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After the kids are grown and living life on their own, having a life insurance policy with a high payout no longer seems to be so important for most people. This is particularly true if you are no longer married or if you have been widowed. If you are in a situation where you no longer have any dependents, you may really only be interested in a life insurance policy that will provide you with coverage for your funeral or burial expenses so you do not place a burden on your loved ones when you pass.
More and more, insurance companies are offering whole life insurance geared toward those looking for funeral/burial life insurance. These policies generally have a low or moderate value, as they are primarily meant to help offset those expenses associated with a funeral. These policies are sometimes marketed as “final expense insurance.” With this type of policy, the agent will generally suggest that the funds paid out by the policy go toward payment of funeral expenses, though this is not a requirement.
Another type of insurance that can be utilized to cover funeral and burial expenses is preneed, also referred to as prepaid, insurance. Although this type of insurance is available to applicants of all ages, it is usually marketed toward older applicants because it is also meant to help pay for funeral expenses.
This type of insurance policy is a little stricter in its use than the final expense insurance. In fact, in most cases, you will be required to sign a prefunded funeral arrangement with the funeral home of your choosing when you apply for the coverage. In this way, the proceeds from your policy actually go straight to the funeral service and your expenses are considered to be paid in full (assuming the amount of coverage was adequate). In most of these contracts, there is a stipulation that any money left over after paying for funeral expenses is to go to a designated beneficiary or to your estate.
When taking out a whole life insurance policy, you need to be careful about how you handle it. Keep in mind that whole life policies have a cash value component as well as a loan provision. As such, if you assign your policy to a trust, the trust becomes the owner of the policy. When this happens, the policy is no longer considered to be an asset for you, which can have an impact on whether or not you qualify for Medicaid or Medicare. So, take the time to shop around for the best policy that will provide the best benefits coupled with the lowest cost – and be sure to handle the policy wisely so it does not negatively impact any financial assistance you may be otherwise eligible to have.