As we get older we have a lot of things to consider when it comes to our health and family. Although it's hard to think about, there will come a day when you will pass on and leave your family and friends behind. While we hope this day won't come anytime soon, it's good to consider what options you have when it comes to making the grieving process easier for your loved ones.
Setting up a prepaid funeral will not only reduce stress both financially and mentally for your family and spouse, but it will also ensure you get the funeral you want. Check out this article to learn about prepaid funeral costs and more information you may need.
Prepaid Funeral Costs
The average funeral costs anywhere between $6,260 and $8,755. This depends on whether you'd like to become cremated or have a burial.
While this average has raised over the years, it's still enough to put some family members in debt if they don't have enough funds to pay for everything. Planning your funeral and paying for it ahead of time, although a tad morbid, prevents this from happening and gives your family members the proper time to grieve.
If you've gone to the same church since you were young or your spouse passed on before you, you might already have the church and plot picked out. If not, don't be afraid to compare funeral home prices to find the best one.
Once you find a home you're satisfied with, you have a few options in how you can choose to proceed for your prepaid funeral. Let's take a closer look.
Pre-Need Plans
Funeral homes sell what they call pre-need plans. A pre-need plan or burial insurance lets you plan your funeral from the type of service you want to the casket.
You have the option of paying upfront or setting up payment plans. These payment plans come in three-five, or 10-year plans.
Once everything is set up, the funeral home begins to put your money into a trust fund which pays out after you pass away. Another option is buying an insurance policy with the funeral home named as the beneficiary.
This insurance policy is typically a form of term life insurance. Although the average funeral costs between $6,000 and $8,000 this insurance will cover between $10,000 and $15,000.
Term Life Insurance
Another route you can take is purchasing term life insurance directly from an insurance agent. This means you can set up a beneficiary to receive the insurance money to pay for the funeral expenses, but the funeral home isn't involved. There are no prepaid plans, and your products or services aren't guaranteed.
This type of policy includes monthly premiums and does have an expiration date. If you take out term life insurance and live past the specified age (usually 95 - 100) the policy does expire. If the policy expires, your money won't be paid out.
These premiums differ based on the amount of money and circumstances. For example, if a 75-year-old woman takes out a $10,000 policy she will pay a set rate of $14-$30 a month. This is assuming the woman is in good health and doesn't smoke.
Medicaid Coverage
Once you've picked the funeral home, you'll set up a prepaid funeral contract with them. They'll place the funds in a funeral trust which is then used to cover the costs once the time comes.
Although you'll be getting term life insurance if you opt for that choice, keep in mind this fund is not considered a financial asset when it comes to qualifying for Medicaid health insurance.
This is important to remember in case your other accounts have to be liquidated to qualify for the Medicaid coverage. If you plan on planning your funeral and service through Medicaid, the prepaid funeral plan fund must remain in the account until after you pass.
What's Included?
Now that we know the average cost of prepaid funerals or term life insurance policies, let's take a look at what's included in the plan.
As you begin to plan your prepaid funeral you have the option of making the contract guaranteed. This means the funeral home will provide the merchandise and services you pick without extra charges. In some cases, there may be substitutions, though.
Many of these services include, but are not limited to:
- Removal/transfer of remains to funeral home
- Embalming
- Use of facilities/staff
- Hearse
- Van/service car
- Metal casket/cremation casket
- Cremation fee
- Urn
- Basic memorial printed package
If you opt for a non-guaranteed contract, your funds will get set aside to cover the funeral costs but with no specific services or merchandise picked out ahead of time.
Additional Costs
Although you've taken the time to prepare and make these plans ahead of time, sometimes surviving family members have to pay extra fees. An example of this would be if the body needs an autopsy or if it were somehow damaged. The cosmetic restoration could range anywhere from $100 - $500.
Another example could be if the body needs to get transported from a different area. Shipping charges alone could cost your family a lot of money, but mortuaries or funeral homes could charge an additional $900 - $2,200 to move the casket and body to a different facility.
Keep in mind, if one funeral home is charging you to move a body, the new location could charge you receiving costs, which is another $850 - $2,200.
We spoke earlier about the guaranteed contracts, but sometimes funeral homes don't carry the same items they did when you pre-selected them. When this happens a substition is not always available and your family might have to opt for a casket which is more expensive.
Prepaid funeral plans include quite a lot when it comes to services and taking care of the body, but most of the time it doesn't include cemetery costs, flowers, obituary notices, and limos. If you don't make it clear to your family you don't want these items, they could be looking at an extra $4,000.
If you decide you would like a cemetery plot, obituary notice, and flowers make sure to put save enough in a separate account to cover these extra costs.
What to Watch For
As nice as prepaid funerals sound, they do have some downsides to consider. Although you could make a guaranteed contract, there's always a chance the funeral home could switch owners or even go out of business.
State regulations do differ, but federal law doesn't cover these prepaid funeral plans. This means if a funeral home goes bankrupt, changes owners, or goes out of business it can be difficult getting a refund.
Although you'll be setting up these funds and contracts in advance, you have to be aware of certain annual maintenance fees. If you think you'll be around for a while longer, these can add up over the years as they can cost anywhere from $50-$150 annually.
When you're making your plans, make sure the services you're getting are at a contracted price. If a funeral home's prices increase from the time you made your contract to the time of the funeral they can send out what's called a "final expense funding" fee. Surviving family will have to pay the difference unless you make sure it's a contracted price.
If you decide to move out of the are, switching prepaid plans to another funeral home is a hassle. You might get a partial refund, but most plans are nonrefundable and nontransferable. Make sure you plan on staying in the area for the foreseeable future before finalizing your prepaid plans.
Lastly, make sure your family members or friends are aware of your prepaid plans. The last thing you want is to have them make their own arrangements when the time comes. Not only will your money and planning go to waste, but your family will deal with unnecessary stress.
Final Thoughts
When it comes down to it, prepaid funeral costs are about the same as average funeral costs. The difference is that you are able to make the plans yourself down to picking the casket or urn you'll stay in after you pass.
You'll also save your family from a financial burden if they don't have enough funds and give them time to grieve without the stress of planning a funeral. Make sure to do your research on a funeral parlor before choosing one and to know what's included in your contract.
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