Pre-need insurance is a modest, low-cost policy intended only to cover burial costs. The amount of coverage is calculated when the policy is purchased, with the guarantee that the real cost of burial won't exceed the covered amount regardless of when the policyholder dies.
Pre-need policies can be paid with a one-time premium when they're purchased, or they can be paid out over time. Some pre-need policies may accrue a cash value over time. If so, that cash is paid upon death to a beneficiary, often the funeral home.