Funeral Planning Products: Guiding Clients to the Right Choice
Advising clients on end-of-life expenses requires a comprehensive understanding of the financial tools available. Three common products—final expense insurance, funeral expense trusts, and preneed insurance—each serve distinct purposes and offer unique benefits. Understanding these differences will enable you to provide sound counsel tailored to your clients’ needs.
Final Expense Insurance
Final expense insurance is a whole life policy designed to cover costs such as funeral expenses, outstanding medical bills, and legal fees. With lower face values typically ranging from $5,000 to $25,000, these policies are more affordable than traditional whole life insurance. They usually require only a brief health questionnaire, making them easier to qualify for compared to traditional life insurance policies that require a full medical exam. Premiums are fixed and remain level throughout the policyholder’s life. Upon the insured’s death, beneficiaries receive the payout directly, which can be used for any purpose, providing flexibility and peace of mind. However, it’s important to note that final expense insurance is considered an asset and may impact Medicaid eligibility.
Funeral Expense Trusts
A funeral expense trust (FET) involves a guaranteed issue whole life insurance policy where funds are assigned to a funeral trust managed by the insurance company. These funds, being irrevocably assigned, are not considered countable assets for Medicaid eligibility. FETs can be funded with a lump sum or periodic payments, with policy values typically ranging from $2,500 to $20,000. The insurance company manages the funeral trust at no cost to the policyholder and pays the funeral home upon the insured’s death, with any remaining funds returning to the insured’s estate. FETs offer control and flexibility, allowing the policyholder to choose funeral services later. Additionally, funds are protected from creditors and are designated strictly for funeral expenses, providing a secure method to manage these costs.
Read More: Funeral Planning and the Elder Law Attorney
Preneed Insurance
Preneed insurance, similar to a funeral expense trust, is designed to cover funeral expenses. However, preneed insurance names a specific funeral home as the beneficiary at the time of policy issuance, directly connecting the policy to a particular funeral provider. Policyholders plan funeral details and costs directly with the provider, ensuring that arrangements are made and paid for in advance. Preneed policies often have higher insurability maximums, typically up to $35,000, and when structured correctly, are exempt from Medicaid.
Choosing the Right Funeral Product
Selecting the appropriate product depends on your client’s specific needs and financial objectives. Each product offers distinct strengths and features, allowing for customization that ensures their needs are met. Funeral planning products provide essential financial protection, ensuring clients’ loved ones are not burdened during a difficult time. By covering funeral costs, these products offer peace of mind, allowing families to honor their loved ones without financial stress.
For more information on funeral planning products and to determine the best option for your client, schedule a call with us today.
