Top 4 Reasons to Avoid Prepaying Your Funeral Through a Funeral Home
Making arrangements for your funeral can be an intimidating process. For starters, no one wants to think about dying. But the reality is -we are all going to die one day. When that day comes the last thing we want our loved ones to worry about is money. If you were smart and planned ahead for your end of life costs then your family will be much better off for it and can focus on the grieving process without the stress of donation websites and fundraisers.
Let's say you have made the decision to prepay for your funeral and you have decided to purchase a plan from a local funeral home. Makes sense right? Whether the funds come from a life insurance policy or from savings, the funeral home is going to get the money eventually. Why not start there? Before we dive into the answer, let's take a step back and discuss what a prepaid funeral plan is and how it works.
How Do Prepaid Funeral Plans Work?
In most cases, prepaid funeral plans are purchased directly through the funeral home. The funeral home will help you plan the funeral, decide on arrangements, and set up payment plan - usually in monthly installments.
Planning for these services in advance makes the process much easier for your loved ones as the steps to execute the plan will already be laid out for them. When you die all your family needs to do is contact the funeral home to start the process of putting your plans in action. Simple, right? Well there is a bit more to consider before making your decision.
Reasons to Avoid Prepaid Funeral Plans
- Beware of funeral scammers!
Unfortunately, there are people out there who take advantage of customers who are looking to take care of their loved ones. According the Association of Certified Fraud Examiners, the most common funeral scams were focused on prepaid funeral services. the best way to protect yourself from these scams is to always read the fine print to see how your money is being used before you agree to purchase the plan.
- Plans are non transferable
In most cases when you buy a prepaid funeral plan it is with one specific funeral home. If you were to move to a different city or state, your plan and services would not come with you. It is common for sick and/or elderly parents to move in or move closer to their adult children. In this case, a prepaid funeral plan would become quite restrictive. The only exception to this is if you were to sign an agreement with a national chain funeral home. However, it is important to note that most funeral homes are single locations and it is non uncommon for them to out of business. If that were to happen you may not be able to receive a refund for your plan.
- Unexpected fees and costs
Paying for your funeral in advance does not necessarily mean that everything is covered. Depending on the agreement you have in place, there may be other fees that your family may be responsible for paying. For example, there could be medical bills from a hospital stay and treatment, loss of income, and other end of life expenses that a prepaid funeral package would not cover. Unless you make plans to have money set aside for those costs, your loved ones would be on the hook to cover them.
- The funeral home could become your beneficiary
When you purchase a life insurance policy to take care of your final expenses, your family is usually the beneficiary. Your family would receive all of the proceeds from the policy (tax free) to take care of funeral costs, medical bills, and any other lingering expenses related to your death. However, in some cases the funeral home can use your life insurance policy to pay for arrangements with these prepaid plans.
This means your funeral director or funeral home makes themselves the beneficiary of your policy through a pre payment plan. The funeral home would receive all of the proceeds from the policy when you die, not your family. If there is money left over over after covering the costs of the funeral arrangements, it may not always go to your family.
What should I do Instead?
Good question. The most efficient and effective way to pay for a funeral for most people is going to be a life insurance policy. Specifically, a permanent final expense policy. Final expense life insurance policy is incredibly flexible,
You can choose from a number of well known, A+ rated insurance carriers so there is no fear of the companies going out of business. You can customize the amount of coverage you want to make sure there is extra money to cover additional expenses such as medical bills from an extended hospital stay. Life insurance also travels with you if you were to decide to move. Most importantly, you get to choose the beneficiary of your policy. You can split the proceeds between your beneficiaries however you like.
A life insurance policy gives you the control to make sure your final wishes are carried out to your exact specifications while also removing the stress and financial burden from your loved ones. If you have never shopped for life insurance, we suggest doing some research and reaching out to an advisor to give you guidance.
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