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Key takeaways:
Funeral insurance is a type of life insurance policy that helps your loved ones when it comes to covering your funeral expenses. It's a permanent kind of coverage, so it sticks around as long as you do (as long as you keep up with the monthly premiums) and pays out a lump sum when the policy holder passes away.
Usually, funeral insurance is not meant for folks raising families that need coverage for big financial obligations like mortgages, childcare, tuition and income replacement during their working years.
This is because funeral insurance is focused on one thing: making sure your final expenses are taken care of.
Funeral insurance is used to save your loved ones from the stress of footing the bill for your final farewell. It's like a safety net specifically designed to cover those final expenses that come with such a difficult time.
The big drawback? Funeral insurance premiums are much more costly than traditional life insurance policies, for less of a payout.
You should only buy funeral insurance as a final resort because, while it doesn't require a medical exam, it has lower-than-average payout amounts with costly premiums.
Funeral or burial insurance may be a viable choice if you:
Otherwise, it makes sense to try term life insurance or whole life insurance first. If you're approved, you'll likely save money and get your beneficiaries a bigger lump sum payout.
Let's get into a breakdown of the differences between funeral insurance and life insurance:
Funeral insurance:
Life insurance:
Funeral insurance is all about easing the financial burden of just your funeral expenses, while life insurance has a broader scope, protecting your family in various ways.
Life insurance can cover your funeral expenses and anything else your family needs if you pass away. Why? The death benefit amount for traditional life insurance is much higher than funeral insurance.
Most life insurance companies offer policies with a death benefit of up to $5M (but there are companies that offer even more). The average cost of a funeral sits at around $10,000.
That leaves your loved ones with a large amount of money to handle such a difficult time, using the remainder of the tax free payout to do things like:
See how affordable term life coverage can be in a few clicks. Max out your family's payout with budget-friendly premiums.
Funeral insurance has some specific uses, helping your family cover end-of-life related costs, like:
A straightforward kind of coverage that skips the medical exams. You'll need to answer health-related questions to determine eligibility. If you have very serious pre-existing conditions or need higher coverage, other options may be better.
Simplified issue life insurance best suited for:
A type of coverage that is designed to approve almost everyone that applies. Guaranteed issue is for those with health issues that make it challenging to qualify for other types of life insurance and have been denied both traditional and simplified issue coverage.
There are no medical exams or health questions for guaranteed issue policies.
Guaranteed issue life insurance is best suited for:
Funeral insurance can cost around $52.72 for a woman and $70.94 per month for a man, both aged 40 for just $25,000 in coverage. These are funeral insurance rates from Canada Protection Plan (one of the leading providers of guaranteed issue life insurance).
Let's look at the cost of a term life insurance policy to compare:
These term life insurance quotes are from PolicyMe for the lowest available coverage amount ($100,000) over 30 years. Broadly, funeral insurance can cost more than 3x term insurance for a death benefit that's 4x less in coverage.
The typical funeral insurance payout amount ranges from $5,000 to $50,000. However, that maximum death benefit is rarely offered. You'll generally see funeral insurance policies capped at $25,000.
The Government of Canada doesn't offer a one-size-fits-all solution for funeral costs. But there are a couple of options to explore:
The coverage and eligibility for the Government of Canada's funeral coverage can vary, so it's essential to do your research.
Here's a look at the top three funeral insurance companies in Canada. We'll be looking at providers of guaranteed acceptance life insurance policies, which is a type of funeral insurance policy.
About the policy:
Best suited for: Seniors and people with pre-existing conditions. Some of the best prices for guaranteed life in Canada.
About the policy:
Best suited for: Smokers and those that wish to borrow against their life insurance.
About the policy:
Best suited for: Someone that wants a lot of add-ons for their policy.
End of life expenses are the costs associated with a person's final arrangements and passing. These expenses include funeral service or memorial services, burial expenses, cremation costs or burial costs, transportation of the body, caskets or urns, cemetery plots, headstones and any administrative fees.
End-of-life expenses can vary widely depending on preferences, cultural traditions and location. Understanding these costs can help you plan ahead and consider options like life insurance to ease the financial burden on loved ones and give them a peace of mind.
You generally do not need to do a medical exam to qualify for funeral insurance plans. In fact, there are some funeral insurance plans that don't even require a medical questionnaire (guaranteed acceptance insurance). That said, different insurance companies may have different policies on the matter.
Before purchasing funeral insurance, you can check in with an advisor to make sure you understand the medical requirements for your policy. Most of these coverage options are considered permanent life insurance, but there are term options as well.
Final expense insurance and funeral insurance aim to cover end-of-life costs. But final expense insurance is a broader term for policies that cover final expenses beyond the funeral, like medical bills. Funeral insurance focuses on funeral-related expenses like caskets, services and burial costs/cremation costs.
Sometimes life insurance companies use these terms interchangeably, as with the terms "burial insurance policy" and "funeral expense insurance", too. To ensure you've got the insurance coverage you need, check your policy's payout terms before signing on.
When it comes to funeral insurance permissible in Islam, the kind that's generally accepted is known as "Takaful." This is a form of Sharia-compliant insurance that complies with Islamic principles, emphasizing mutual support and community assistance.
To break this down: In Takaful insurance, instead of paying premiums like traditional insurance, participants contribute to a shared fund. If someone from this group incurs expenses (like funeral costs), these are covered from this communal pool. Any leftover funds after meeting all claims and costs are then given back to the participants.
However, it's important to remember that interpretations of insurance can vary among different scholars and communities in Islam. So, if you're uncertain, it's always a good idea to seek advice from someone knowledgeable in your community or religious authority.
