When it comes to life insurance, most plans are designed to provide financial compensation to your loved ones when you’re gone. In almost all cases, the death benefit is a lump sum that can be used however your beneficiaries see fit.
While traditional life insurance is suitable for a variety of situations, there are times when you might want to be more specific. Your life insurance policy can be designed around your needs. Today, we want to talk about cremation insurance and how it may be a better option for your situation.
What is Cremation Insurance?
As the name implies, this kind of life insurance is built around paying for the cost of cremation after you die. That being said, few plans stipulate that the money must be used for cremation, so your loved ones do have some flexibility. Overall though, this kind of policy is designed to help alleviate end of life expenses.
The Current Cost of Cremation
Although cremation is typically much less expensive than a traditional burial, it can still be a lot more than your loved ones can afford. There are also varying ways that you can get cremated, but, on average, your family can expect to pay anywhere from $500 to $10,000.
Variables can include whether or not you have a memorial service, the type of urn you get, and how involved the funeral home is with the handling of the body beforehand. We’ll get into more detail about the different options available later on.
Where you live can also affect the cost of cremation. For example, in Nashville, TN, the minimum price is over $1,200, while in New York City, it’s $550. You will want to be sure to do some research regarding cremation expenses before getting a policy so that you know what to expect.
The Ins and Outs of Cremation Insurance
Typically speaking, you can add end-of-life expenses to your current life insurance plan. These riders offer additional funds that are designated for paying for a variety of items, including a funeral, burial, or cremation.
However, if you want to get cremation insurance specifically, that is also an option. Let’s take a look at some of the ways this kind of policy differs from traditional life insurance.
When you try to get life insurance, chances are that you’ll have to either answer medical questions or submit to an exam. If you’re still relatively young, a review is most likely unnecessary. For those over 40, however, it’s usually a requirement.
The purpose of getting a medical exam is to determine your level of risk. All insurance companies want to minimize the chances of delivering a big payday. So they charge you according to your overall health. For example, if you smoke, you will have to pay much higher premiums than if you didn’t.
For cremation insurance, however, a medical exam is not needed. Regardless of your age or any particular ailments you may have, insurance companies don’t need a clean bill of health. Because the money is designated for cremation and other funeral costs, everyone is guaranteed a policy.
That being said, you may still have to answer a few medical questions, particularly if you’re over 65. While your answers shouldn’t bar you from getting a policy, they can affect your premium rates, especially if you suffer from chronic diseases or other adverse conditions.
What’s nice about cremation insurance is that your loved ones don’t have to spend all of the money on cremation. For example, if you get a $20,000 policy and the funeral expenses are only $10,000, your family keeps the rest.
However, keep in mind that most cremation insurance policies have strict benefit limits. Most of them capping off at $25,000. So, don’t expect your loved ones to get a substantial payday from your policy.
Still, it’s nice to know that they have flexibility when trying to determine how to spend the death benefit. It’s even better when you recognize that any leftover cash goes to your beneficiaries, not the funeral home.
Lenient or Nonexistent Underwriting
As we mentioned, virtually everyone can get cremation insurance. In fact, many companies may not worry about underwriting your policy at all. This flexibility and leniency mean that you can get cremation insurance while suffering from a significant health issue (i.e., cancer).
These conditions will typically prevent you from getting standard life insurance. But, with cremation coverage, you can avoid leaving your loved ones in a financial bind.
Two-Year Minimum Payment
Realistically, you shouldn’t have to worry about violating this rule. But, you have to recognize that all cremation insurance policies have to be paid for at least two years. If you die before then, your family can typically get a refund, although most insurers will charge interest on it.
The reason why this two-year minimum can be such a critical consideration is that you don’t want to pay for cremation insurance for the long-term. If your policy caps at $25,000, you shouldn’t spend more than that in premiums. So, if you’re paying for cremation insurance for 10 to 20 years, it’s better to invest that money in something that will appreciate in value instead.
On the one hand, guaranteed acceptance may be a shining welcome sign to many people. On the other hand, having such a high-risk pool of policyholders means that everyone has to pay more.
Since cremation insurance is not usually disputed or revoked, you will have to spend more on premiums than you might expect. Again, you don’t want to plan on paying for this coverage for too long.
