Funeral insurance is one of those things that are really important yet, awareness about the different forms of life insurance is extremely low. The truth is, properly preparing for the passing of yourself or your loved ones is one of the most important decisions you can make.
Funeral insurance is a beacon of personal responsibility because having it alleviates the burden of responsibility that is thrust upon your loved ones when you die. End-of-life arrangements aren’t simple and a hefty expense is bound to make a bad situation even worse. Even cremation and a plastic box urn can cost thousands of dollars.
So read on to learn about 4 things that will help you better understand the different kinds of funeral insurance so that you can make a good choice that will benefit your surviving family in more ways than one.
Funeral Insurance Is Whole Life Insurance
If you don’t know much about the different kinds of life insurance and its benefits, it’s important to pay attention now. The major two kinds of insurance are whole life and term life insurance. Term insurance only lasts for a set amount of years and upon its expiration, a new term must be bought and negotiated.
Needless to say, many buyers are in for a surprise when they find the monthly rates for their term policy have skyrocketed the second time around because of their advanced age. Since insurance companies are designed to make as much profit as possible, older policyholders are asked to pay more to offset the higher risk of death.
On the other hand, whole life insurance lasts for the lifetime of the policyholder. That’s why it has the moniker “whole life”. This way, the policyholder never needs to worry about changing premiums and final expense policies. Whole-life policies offer peace of mind in a way that other policies just can’t compete. You can rely on your whole life policy to remain stable and consistent over the whole lifetime of the covered individual.
Whole Life Policies Have Two Major Functions
The major function of whole life policies is to pay out a sum to the selected beneficiaries upon the demise of the policyholder. This, of course, is the most important function of life insurance as it allows your family to focus on what’s really important – grieving and remembering your loved ones. But grief isn’t the only thing survivors need to deal with. There is a myriad of issues that come up when someone dies and nobody is prepared for them all. Covering the financial and burial arrangements in great detail is the responsible thing to do.
However, most people don’t know that whole life insurance also offers a secondary feature that can greatly benefit policyholders and beneficiaries while still living. Cash builds up from your premiums and can be used for investments. Other forms of term life insurance don’t have such a feature.
The Savings Aspect Of Your Policy Can Be Invested
The savings aspect of whole life insurance is a really interesting and useful feature to benefit everyone while still living. The money that is accumulated on your whole life policy can be used to do a variety of things.
This aspect is like a savings account. This is how it works: The policyholder remits payment in excess of the monthly premiums by whatever amount they want. That excess amount is added to their whole life savings account. The balance then accumulates interest at rates that are typically competitive with the big banks. That balance can then be used.
There are several things you can do with your savings balance. First, the balance will accrue interest and those dividends can be applied to the value of the savings to capitalize. In other words, it can be added to the principal sum that’s in your account. Next, the money can be invested in a variety of different ways of your choosing. Finally, the money can be withdrawn or borrowed as collateral for loans.
There Is A Withdraw Option
While whole life insurance has an aspect of permanence (that’s the point), it can still be canceled by the customer. This is important for whole life insurance due to the savings feature that comes with the policy.
Essentially, when you withdraw from a policy your coverage will be canceled and you’ll receive a cash surrender value related to the actual cash value of your savings component. Late in life, these two values will be equivalent. However, if you withdraw early in the life of the policy, the cash surrender value will actually be less than the actual cash value because of cancelation and administrative fees. Whole life policies are definitely more beneficial with time because of stable premiums and the accumulation in your savings account.
With the wealth of information provided here, you probably have a better idea of the different kinds of funeral insurance on the market. Be careful to consider these factors when choosing your policy. There are a few major takeaways that need to be considered. Namely, whole life insurance never expires while the covered individual is alive. And whole life insurance provides a savings feature that accumulates over years and can be used to invest, cash out, or used as collateral to enrich your life while still living.