What Are the Pros and Cons of Choosing Cremation Insurance?

While cremation is generally less expensive than burial, a traditional cremation with a full-service funeral and disposition can still cost thousands of dollars. 

While there are a range of costs for cremation depending on whether you choose a simple, direct cremation without a funeral or viewing or a full-service, traditional funeral, urn and internment at a cemetery, your cremation could cost anywhere from $1,000 to $10,000. The typical American has only $1,200 in their savings account, so funeral expenses can be an unpleasant surprise, especially when the death is unexpected or plans have not been made or communicated.

Making financial arrangements for end-of-life costs is one way to have peace of mind that our loved ones won’t be faced with the financial burden of handling our disposition. 

There are several ways to plan ahead for those costs including life insurance, purchasing a “pre-need” plan or setting up a payable upon death bank account. 

What is Cremation Insurance? 

Cremation insurance is actually a small-value life insurance policy. It also is known as a final expense or end-of-life insurance. The payout is meant to be used for funeral expenses but can also cover other end-of-life costs. 

An insurance company can set up a policy for you for cremation insurance. In some cases, you can also make arrangements through your chosen funeral home or cremation provider to have them paid directly. You can select the level of coverage you need, you’ll pay monthly amounts into the policy and when you die, the money will be paid out directly to your beneficiary (depending on how it is set up, sometimes the beneficiary is the funeral home) and is normally a tax-free benefit for your loved ones. 

If the money goes to a beneficiary, they can spend the money in any way they see fit. Some of the additional fees your beneficiary might use the cremation insurance payout for include:

• Outstanding medical bills 
• Air or boat fare for a spreading of ashes ceremony 
• Travel expenses for funeral attendees 
• Other funeral or celebration of life costs (food, flowers, venue, etc.)

Benefits for Purchasing Cremation Insurance 

Is cremation insurance “worth it”? Like many of our end-of-life plans, it depends, according to planning site, Cake. If you have plenty of savings that will cover your costs and you are confident your loved ones will use their inheritance wisely to pay for your cremation, then you may not need cremation insurance. Cremation insurance is not legally required by any state or federal laws. It is just a tool to help you budget effectively for your end-of-life expenses. According to the Cremation Institute, because the policies are aimed at people who are a higher risk to the insurer, the policies can be more expensive than traditional life insurance.

Here are the “pros” of purchasing cremation insurance:

• It gives you peace of mind that your beneficiaries will not be burdened by the cost of your cremation.
• You can pay into your insurance monthly if you don’t have enough savings to cover your cremation costs.
• Since these policies are often sold to older people, they generally don’t have a requirement for a medical exam. 

Drawbacks in Purchasing Cremation Insurance 

• Your beneficiaries will have to file a death claim and present a death certificate, so it could take several months to receive the money.
• Some policies (those that don’t require a medical exam, sometimes called guaranteed issue life insurance) won’t pay the full-face amount in the first two to three years of the policy.
• You will need to apply and then make regular payments into your policy, money that might be better spent by putting it aside in a payable-upon-death savings account for greater flexibility and less paperwork and faster access. 

Whether you purchase cremation insurance or other life insurance policy or opt to pre-pay for your cremation or set money aside in a bank account, the important thing is to plan ahead so that your family knows what you’d like and won’t be burdened with the associated costs. Any of our providers can assist in funeral and cremation preplanning. Contact a nearby location here.

If you're interested in learning about burial insurance as well, take a look at our article: Do You Need Burial Insurance?