need insurance. 

In short, pre-need typically costs 200% to 300% more than a “burial” life insurance policy.

For example, if you purchase life insurance policy with a $10,000 benefit for $50 a month, expect to pay $100 to $150 a month for the same benefit a pre-need insurance plan offers.

Those on a tight fixed income will fare better with a life insurance policy to pay for burial costs.

2.Family Is Not Beneficiary

Pre-need insurance plans require the funeral home as the SOLE beneficiary.

This is fine if all you want is a policy to pay funeral costs.

But what if you want to leave money behind to a surviving spouse or to kids? What if you have obligations like a mortgage to pay off?

Obviously, a pre-need plan along will not due, and having a traditional life insurance plan makes more sense.

Cost Comparison – Pre-need Insurance

One way to clarify whether pre-need or life insurance is your best coverage choice is to review pricing.

So, let’s do cost comparison.

Pre-need insurance is broken down into the following.

  • Single pay plans – you make one payment which covers the entire funeral, or
  • Multi-year pay plans – you make regular payments over a 2-, 3-, 5-, 7- or 10-year period.

A rule of thumb with pre-need plans…

The longer you pay, the higher the total cost.

More specifically, if you compare premiums paid in over a 2- and a 10-year pre-need plan, you’ll pay more premiums in over the 10-year plan.

Make sense?

Average Premiums For Long-Term Pre-Need Payment Plans

In my experience, fixed income seniors foot a HUGE bill with pre-need plans.

So much so that seniors typically pay MORE in premiums than the pre-need policy is worth! (more on this shortly).

What can a fixed-income senior expect to pay?

For a funeral service, expect your pre-need premium to cost between $125 to $175 a month if you opt for a 7- or 10-year pre-need policy.

However, we’re only scratching the surface.

Not only should you keep in mind how much you pay monthly, but how much total premiums are paid in over the course of the policy.

And that total my shock you a bit. 

A Client With Pre-Need Coverage

A few years back, I met a senior on a fixed income in her 60’s. She had a pre-need policy at the local funeral home.

Her policy cost her $150 per month, which she would pay over 10 years for a funeral valued at $10,000.

I congratulated her on getting some type of coverage, and suggested we do the math together to see if her investment was a good value.

And doing the math, we found out she was paying $1800 a year for her coverage.

Over the course of 10 years, she will end up paying $18,000 in total premiums paid.

Why Pre-Need May Not Be A Good Value

Here’s where you have to question the true value of pre-need life insurance.

For $18,000 in premium, she gets a $10,000 value funeral service.

Ask yourself – when is it ever a good value to pay DOUBLE for something?

In this case, is it worth an additional $8,000 to protect against potential future price increases?

For many of my clients, this is not worth the money.

What do they do instead?

They opt for a life insurance plan that gives them 200% to 300% more coverage while also giving my clients full control over the beneficiary designation.

And as far as pre-planning, they either leave their wishes to their family, or with a funeral home they trust.

Life Insurance Quotes

Let me  show you what you can do price wise.

60 year old male non-smoker, $10,000 in coverage

Life insurance cost comparison for 60 year old male non-smoker, $10,000 in coverage/pre-need plan

70 year old male, non-smoker, $10,000 rate

Life insurance cost comparison for 70 year old male non-smoker, $10,000 in coverage

60 year old, $10,000 non-smoking female

Life insurance cost comparison for 60 year old female non-smoker, $10,000 in coverage

60 year old, $10,000 non-smoking male

Life insurance cost comparison for 70 year old female non-smoker, $10,000 in coverage


Underwriting Difference Between Pre-Need And Life Insurance

Almost as important as figuring out WHAT policy works best… is figuring out IF you may qualify for it!


When comparing pre-need and life insurance, final expense life insurance plans almost always are easier to qualify for than pre-need.

