As much as we hate talking about death, it is inevitable. Funeral insurance, also called burial insurance and end-of-life expense insurance, is a parting gift that you can leave your family on your demise.
What Is Funeral Insurance?
As the name implies, the purpose of funeral insurance is to cover the expenses of your funeral upon your death. In Canada, the funeral expenses of an average person range from $5,000 to $10,000. This figure can vary depending on the type of funeral you want. The inevitability of an emotional crisis cannot be avoided in the event of the death of a loved one, but it doesn’t have to be coupled with a financial crisis, and funeral insurance is a way to avoid that.
Permanent Life Insurance vs. Funeral Insurance
The commonality between permanent life insurance and funeral insurance is that they both pay the death benefits. The difference between them is that they are used for different purposes. The purpose of permanent life insurance is to take care of any costs that can be burdensome for your family to fulfill after your demise. These costs can include things like the tuition fee of your children or the mortgage of your house. The premium for permanent life insurance is usually high but so is the payout.
The purpose of funeral insurance is very specific. Funeral insurance is meant to cover the cost of your funeral. This includes things like the arrangement of caskets, the cost of cremation or burial, and other funeral-related professional services. The premium of funeral insurance is not very high and hence the payout is also just enough to bear the funeral expenses and nothing other than that.
For an average Canadian the death benefit received as a result of funeral insurance ranges from $5,000 to $10,000 while the same in case of permanent life insurance reaches up to $100,000. If you already have permanent life insurance, the death benefit paid at the end can be enough for your family to cover the funeral expenses within it but if you do not have one then you will need funeral insurance to cover those expenses.
Types of Funeral Insurance
Following are the two types of funeral insurance that you will get in Canada:
Simplified Issue Life Insurance
Application for this type of life insurance does not guarantee its acquisition unlike the case with guaranteed issue life insurance. We will recommend simplified issue life insurance for funerals if you are at a moderate health risk and do not have traditional insurance. Unlike as you have to do in traditional life insurance, there is no medical exam required in this one. All that is required is that you submit some basic information about your health condition.
Guaranteed Issue Life Insurance
As the name implies, the acceptance of your application is guaranteed in case of guaranteed issue life insurance as long as you are under a certain age. Unlike simplified issue life insurance, this type of insurance does not even require basic information about your health. You can apply for it even if you have a chronic illness. The downside of guaranteed issue life insurance is that the premiums are high and the payouts are low as compared to the simplified issue life insurance.
Deciding the Funeral Insurance Coverage You Need
The amount of funeral insurance coverage you need really depends on the kind of funeral you want to have. If you are very particular about the kind of memorial service you want to have or it is a custom in your family to have a certain kind of memorial service, it is a good idea to pre-plan the service and work out the expenses.
The things you might want to consider include the number of people you are looking to have at your memorial service, the professional services that you might need from institutes like churches, the kind of casket you want to have. Embalming, cremation, and burial expenses including urns and headstones should also be covered under funeral insurance.
How Is the Cost of a Funeral Insurance Calculated?
The cost of funeral insurance varies depending on a number of different factors. The most obvious among those factors is the amount of coverage you need depending on how you want your funeral to be. Other factors include your age and the kind of policy you are buying.
As far as age is concerned, the premium increases along with the age, and as far as the type of policy is concerned, we have already mentioned before that simplified issue life insurance costs less than guaranteed issue life insurance.
How Can I Buy Funeral Insurance in Canada?
Buying any kind of insurance is a very significant decision and it is important to make it right. To ensure that you are getting the right funeral insurance we will advise you to get in touch with an insurance broker that can guide you through the process. You can contact us at any time and get in touch with a consultant.
What Are the Alternatives to Funeral Insurance?
If the idea of getting funeral insurance doesn’t sit right with you and you want to know the alternative options, here are two:
If you have enough money, then you can set aside some money to cover your funeral expenses. You can do this informally by talking about it to a trusted family member who will be responsible for managing your funeral in case of your death or you can do it in a more proper manner by engaging your lawyer and having a deed written about it. In the first case the person you are trusting might be morally bound to use your saved money according to your wishes but they will not be legally bound to do so, but in the second case, they will be.
Permanent Life Insurance
As discussed before in the article, permanent life insurance provides a death benefit, and usually, it is enough that your family can easily take some money out of it to cover your funeral expenses and still have enough saved for other purposes.
However, if you are on a tight budget and cannot afford the premiums of permanent life insurance, funeral insurance can be a savior. Even though the payouts of funeral insurance are lesser than those of permanent life insurance, the premiums are also less. Moreover, if you are in poor health or are old, getting a life insurance policy can become increasingly difficult and expensive. In that case, your only option is to get funeral insurance. You can even get funeral insurance if you have a chronic illness.
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