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Life Insurance or Prepaid Funeral Plan?

Researcher & Writer
April 10, 2020

All human beings share two universal experiences: being born and dying. While it’s probably not all that fun to think about our own mortality, the sooner we come to terms with the fact that we will one day die, the better. Take that a step further---the sooner we decide to make preparations for our own death so as not to add a burden to our grieving loved ones, the better.

How much does it cost to die?

The final tally on how much it costs to die will vary from person to person, but there are a number of costs associated with dying, including:

  • Final medical expenses
  • Funeral services
  • Cremation and/or burial expenses
  • Headstone
  • Casket or urn
  • Obituary
  • Lost wages for loved ones
  • Creditor claims
  • Attorney Fees

These are just a few of the final expenses that may arise when a person dies. One can estimate that the cost of dying is upwards of $10,000. That’s a lot of money, especially when it’s unexpected. $10,000 can financially hurt or destroy a family. 

How can I financially prepare for my death?

For financial preparation, you have a couple of options: life insurance or prepaid funeral plans.

What are pre-paid funeral plans?

Funeral homes sell prepaid funeral plans. You choose everything, from the casket to the burial plot—your family members won’t have to do anything but show up. Some people like this route because they get to make sure their funeral goes exactly as they want.

There are three main drawbacks of prepaid burial plans.

The first drawback is that you buy directly from a funeral home. If you are still relatively healthy and death isn’t right around the corner (hopefully), then it’s hard to make a commitment on where to have your funeral. Things change, people change. You could move. You could change your ideas and desires. Do you really feel certain of how and where you want your funeral to take place…twenty years from now?

Another con of prepaid funeral plans is the lack of regulation of pre-need funeral plan contracts. The life insurance industry is highly regulated. However, what about your funeral director? Millions of dollars spent on pre-need funeral plans are lost due to funds being misspent or misappropriated.

Finally, your family/loved ones will not get any cash benefit. This means that things like lost wages will not be recovered. Your family will need time to grieve—nobody wants to go back to work the day after a loved one dies. But if they don’t receive any cash benefit, then they’ll be forced to go back to work or suffer financially.

What is a final expense or burial life insurance plan?

Think of it as funeral insurance with benefits. A final expense or burial life insurance plan is similar to pre-paid funeral plans in that it helps you prepare for burial expenses. However, there are a few major advantages to final expense and burial insurance.

First, you can leave your loved ones money. The life insurance policy is usually a lump sum that your loved ones can use as they need. If they must set some of that money aside for lost wages, they can do that. Or they can spend it all on your funeral and final expenses.

Another big advantage is that your family isn’t restricted to one funeral home. They can decide where and how to hold your funeral. When purchasing a final expense or burial life insurance policy, you won’t be locked in to choices you made 20 years earlier.

If that’s not enough, final expense or burial life insurance policies normally have really flexible payment plans. Prepaid funeral plans are rigid in payment, which can be difficult.

Life insurance comes in different types, including simplified issue and guaranteed issue life insurance. Therefore, if you need coverage but have a pre-existing medical condition, you can still find life insurance.

Last but not least—the lump sum given to your life insurance beneficiaries is almost always tax free.


Being prepared is the most important part of all of this. Whether you choose to go with a pre-paid funeral plan or a final expense life insurance policy, that is up to you. Either one could be the best choice for your needs. 

If you need some guidance, feel free to give us a call or check out the best companies for final expense insurance.

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We are a team of life insurance experts with the simple mission of helping you find the best coverage for your unique situation. We research, review, and rank life insurance companies to make that process easier.