Types of Prepaid Funeral Plans

Prepaid funeral plans and final expense insurance both provide a way to plan ahead for the cost of your funeral. The difference is in the details.

Prepaid funeral plan

Some people want not only to pay for their funeral or cremation in advance but also to pick the casket, cremation memorial, type of celebration, kinds of flowers and more. If that's you, then a prepaid funeral plan makes sense. It includes your detailed final wishes and the funds. Plus, it guards against inflation.

When you purchase a prepaid funeral plan, you can pay for the arrangements over time or in full at the time of purchase.

Final expense insurance

However, if you’re less inclined to choose the specifics but want to know your family won’t face the financial burden of end-of-life expenses, final expense insurance may be the best choice. It pays a flat amount to your beneficiary for funeral and burial costs, as well as other expenses.

The beneficiary decides how the money is spent, but there’s no protection against inflation. It’s often recommended that you purchase a bigger benefit than the current funeral plan costs. It doesn’t pay out immediately, though, and your family may have to handle funeral expenses out of pocket and wait for the policy to pay back later.

Final expense insurance policies typically require regular premium payments, either for life or for a set amount of time, depending on the terms of the policy.

Our chart breaks it down.

When you purchase a prepaid funeral plan, you choose the type of service you want, down to the smallest detail, and lock in today's prices on many items. Once you've made decisions such as burial or cremation, casket or urn, traditional service or celebration of life and sign a contract, your money is set aside with a third party, either via an insurance policy or in a trust account. That ensures your payments are in one of the following safe places:

Pre-need insurance policy: you pay premiums for several years. The policy is in effect as long as your payments are up to date, and the benefit is paid directly to the funeral home. Dignity Memorial^® providers have partnered with Forethought Life Insurance Company (Global Atlantic) to provide pre-need insurance to our customers.

Revocable prepaid trust-funded contract: money (a lump sum or payments) for funeral expenses is placed into a trust with a trustee. The trust can typically be cashed out or canceled whenever you'd like. The benefit is paid directly to the funeral home.

Irrevocable prepaid trust-funded contract: money (a lump sum or payments) for funeral expenses is placed into a trust that cannot always be canceled. In many circumstances, an irrevocable trust has no cash value, and the money in the trust cannot be removed. Families usually designate a trust as irrevocable only as a state requirement for Medicare or Medicaid assistance. The benefit is paid directly to the funeral home.

What's available to you will vary by state or province, depending on the law.

Purchasing a prepaid funeral plan is among the best ways to ensure your loved ones aren’t burdened with unexpected expenses for your funeral, cremation or burial. This FAQ can help you understand what a prepaid funeral plan is, how it works and how it can benefit you and your family.

When planning a funeral or memorial service, there are literally hundreds of details to consider and decisions to be made. Like any funeral or cremation, a prepaid plan can be personalized just for you.

When you sit down with a planning professional, he or she will first get to know you and your cultural and religious traditions, family customs and how you would like to be remembered. Then he or she will explain your full range of options, including the goods and services typically included in a funeral or cremation, as well as specialty items like keepsakes, remembrance jewelry, cemetery or cremation property, or even burial in an underwater reef.

Prepaid funeral plans may cover these items

Services of a funeral director and funeral home staff 

In addition to providing guidance and family care during planning and the day of the funeral, the funeral director and supporting staff are often on call around the clock. They make sure every detail is expertly handled, from scheduling flowers, clergy, speakers, music or catering, to obtaining permits and death certificate copies and more.

Transportation to the funeral home and care of loved one

When a loved one dies, the funeral home will transport that person from home or a medical facility to the funeral home and then prepare the loved one's body for burial or cremation. Leading funeral homes follow strict custody procedures to safeguard the identity of your loved one.

Casket or cremation container

When choosing a traditional burial or traditional funeral prior to cremation, selecting a casket is an important step. Caskets are typically offered in wood or metal and can vary in price. A cremation container is required by law and can take the form of an all-wood casket or a lower-price cardboard container.

Cremation services and urns

The majority of end-of-life services now involve cremation. Dignity Memorial specializes in cremation services that honor loved ones in personalized ways, including cremation memorials, witness cremations and a range of urns to suit every taste.

Venue for the funeral and/or reception

Many funeral homes have beautiful chapels and modern reception areas designed especially for memorials. Some have spacious patios for outdoor gatherings or lawns for tented events.