Here are health conditions that may qualify for first-day full coverage with final expense life insurance that may NOT with pre-need policies:

  • History of cancer,
  • History of heart problems, 
  • Neurological problems like Parkinson’s and Multiple Sclerosis,
  • Mental health issues like depression, bipolar, and schizophrenia,
  • Lung disease like COPD,
  • Kidney problems,
  • Diabetes,
  • And many more

And yes… most of these health issues may qualify you for immediate first day coverage.

This is the opposite of what I’ve seen pre-need policies offer.

For whatever reason… maybe there isn’t as much competition… underwriting for pre-need is MUCH more strict.

And while many have two-year waiting period options for folks that can’t medically qualify for first-day coverage, the underwriting is so tight that a diabetes or depression diagnosis cause you to wait two years before your pre-need policy is in full effect.

Trust me… that’s crazy!

You see, that’s the problem with pre-need insurance underwriting.

You have higher odds of qualifying for inadequate coverage initially with pre-need than you do with final expense life insurance. 

Because… with pre-need… if you had a medical condition that only allowed for a two-year wait on full natural death…

What if you actually DIED in that two year period of time?

Bottom line… your funeral is NOT covered. But may have been if you had final expense life insurance instead that fully approved you for full benefits from the first day.

Hopefully you see why I think life insurance is a good deal for funding your funeral arrangements.

Avoid risks when you can. And make good use of your money. Life insurance allows this more often than pre-need insurance.

Final Thoughts

Let me give you my final thoughts on pre-need life insurance versus regular life insurance.

1. Pre-Need Is Good When Budget, Health Isn’t An Issue

I like pre-need a lot when dealing with a financially-secure and healthy senior.

If you can pay your pre-need policy off in a single payment or over a 2- to 3-year period of time, pre-need is a great deal financially.   

2. Get Pre-Need If Setting Plans In Stone Is Important

Have you been in the tough position of selecting between different caskets and what dress to wear for a family member?

These are more difficult decisions than you can imagine for someone actively grieving.

And pre-need plans go a LONG way in eliminating these concerns, giving space to your loved ones to grieve.

When I meet a client adamant about planning EVERYTHING ahead of time, pre-need is worth considering.

However, if budget is a concern, keep in mind you can get similar results pre-planning at the funeral home and insuring with a low-cost final expense life insurance policy.

3. Tight Budget? Get Final Expense Life Insurance

If your budget is tight, consider life insurance instead. 

You may think a $150/month premium is too much. But maybe a premium $50 to $100 makes more sense.

If that’s the case, you’ll breathe easier with a final expense life insurance plan. You’ll get quality coverage to pay your funeral bill without breaking the bank.

4. Want More Than Funeral Insurance? Get Life Insurance

If you want more than a funeral policy, consider getting a life insurance policy instead.

If you want to leave money to your surviving spouse and pay off debts, a pre-need policy cannot accomplish this.

However, a life insurance plan can. A life insurance plan is the ultimate combination package.

5. Want Beneficiary Control? Get Life Insurance

People who select life insurance appreciate the control of selecting beneficiaries. 

How To Qualify

My twin girls Emily and Eva thank you for reading, and hope you’ve gained truly valuable information on your search for life or burial insurance. If you’re ready to discover your options for life or burial insurance, call me at 888-626-0439 now for your free life insurance quote!

Interested in a pre-need insurance policy?

Go to your local funeral home. Pre-need plans are almost exclusively sold through funeral homes.

Interested in life insurance to cover funeral expenses?

I can easily help you there.

Here’s what you need to do for me to help.

Call 888-626-0439 now. Either myself or my team will pick the phone up and help you out.

Applying for life insurance is easy. There are no exams. Applications are done telephonically or through email. And in most cases we get a same-day decision.

Thanks for reading this article. I hope you have found it helpful in your search for more information about burial insurance.

If you would like to learn more about how burial insurance works or would like to get a free, customized quote, give us a call at (888) 626-0439. You can also send us a request using the message box here. We hope to speak with you soon!

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1 Comment

[…] Did you know that funeral home pre-need policies force you to make the funeral home the beneficiary? […]

January 30, 2019 at 8:26 pm
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