What Is Cremation Insurance?
Cremation insurance is a specific type of whole term life insurance designed to cover the cost of cremation.
Cremation insurance can be more convenient to obtain than some other types of life insurance.
It usually doesn’t require a medical exam, so even if you are in poor health, you can still qualify.
Cremation Insurance Policies: Why Are They Different?
So should you choose a cremation insurance policy instead of traditional life insurance?
Cremation insurance is different from life insurance in several ways.
It’s important to be aware of all these differences before making a decision.
Take these important differences into consideration, along with your own circumstances.
With no medical exam, you can take advantage of cremation insurance regardless of your age or any chronic illnesses.
The process of applying and purchasing cremation insurance can be completed simply either online or over the phone.
You may be asked a few questions about your age, smoking habits, or any health conditions you may have.
The added convenience can make this option very appealing.
Unlike other kinds of insurance payouts, there are absolutely no restrictions on how to use it.
In theory, your family could take the money and just go on a vacation if they wanted.
Of course, they wouldn’t do that. But it’s nice to know that they have just a little freedom.
Got a serious health problem? No worries. Cremation insurance plans are designed to accept anyone, regardless of any health issues.
There are even a few guaranteed issue plans out there that require no underwriting at all.
Cremation Insurance Issues
Because of the added convenience, cremation insurance can seem like a very appealing alternative compared to other forms of life insurance.
However, there are also some potential problems which are important to consider.
If these seem daunting to you, then cremation insurance may not be your best option.
May Not Be the Best Value
With no requirement for a medical exam, these plans insure a high risk group of people.
They often must compensate for the high risk by charging more.
Traditional life insurance almost always gets you a better deal than cremation or burial insurance.
Even if you are in poor health, chances are good that life insurance will cost you less over the long term.
Two Year Paying Period
Cremation insurance policies require a two-year paying period before you can collect.
This means they won’t pay out unless you’ve been paying for at least two years.
You can get a refund on the premiums that you have paid, but at 10%-20% interest.
They also may stop insuring you once you are over the age of 100.
As life is uncertain, these requirements could very easily work against you.
There are still many things you might be wondering if you’re thinking of purchasing a cremation insurance policy.
Here are a few of the questions you may have.
Is Cremation Insurance Really Life Insurance?
Yes. However, not all life insurance policies are alike.
Cremation insurance is a specific type of final expense life insurance created to cover the costs of cremation.
It’s a simplified whole life expense policy with more options.
For example, you can choose to purchase smaller amounts of coverage if that is all you need.
What Other Names Does Cremation Insurance Have?
As noted above, cremation insurance is just a name for a very specific type of life insurance.
Here are some other things it might be called.
- Funeral insurance
- Burial insurance
- End of life insurance
- Final expense insurance
What’s a Typical Payout?
The death benefit that is paid out to beneficiaries varies widely.
It is typically anywhere between $5000 and $25,000.
Do You Have to Spend All the Money?
As with most other types of final expense life insurance, the payout often exceeds the amount needed to cover end-of-life expenses.
So what to do with the leftover money?
Well, your family gets to keep it to use any way they want.
This is a very nice perk, allowing your family to have some extra cash on hand to cushion the feelings of loss.
Of course, it doesn’t make all the pain go away, but it’s definitely an improvement over other kinds of plans where the extra money goes to the funeral home.
It’s well known that cremation is a lesser expense than burial.
However, the cost you pay can vary depending on what kind of services you want.
There are a number of options from which to choose. These depend on your budget and what you want for a funeral or memorial service.
This is often called “low cost cremation” and with good reason.
It allows you to bypass the traditional costs of a funeral.
Because there is no visitation, you can skip the cost of embalming, which is a significant expense.
You can also purchase a simple box for the remains instead of an expensive casket.
And unless you’re burying the ashes, you don’t have to pay for a gravesite or a marker.
Funeral Director Fees
If you’re working with a funeral home, you should expect them to charge a basic fee for their services.
The cost averages between $1500 and $3500. But it can cost as much as $7000.
These costs should cover necessary paperwork (permits, obtaining a death certificate, etc.)
They may also cover the use of their facilities and the transportation of the body.
Generally, your funeral home will contract with a third party (such as a crematorium) to provide this service, which usually costs between $250 and $400.
When purchasing this as part of a package at a funeral home, double check that the price of cremation is included. Often, funeral homes expect you to pay for that separately.
In general, you won’t need a casket if you’re choosing cremation.
However, you might want a traditional casket if you’re planning to have a funeral or viewing before cremation.
You can purchase a special cremation casket for $500-$600.
You may also opt to rent a casket. In this case, the body would be removed after the funeral and the casket returned. This service costs $400-$600.
In general, embalming can cost anywhere from $200 to $800.
This cost varies depending on where you live and on the condition and size of the body.
If the body is severely injured or required an autopsy, it will be on the pricier side.
You will also need to plan on an additional $100 to $500 for the cost of cleaning, dressing and cosmetically preparing the body.
You may want a memorial service showcasing your loved one’s remains in a cremation urn.
A priest, minister or rabbi can conduct a cremation ceremony. Or you can host a simple gathering of friends and loved ones.
There are many possibilities, and your budget for this is exactly what you want it to be.
Your funeral home may offer some options for a suitable box for your loved one’s ashes.
However, there is an extensive variety of urns available for purchase online.
You can choose an eco-friendly biodegradable urn, a baby urn for an infant, a simple wooden box…the list goes on and on.
And the price will vary too. You can plan on spending anything from $50 to $1000, depending on what you choose.
Prepaid Cremation Plans
Besides purchasing insurance, there are other ways to pay for cremation services ahead of time.
A prepaid cremation plan is one of these options.
How Prepaid Cremation Plans Work
In a prepaid plan, you arrange and pay for all your end-of-life services.
This can be worked out with the funeral home or you can purchase an insurance policy.
The cost varies from $10,000 to $25,000, which can be paid in one lump sum or over a period of several years on a payment plan.
How to Preplan Cremation
The first step is to call some local funeral homes and crematoriums in your area so that you can compare prices.
Ask them to break down the costs so that you can compare specifics on each type of service that you want.
Benefits of Preplanning
Here are some good reasons why you might decide to preplan your cremation.
- To ease the burden on grieving family members
- To lock in prices protected from inflation
- To keep your estate out of probate after your death
- To give you control over the details of your end-of-life services