Funeral expense insurance policies are usually whole life plans designed to cover the costs associated with burial expenses. They can be purchased using a single premium or though regular installment payments over time. We offer coverage from several providers and can help you find the lowest rates.
Funeral insurance policies are valuable to families and estates as they efficiently and immediately provide funds to cover funeral expenses in times of need. These policies are advantageous as their proceeds are almost always tax-free when setup properly.
Whole life
policies are the preferred coverage type for those looking to pre-plan a funeral while also providing the funds needed at passing. (Guaranteed universal life policies can also be used as they have a defined death benefit.)
Policy face amounts will usually range from $5,000 to $30,000 depending on the anticipated funeral costs and other expenses that need to be accounted for.
Medical underwriting is often simplified and easy making these plans easy to purchase. The proceeds can be paid to the deceased’s estate, a named beneficiary, or a funeral home of choice.
With almost all policies, insurance premiums will not increase over time. Owners can pay monthly, quarterly, semi-annually, annually or by single premium. The overall cost will usually be less when the policy is paid for annually or all at once.
Assuming the final expense insurance is purchased at a younger age, most policies will build-up enough cash value and dividends to pay for the cost of the policy itself. In this way, the policy can be paid-up and future premiums will no longer be needed.
An irrevocable funeral trust is one that holds the life insurance policy inside a trust. The irrevocable trust protects the cash value of the life policy from creditors such as Medicaid. Typically, these policies are funded with a single premium or in a few installments.
In most states, Medicaid allows individuals to save at least $15,000 toward their funeral expenses. However, current laws require those involved in the spend-down process to usually spend most, if not all, of the available cash value in a traditional, unprotected life insurance policy.
Irrevocable funeral trusts avoid this issue as Medicaid cannot easily attach to irrevocable life policies. The primary reason is irrevocable policies have no cash value. Individuals will oftentimes transfer the cash value in a paid-up policy to an irrevocable trust to avoid Medicaid spend down requirements.
Life insurance funeral trusts funded with a single premium can be very advantageous for those involved in the Medicaid spend down process. A 1035 tax-free exchange can help protect the accumulated cash value in an existing life insurance policy that might otherwise need to be spent down before benefits are available.
Of course, an irrevocable policy can also be funded with cash or from the sale of other assets. Protecting existing cash value in a paid-up policy through transfer is a common strategy however. In many cases, both cash and exchanged funds are co-mingled to maximize the amount protected.
IFT policies are also wise for those who simply want to efficiently account for burial expenses without subjecting the funds to creditor attachment at a later date. The proceeds are income tax free and can be made available almost immediately to help family and loved ones.
We are a full service independent life insurance agency representing several highly-rated carriers offering both irrevocable and traditional final expense policies across the country. You can compare quotes and plans with our brokerage.