Catering

Food and drink can be as simple as a commemorative brunch of tea and pastries, as unique as serving a loved one’s secret recipe, or as elaborate as a four-course meal with wine.

Transportation to the cemetery 

A procession to the cemetery is part of some services. In those cases, a hearse may be needed as well as transportation for family and friends.

Burial vault 

For in-ground casket burial, many cemeteries require a vault, or outer burial container, into which the casket is placed. The vault helps maintain the integrity of the cemetery grounds. Those who choose cremation may need to purchase an urn vault.

Other items 

Items such as flowers, stationery, decor, keepsakes for family and mementos for friends may included in a prepaid plan.

Prepaid plans may not include

Goods and services provided by third parties

Be sure to ask your pre-planning advisor about typical third-party costs and if you can set aside money in your plan to cover items such as:

• Death certificate copies
• Cremation permitting
• Clergy honorariums
• Celebrant fees
• Police escort fees
• Musicians

Grave opening and closing costs or other cemetery goods and services, such as a grave marker or monument

There are many Dignity Memorial locations consisting of both a funeral home and a cemetery, which means you have the convenience of making all your arrangements in one place and including funeral home and cemetery prepaid plans. However, that's not true of every funeral home, and cemetery services may need to be planned separately.

If your prepaid funeral plan is funded through a revocable trust, you can cancel the contract and get most of your money back (the trust keeps a cancellation fee to cover administration costs). On the other hand, an irrevocable trust often cannot be canceled. It can often be transferred to a different funeral home, though you may lose price protection. If your prepaid funeral plan is funded through an insurance policy, you do not get a refund of premiums paid.

In addition to protecting your family from financial stress at the time of your death, prepaid funeral plans can also help you save money. Average funeral prices have more than doubled in the last 35 years, but when you buy a guaranteed plan that specifies the exact goods and services you want, the prices you agree upon are locked in, no matter when your death occurs. That means even if prices go up for the items you prearranged, your loved ones won’t have to pay more.

Nonguaranteed plans don’t offer protection against rising prices, so if you choose a casket today that costs $3,000 and the least expensive casket is $4,000 when you need it, your loved ones will have to bridge that gap.

Your prepaid funeral plan will never expire—it remains in effect until it’s needed. However, it’s important to make the required payments on time. A missed payment will put you behind, and after a period of nonpayment, your plan may be canceled. 

If your plan is canceled, you don’t lose the money you’ve already paid into the plan. You can still use it to fund future end-of-life arrangements. However, price protection will no longer be in place, and the goods or services you’ve chosen for your funeral or cremation will likely cost more than they did when you originally planned. 

Final expense insurance policies do not expire as long as you pay the premiums on time.

It’s never too early to pre-plan your end-of-life arrangements. People of any age benefit from pre-planning and making their wishes known to their close family and friends. If you choose to prepay, too, you will also have the advantage of locking in prices early. You may have other reasons why you wish to pre-plan and prepay as well, such as ensuring your family will not be financially burdened or being certain that your wishes will be carried out exactly as you want. It’s never too early to plan ahead.

It’s a common misconception that if you purchase a prepaid funeral plan and the funeral home goes out of business you lose all your money. State laws require that prepaid funeral plan payments be securely invested with an independent entity—an insurance provider or trust—so that if the funeral home you made plans with goes out of business, the funds in your plan can be transferred to another provider.

When you plan and pay in advance with a Dignity Memorial provider, you get a promise that your funeral plan will be honored by any one of more than 1,900 locations in North America—that’s part of The Dignity Difference. (Restrictions apply.)

Relocation Protection is also part of The Dignity Difference. This benefit allows you to transfer your prepaid plan to another Dignity Memorial location if you move more than 75 miles away from where you originally planned. (Restrictions apply.)

Prepaying for your end-of-life arrangements is a compassionate and considerate step to take when pre-planning your wishes. When you pre-plan, you guarantee your loved ones won’t have to make decisions about what kind of arrangements you would have wanted. And when you prepay, you guarantee that your loved ones won’t be burdened with the sudden financial stress of paying for the costs of a funeral and burial or cremation. 

Add this to the protection from rising costs that comes with locking in today’s rates, and it’s clear that purchasing a prepaid funeral plan is both a financially smart decision and a thoughtful gesture for your loved ones.