In most cases, adding an end-of-life expenses rider to an existing life insurance policy is the best option. The reason for this is because you can get a higher death benefit and better rates. Unless there is a compelling reason to avoid standard life insurance, you should look into that first.
Types of Cremation Services
As we mentioned, your family will get to keep any leftover money from your death benefit. However, it’s crucial to talk with your loved ones beforehand. That way they can understand your wishes and execute them effectively when the time comes.
The cost of cremation can vary wildly, so you should understand the varying ways that you can get cremated. Here is an overview of the most common options.
For those who are trying to limit funeral expenses as much as possible, direct cremation is usually the preferred choice. With this service, a funeral home will often collect the body. Then they deliver the ashes to you in a receptacle of your choice.
Urns can be made of a variety of materials, including wood, stone, metal, or glass. Other options include eco-friendly biodegradable urns and jewelry to immortalize your remains tastefully.
Direct cremation forgoes much of the added expenses that can come from a funeral. This includes embalming, a memorial service, or burial plot. Overall, this is the simplest and most cost-efficient way to handle your remains.
If you want to avoid paying anything at all, you can donate your body to science. Because of your donation, the remains are cremated at no cost to your loved ones. Being a donor means that you can aid in many different research projects. Or, you can provide healthy tissue to living patients.
Before opting for donor cremation, you need to talk with your family first. Many loved ones are not comfortable with the idea, and they might not fulfill your wishes accordingly.
Failing to discuss your thoughts and feelings on the matter could create an undue burden on your family and relatives. It may seem a bit dark to talk about such things, but it’s far better to handle it now than wait until it’s too late.
Unlike direct cremation, this option provides additional services, such as a funeral or viewing of your body. If you want a conventional cremation, you will want to talk to a funeral home. This is to discuss the potential elements you wish to include, as well as the costs of each component. For example, if you want your body to be embalmed for viewing before being cremated, that will add extra costs.
Some typical add-ons for traditional cremation include:
- Memorial Service – a hosted affair that celebrates your life.
- Headstone Marker – even though your body isn’t buried, you can still have a headstone for loved ones to visit later on.
- Urn – with direct cremations, your remains may simply reside in a sealed container that will allow your family to spread the ashes. In some cases, however, you might opt for an elegant urn that can either rest somewhere (i.e., a mausoleum) or become a keepsake.
Regardless of the additional parts you want to add, the funeral home should take care of all of the necessary paperwork. You typically don’t want loved ones handling things like the death certificate, as it could be too painful.
In many instances, people want to have a memorial service with a viewing casket. That can even be when cremation is the next step. In these cases, the chest will burn along with the body, rather than getting buried.
As a rule, viewing caskets are going to inflate the cost, as the piece itself can be between $500 and $600. You can also rent a container for this purpose, which will cost a little less.
In addition to the casket itself, the body will need to be embalmed and dressed before the viewing. Often, this expense will be between $200 to $800 for the embalming. Plus, an additional $100 to $200 for cleaning and dressing. If your body requires an autopsy or is in poor condition, these costs can go much higher.
Pre-Planning for Your Cremation
Although cremation insurance plans don’t pay out until death, you can further alleviate the stress and anguish of your passing by pre-planning for your cremation services. In this case, you can either pay for the cremation beforehand or simply make arrangements with the funeral home.
We don’t recommend pre-paying for your cremation or memorial service. That can potentially create problems down the road. First of all, some funeral homes may not deliver on their promises. Secondly, your money is better kept in a savings or investment account.
That being said, pre-planning for your cremation can be a good idea for these reasons:
- Alleviate Stress – your loved ones will already be going through a lot when you pass on. By planning ahead, you can ensure that they don’t have to worry about paperwork and logistics on top of everything else.
- Ensure That Your Wishes Are Followed – even if you discuss your funeral plans with your family, they may not be equipped to fulfill them. By planning with the funeral home directly, you can be sure that everything will happen according to your wishes, not your loved ones.
- Better Cost Estimate – knowing how much of a benefit to get with your cremation insurance is crucial to protect your family from hidden costs. Walking through your cremation service beforehand can give you a better sense of how much to have in your policy.
Let NextGen Life Insurance Help
Whether you want to get cremation insurance directly or add it to an existing plan, we are more than happy to help. Call us or get a quote today so that we can discuss your specific situation. Don’t wait until it’s too late. Be sure that you and your loved ones will be taken care of when the time comes.