Pre-need life insurance

Pre-need insurance makes a funeral home the beneficiary of your policy and pays only for your service and burial arrangements, which you choose in advance.

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Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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Maria Filindras

Maria Filindras

Financial Advisor

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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Funerals cost an average of $7,000, with the cost of cremation not far behind. If you don’t have enough saved to fund your burial arrangements, the responsibility falls to your family. Many people rely on their life insurance payout to help their families cover those final expenses.

While the death benefit from a standard life insurance policy can be used for funeral costs, that still leaves the planning up to your grieving loved ones. Pre-need life insurance allows you to set up a contract with a funeral home to plan and pay for your end-of-life proceedings in advance. But, buying pre-need insurance isn’t the best choice for the majority of people, since the policy is often impossible to alter and you can likely get an equal or greater death benefit for less money with other types of life insurance.

Key takeaways

  • The beneficiary of a pre-need policy is a funeral service provider, not your loved ones

  • You decide your funeral arrangements in advance and the death benefit covers only those costs

  • Pre-need insurance is usually non-refundable and non-transferable

  • Because of the low benefit amount and limited flexibility, term life or final expense insurance is better in most situations

What is pre-need insurance?

Pre-need insurance, sometimes called burial insurance, funeral insurance, or a pre-need funeral contract, is a type of permanent life insurance used to pay for the cost of funeral services and burial or cremation. What sets pre-need plans apart is that you work directly with a funeral home to price your funeral arrangements — cemetery plot, services, casket, burial, etc. — and the funeral home is your policy's only beneficiary. You pay a premium to fund the death benefit, which covers only those costs.

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Pre-need insurance vs. final expense insurance

Pre-need insurance and final expense insurance are often talked about together because pre-need and final expense insurance have a very focused scope: your final expenses.

The main difference between the two is that while pre-need insurance pays out directly to the funeral home for a predetermined amount, final expense insurance can pay out to the beneficiary of your choice. Your family can get the death benefit and use it to pay for funeral expenses, but they can also use it to pay for any medical expenses or debts. However, it is possible to pay the funeral home directly with a final expense policy. This is called making an assignment, and your loved ones will receive any remaining funds after the funeral home covers their costs. Here’s a quick overview:

Pre-need insuranceFinal expense insurance
TermNo expirationNo expiration
Death benefitCost of funeral service and burial or cremation expenses$5,000 to $40,000
Age restrictionsVaries by providerAge 45 or older
Medical requirementsNoneNone (guaranteed issue) or Medical questionnaire (simplified issue)
BeneficiaryFuneral home you chooseFuneral home or loved ones you choose
Best forPeople who don’t qualify for term life or final expense and for whom pre-planning and pre-paying their funeral arrangements is a top priorityOlder or less healthy people who don't qualify for a cheaper term life policy and can't fund a burial with their savings

Learn more about final expense insurance.

Who should get pre-need life insurance?

Maybe you only need enough life insurance to cover your final expenses or don’t qualify for an affordable term life insurance policy. If you have a terminal illness that disqualifies you from a final expense policy — rare, but possible — and want to preemptively lift the burden of planning funeral arrangements from your grieving beneficiaries, then pre-need insurance could be right for you. Otherwise, most people will get a better deal and more flexibility in how the death benefit can be spent by choosing term or final expense insurance.

What are the pros and cons of pre-need insurance?

Though we recommend other types of life insurance, if you feel strongly about taking funeral planning off of your family’s plate and aren’t worried about committing the funds in advance, the benefits may outweigh the costs.

You plan your end-of-life services so others don't have toPolicy may not transfer if funeral home closes or changes ownership
Death benefit pays directly to the funeral homeYour loved ones don't receive a payout
Pays for your final expenses in advanceTies up money that might provide more value as an investment
No medical questions or exam requiredLess coverage than a term life or final expense policy

We don’t recommend pre-need life insurance in most situations. For the majority of people, purchasing term life insurance is the best way to pay for your final expenses, including funeral costs, outstanding medical expenses, and other debts. The sizeable payout to your beneficiaries gives your loved ones a financial cushion for more than just your end-of-life expenses, and the affordability allows you to easily fit the policy into your budget.

Even older or less healthy people who might not qualify for affordable term life insurance would get greater value with final expense insurance, which is often cheaper for a greater death benefit and offers much more flexibility in how the benefit can be used. A Policygenius agent can help you decide which kind of policy makes the most sense for your situation.

Frequently asked questions

What is a pre-need life insurance policy?

Sometimes called burial insurance or prepaid funeral insurance, a pre-need policy is a life insurance contract with a funeral home of your choice that allows you to plan and pay for your funeral arrangements in advance.

What is the difference between pre-need insurance and final expense insurance?

Both types of life insurance are intended for end-of-life expenses, but pre-need insurance pays out to a funeral home and can only be used for funeral services, whereas final expense policies can pay out to your loved ones and they can use the death benefit however they choose.

How much does a prepaid funeral cost?

The average cost of a funeral or cremation is $7,000, though prices vary depending on your preferences and your vendors.

Who should get pre-need insurance?

Most people will get more value and flexibility from a term or final expense policy. If you don't qualify for either and a top priority is making your end-of-life arrangements yourself, then a pre-need policy could be worth considering.