How to Pre-pay for a Funeral

When getting started with prepaying funeral expenses, a big factor to consider is your age and current health status. Unlike life insurance policies, funeral planning insurance from most major providers is available to anyone over 18 who wants a policy. However, depending on the type of policy, you may have to answer some health screening questions. Your answers will impact the terms and benefit payouts determined by time of death, says Yahoo Life’s recent article, “Should You Pre-Pay for Your Own Funeral as Part of Estate Planning?”

Pre-arrangement insurance policies must be paid in full by age 90, so someone near that age and planning for the first time will likely have to pay in full upfront.

Some companies might state that certain diagnoses with imminent death are disqualifiers for policies, and others will insure individuals with a short life prognosis but with altered payout clauses—or they may require full payment upfront.

In those instances, a trust might be a better choice. That fiduciary arrangement lets a third party (the trustee) hold assets on behalf of a beneficiary or beneficiaries.

Remember that companies, policies and regulations vary greatly by state. It will, therefore, be helpful to consult an experienced estate planning attorney on the best options for you.

You should review your plans periodically throughout life because what you want today in your 20s may differ from what you want in your 80s. You should also keep your family up to date on any changes you make.

There's one main difference between trusts and insurance policies. Insurance will often have a clause allowing for the difference between what you've paid and the total cost of your funeral arrangement to be covered, if you haven't paid your policy out in full at the time of death.

However, a trust will typically let you put in whatever amount you want over time.

The pre-arrangement insurance policies used by funeral homes to cover the cost of funerals differ from what is generally known as "life insurance." A life insurance policy is meant to cover unexpected death. However, it’s not guaranteed to pay out benefits—because factors like cause of death affect the policy payout.

We, at Curran Estate & Elder Law in Reading, Pennsylvania, can guide you in the right direction for what planning is best for you.

Reference: Yahoo Life (Feb. 17, 2022) “Should You Pre-Pay for Your Own Funeral as Part of Estate Planning?”