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Pre-Need Plan vs Final Expense Insurance: Whats the Difference?

Pre-planning your funeral allows you to document the end-of-life wishes for your funeral and burial or cremation and make the exact arrangements that are your particular personal preferences and desires. Those decisions are so much wiser than leaving those important and intricate details for your loved ones to deal with at an emotional time. Not only that, but there may be arguments among them as they have different ideas, and none of those may be what you have in mind. Those decisions can be stressful when the family is already grieving, and they also may not have the funds to pay for a funeral and all the accompanying costs. 

What is a Pre-Need Plan?

A Pre-Need Plan is one that is purchased and paid directly to a funeral home of your choice. You get to choose all the arrangements that you desire regarding services, casket, plot, burial, etc. Those are predetermined, placed on a contract, and you pay for them all at once or over a period of time. The beneficiary of the plan is the funeral home, and they will receive the money directly to pay for the services. 

The best thing about a Pre-Need Plan is that it takes the guesswork away by providing a pre-arranged funeral. Not only have all the decisions been made, but, the service has already been paid for.

What is Final Expense Insurance?

Final expense insurance works the same way as other life insurance; you get to choose beneficiary – who gets the death benefit. The beneficiary can then use the funds for final expenses or pay for any unpaid medical expenses or as to how they choose. While the death benefit from a standard life insurance policy can be used for those end-of-life costs, there are insurance policies that are used explicitly for those payments. 

Comparing Pre-Need to Final Expense Insurance

FeaturePre-NeedFinal Expense
BeneficiaryFuneral home is the sole beneficiaryYou choose the beneficiary; can be family or church
CostPre-determined costs for funeral; generally more expensive than final expenseUp to 200% cheaper than pre-need.
Medical ConditionsAlways acceptedProvider may decline due to age or health
Pre-PlanningAll decisions are made ahead of time No pre-planning

Final Thoughts

While both a Pre-Need Plan and Final Expense Insurance would cover funeral and burial or cremation costs, the final expense policies only set aside funds for arrangements and do not make any decisions on planning, but gives the flexibility to chose the beneficiary.

Updated on April 5, 2020

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