This page is for choosing between life insurance, burial insurance and a prepaid funeral plan. Our other insurance pages: Burial insurance explained, Burial insurance vs. life insurance, How life insurance pays a funeral home and Waiting on a life insurance claim.
What is the difference in one sentence?
Here it is:
Life insurance protects people financially. Final-expense insurance pays a smaller death benefit. A prepaid funeral arranges or pays for specific funeral services.
In the end they can pay for some of the same things. They still aren't interchangeable.
After.com's current insurance comparison draws a similar line between broader life insurance and smaller burial or final-expense coverage. See After: Burial Insurance vs. Life Insurance.
The side-by-side view
| Feature | Life insurance | Burial / final-expense insurance | Prepaid funeral plan |
|---|---|---|---|
| Main purpose | Broader financial protection | Smaller final-expense benefit | Specific future services |
| Who receives value | Named beneficiary | Named beneficiary | The contracted arrangement or provider |
| Cash flexibility | Usually high | Usually high | Usually lower |
| Price-lock feature | Doesn't lock the funeral price | Doesn't lock the price automatically | May guarantee specified charges |
| Coverage size | Can be large | Usually smaller | Based on the services you pick |
| Portability | Depends on the policy | Depends on the policy | Depends on the contract |
| Main risk to review | Coverage ending, lapsing, or too small | What you pay in premiums vs. the benefit, and graded benefits | Provider, transfer, cancellation, and guarantee terms |
When does ordinary life insurance make more sense?
Look past the funeral.
If a surviving spouse or child relies on the person's income, the family may need money for:
- mortgage or rent;
- childcare;
- education;
- household bills;
- debt;
- lost income.
The funeral may be a small part of that.
A $10,000 final-expense policy can help pay for a funeral. It won't replace years of income.
When does final-expense coverage fit the question?
Someone may have no dependents and just want money set aside for:
- cremation;
- burial;
- cemetery charges;
- a memorial;
- a few bills left unpaid.
That's closer to the problem final-expense insurance is built for.
Even then, compare the total premiums you'd pay with the benefit, and with any other money you have.
When does a prepaid plan solve a different problem?
Some people worry less about leaving cash and more about leaving decisions.
They want:
- a particular provider;
- direct cremation;
- a certain cemetery arrangement;
- a known package;
- specific merchandise;
- fewer choices for their family to make.
A prepaid arrangement is meant for that kind of planning.
The contract still needs a careful read.
Does a prepaid plan lock in every price?
Not always.
A provider might guarantee its own services while charges from others can still change.
Third-party charges can include:
- cemetery costs;
- government fees;
- clergy;
- flowers;
- newspaper notices;
- transportation outside a set area.
"Price guaranteed" only helps if you know which price it covers.
What if you already have life insurance?
Before you buy anything else, read the coverage you already have.
Check the:
- death benefit;
- beneficiary;
- policy type;
- end date, if it's term coverage;
- premium;
- policy loans;
- any coverage through an employer.
You may find the funeral is already covered by a much larger benefit.
What if you move?
Insurance policies and prepaid funeral contracts work differently here.
A life insurance death benefit usually isn't tied to one funeral home.
A prepaid funeral contract can depend much more on the provider and the state.
Before you prepay, ask exactly what happens if you move.
Frequently asked questions
Is burial insurance better than life insurance?
They meet different needs. A burial policy is usually smaller and focused on final expenses. Traditional life insurance can cover a household's wider financial needs.
Is a prepaid funeral plan life insurance?
Not always. Some plans are funded through insurance, but the arrangement you sign is different from buying ordinary life insurance.
Can you have all three?
Yes. Whether that makes financial sense depends on the person's needs and the coverage they already have.
Which option locks in funeral prices?
A qualifying prepaid contract may guarantee specified funeral charges. Ordinary life insurance doesn't lock the funeral home's future price.
Which option gives the family the most flexibility?
A cash benefit paid to a named person usually leaves more freedom in how it's spent than a prepaid contract with one provider.