Pre-Need Insurance vs Final Expense Insurance


It’s easy to get confused when it comes to the differences between preneed insurance and final expense insurance. They are each a way to plan ahead for your funeral and they have many factors in common. However, they are also significantly different and each of them has different benefits and pitfalls. This guide aims to highlight the ways in which these two types of insurance vary so that you can make an educated decision when planning your final arrangements.

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What is Pre-Need Insurance?

Preneed insurance enables you to set aside funds to be paid to your chosen funeral home for your planned final expenses while you are still alive. You’ll purchase your preneed insurance directly from the funeral home or from a company that specializes in prepaid funeral plans and prepaid cremation. Using a calculator to determine your insurance price for the services you select, the price of the services you choose is agreed upon and paid upfront or in installments.

Preneed insurance allows the purchaser to plan their own funeral, ensuring all of their wishes are executed when the time comes according to their preferences. It’s paid for in advance and all of the services are guaranteed at today’s rates, even if they’re not needed for another decade or longer. An inflation calculator can show you how much you might save in this scenario.

The funeral home is the beneficiary in the case of preneed insurance, who will receive the funds that cover the costs of all the planned details that had been agreed upon. The payout is enough to cover the cost of your funeral and related services that had been previously planned and priced out with the funeral home.

Preneed insurance takes the guesswork out of the hands of your family in their time of grief, ensuring they can focus on healing and closure rather than complicated financial matters, expense calculators and personal decisions.

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Advantages of Pre-Need Life Insurance

Pre-need insurance benefits the buyer and their family in numerous ways. Let’s explore some of these advantages.

1. Death benefit pays directly to the funeral home of your choosing.

Rather than the death benefit going to a loved one who then has to pay the funeral home, the preneed insurance policy is assigned to the funeral home itself. This can have the effect of making things move faster and takes a heavy burden off the shoulders of your family members as they aren’t left scrambling to cover the costs of your services while they wait for the payout.

2. Your family and loved ones do not receive a payout.

Unlike other forms of life insurance, your family and friends are not the beneficiary of pre-need insurance. The payout goes to the funeral home to cover the cost of the plans set out when you purchased your insurance. However, this is also an advantage, given that pre-need insurance is designed specifically to take the burden of paying for and planning your funeral off of the shoulders of those who you love while they are in mourning.

3. Pre-need life insurance has less coverage than final expense insurance.

Pre-need insurance covers only the cost of your funeral and related services. As such, the payout is not as large as it might be for life insurance or final expense insurance policies. The amount of coverage uses a calculator specifically to cover the services you wish to take place and nothing more. This is a great way to ensure your wishes are carried out precisely as intended without requiring any action or money from your loved ones.

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Pre-Need Insurance vs. Final Expense Insurance

Final expense insurance is different from pre-need insurance in numerous ways, the first of which is that you would purchase final expense insurance from your choice of life insurance companies, rather than directly from the funeral home. Some final expense policies may only be valid for the term of the policy, whereas pre-need insurance is set in for life. You may also find that some final expense providers have age restrictions on who can purchase their policies, and medical exams or health questions may be necessary for approval. With pre-need insurance, everyone is approved.

One of the biggest differences when it comes to pre-need vs. final expense insurance is the beneficiary. When it comes to final expense insurance, the beneficiary can be whoever you want it to be but this often means it takes longer to see the death benefit — resulting in unnecessary out of pocket costs when funds may not be available. This benefit can also be used to pay for other expenses aside from funeral services, such as medical expenses, mortgages, debts and so on.

On the flipside, with preneed insurance, the beneficiary is the funeral home that’s been designated to provide the services. This relieves your family from the burden of having to navigate the complicated finances of funeral planning and budget calculators in the immediate, grief-stricken days after your passing. It also ensures your wishes are carried out exactly as you wanted them to, as you’ve already planned them and paid for them. Choosing final expense insurance means your family has to plan and pay for your services themselves, putting a heavy burden on their shoulders as they grieve without any assurance your wishes will be honored.

Pre-need insurance is a good choice for people who don’t wish to burden their loved ones with funeral plans after they pass. It’s also a great fit for those who are a little bit older and may not be accepted for a final expense insurance policy.

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Ready to Talk More About End-of-Life Pre-Planning? Get in Touch with Us.

Pre-need insurance is a compassionate and thoughtful way to preplan your funeral. The beneficiary is the funeral home, who is aware of your wishes and is ready to carry them out exactly as you’ve planned. This frees your family from the heavy task of choosing what you may have wanted and also having to resort to their calculator to crunch the numbers and pay for the services. While final expense insurance pays out to any beneficiary you choose, this can take longer and it requires your family to make burdensome financial decisions when it comes time to pay for your services. A pre-need insurance policy is designed to cover your services precisely, at today’s prices, so your family doesn’t have to. If you think you’re ready to start pre-planning your end-of-life arrangements, give the Everdays care team a call and we’ll take it from there.

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Our content is created for educational purposes only. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Everdays encourages individuals to seek advice from their own investment or tax advisor or legal counsel.


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