Life Insurance vs. Preneed Funeral Insurance: What’s the Difference?

When planning ahead or making arrangements after a loss, one of the most common questions we hear is:

 What’s the difference between life insurance and preneed funeral insurance?

While both can help cover funeral costs, they work very differently—and knowing the difference can save your family from added stress during an already difficult time.

Life Insurance: Designed to Replace Income

Life insurance is primarily intended to provide financial support for your loved ones after you pass away. It’s often used for:

• Replacing lost income
• Paying off debts
• Covering long-term expenses like college or housing

Some families choose to use life insurance to pay for funeral services. While we do accept life insurance assignments at no extra charge (most funeral homes charge 3–4%), there are still a few important things to consider:

• The paperwork can be time-consuming. It often requires a death certificate, policy details, claim forms, and signatures from all beneficiaries.

• Most policies must be in effect for at least two years to pay out the full death benefit. This is known as the contestability period, and if the policy is newer than that, the claim can be delayed or denied.

• Outdated beneficiaries cause delays. We frequently see situations where the listed beneficiary has passed away, and the policy hasn’t been updated. In those cases, all next of kin must agree and sign off to use the funds for funeral expenses, which can be emotionally and legally complicated.

Preneed Funeral Insurance: A Simpler, Secure, Price Protected

Preneed funeral insurance is a policy created specifically to cover the cost of your funeral or cremation. You plan everything in advance with the funeral home, and the policy is tied directly to those arrangements.

Benefits include:

• Locks in today’s prices— your family won’t pay more even if prices rise
• Funds go directly to the funeral home— no guesswork or delays
• No beneficiary issues— the policy is assigned directly to us
• Flexible payment options— you can pay in a lump sum or over time (3, 5, or 10 years)

What If You Choose Monthly Payments?

If you choose to pay over time (multi-pay), coverage works one of two ways:

Immediate full coverage is available if you can answer basic health questions and qualify. This means your entire funeral is covered starting day one.

If you don't qualify for full immediate coverage, the policy is still active but pays:

• 70% of the funeral cost after one year, and
• 100% after two years

This flexibility allows nearly anyone to preplan their funeral, regardless of health or budget.

In Summary:

• Life Insurance = Supports your family financially; may be used for a funeral but not guaranteed or price-locked.

• Preneed Funeral Insurance = Covers your funeral only; planned in advance and protected from inflation.

Both are valuable tools—but they’re designed for different needs. If you want to make sure your family isn’t left with the burden of making funeral decisions or covering rising costs, preneed final expense insurance is a smart and thoughtful choice.