Burial insurance or a prepaid funeral plan: which is better?
A side by side on cost, flexibility and what happens if you move, change your mind or the funeral home closes.
Both are ways to make sure a funeral is paid for. They are structured very differently, and the differences matter more than the sales pitch for either one.
What each one is
Burial insurance, also called final expense insurance, is a small whole life policy. You pay premiums, and when you die the carrier pays cash to your beneficiary, who can spend it on anything.
A prepaid funeral plan is a contract with a specific funeral home. You pay for goods and services in advance, and the funeral home agrees to provide them. In Texas these arrangements are regulated and the money is placed in trust or used to buy an insurance policy assigned to the funeral home.
Where they differ
- Flexibility: insurance money can be spent anywhere and on anything, including bills. A prepaid contract is tied to that funeral home and those goods
- Moving: if you move to Houston or back to Mexico, an insurance policy follows you. A prepaid contract usually does not
- Price protection: a prepaid contract can lock in today's prices for the specified services. Insurance pays a fixed dollar amount, which inflation erodes over time
- Leftover money: insurance overage goes to your family. Prepaid overage usually does not
- If the funeral home closes or is sold: contracts can transfer, but this is where families run into trouble
How to choose
If your main worry is that your family will not have the cash, insurance is usually the better fit because it is portable and the money is theirs. If you have already chosen a specific funeral home, want the exact service specified, and expect to stay in the same city, a prepaid contract does something insurance cannot, which is lock the price of the service itself.
Plenty of families do both: a prepaid contract for the service, and a small policy for everything else, because a funeral is not the only bill that arrives.
Read the paperwork before signing either
- Is the plan guaranteed price or does it only apply a credit?
- What is cancellable, and what is refunded if you change your mind?
- Who owns the policy behind the plan, and who is the beneficiary?
- What happens if you die out of state?
We will compare it honestly
We do not sell funeral contracts, so we have no stake in that side of the comparison. Bring what a funeral home quoted you and we will price the insurance version. Call (956) 687-3334. Se habla español.
Common follow-up questions
Can I cancel a prepaid funeral plan?
Texas rules give purchasers cancellation rights, and what you get back depends on how the plan was funded and how long you have had it. Ask for the cancellation terms in writing before you sign.
Does burial insurance pay fast enough for a funeral?
Usually yes. Most final expense carriers pay within a few business days once the claim and death certificate are submitted, and many will assign benefits directly to a funeral home.
Is one cheaper?
It depends on your age and health. For a healthy 60 year old, insurance usually costs less over time. For someone in poor health, prepaid arrangements sometimes come out ahead.
Want this looked at properly?
We are an independent agency in McAllen serving Hidalgo, Cameron and Starr counties. No cost to talk it through.
Call (956) 687-3334Read next
How much life insurance do I actually need?
Life