Life insurance and funeral insurance are both useful financial products to help manage end-of-life care and costs. However, the two products differ in some significant ways that make them distinct.
With that in mind, the team at Medical Profiles Inc. is here to discuss the major differences between life insurance vs. funeral insurance and which product is right for you.
Call us today to schedule a paramedical exam!
Funeral Insurance vs. Life Insurance Comparison: Main Differences
Below are some of the main life and funeral policy differences as financial products.
Coverage Purpose & Amounts
The single largest difference between life vs. funeral coverage is intended coverage.
Life insurance provides a payout to the policy’s beneficiaries in the event you die. The beneficiaries receive the death benefit in a lump-sum cash payment. Your beneficiaries are then free to spend the death benefit on whatever they wish, including but not limited to:
- Outstanding debt
- Replacement income
- Education costs
- House payments
- And more
Funeral coverage insurance, on the other hand, is specifically meant to cover funeral and end-of-life expenses, so it is often called final expense insurance. You can use funeral insurance to pay for:
- Casket costs
- Funeral service expenses
- Cremation costs
Given their different purposes, life insurance coverage amounts are usually higher than funeral insurance benefits amounts.
Premium Payments
Life insurance and funeral insurance also have different premium payment structures.
With life insurance, you usually pay either a monthly or annual premium, though there are some options to pay for the entire policy upfront in a single payment.
With burial insurance options, there is usually just one premium payment, though some policies allow for multiple payments over a few months. In either case, premium payment and structure are less complicated for funeral insurance.
Approval Process
The approval and underwriting processes for the two types of policies are also different.
Funeral insurance has a much simpler approval process and usually does not have any minimum eligibility requirements, so you can get it no matter your current health condition.
Life insurance, in contrast, has a more complex underwriting and approval process. You will most likely have to take a paramedical exam and fill out a family health history questionnaire during the application process. Depending on your health, you may have to pay higher premiums or may not be eligible for life insurance.
Cash Value Portion
The last major difference between life insurance vs. funeral insurance is its accumulated value.
Permanent or whole life insurance policies have a separate cash value investment component that accrues interest over time. The policyholder can directly access this cash, use it as collateral for a tax-free loan, or pass it to their beneficiaries tax-free when they die.
Funeral insurance, in contrast, does not have any wealth component. You will receive the funeral payout tax-free, but there is no cash value investment.
Which Is Right for Me?
In many cases, it can help to have both kinds of policies, but as is the case with anything related to insurance, the right choice depends on your specific lifestyle and financial situation. That way, your beneficiaries won’t have to worry about using the life insurance payout for funeral costs. It can help to talk to a financial advisor to put together a plan that works for your family and income level.
Medical Testing for Life Insurance and Wellness
Now that you know the differences between life insurance vs. funeral insurance, take the next step. Contact Medical Profiles Inc. online or give us a call today at (832) 251-3926 to schedule a paramedical appointment!
