What’s the difference between a traditional life insurance policy and preneed life insurance?

Traditional life insurance is intended to benefit your survivors for a broad range of future financial needs. Preneed life insurance, on the other hand, is specifically intended to cover only the predetermined expenses of a funeral, cremation or burial. Preneed life insurance may be payable immediately to an assignee (generally the funeral home) upon the policyholder’s death; traditional life insurance policy benefit distributions may require several weeks to be paid by the insurance company.

Do I actually need preneed life insurance? Can’t I simply use some other funding?

Preneed life insurance is a choice, not a requirement. However, it is important to understand the added value of preneed life insurance over other sources of funding, such as savings accounts, trusts, and final expense insurance.

  • Preneed life insurance is tied directly to the costs of a funeral or cremation. All of the services and merchandise that you select may be completely covered by your insurance if your funeral home has guaranteed the price of your funeral.
  • There may be no tax liability on the death benefit to your surviving family members.
  • The benefit of your preneed life insurance policy may be payable immediately to the funeral home at the time of your death.
  • There may be limited or no underwriting required applying for a preneed life insurance policy. A decision is typically made within minutes.

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