Denton County Living Well Magazine May/June 2022 | Page 45

How Much

LIFE INSURANCE Do I Need ?

By RICK ALLEN

Typically , the question regarding life insurance is one that should be discussed with your financial planner or life insurance representative . However , as I work with clients who are pre-planning funeral services for themselves , I am often informed that a life insurance policy has been purchased to cover the cost of a funeral .

While a life insurance policy is an acceptable way to pay for a funeral , it is not the most advisable . When you purchase life insurance , a beneficiary is designated , and that person will receive the proceeds from the death benefit of the policy upon the death of the policyholder . The person who receives this benefit should not have to immediately relinquish a portion of that benefit to pay to bury or cremate you . That money is intended for the person ’ s benefit who receives it . That is why it is called life insurance not death insurance . It benefits the living , not the dead .
Another negative to using life insurance to pay for funeral expenses is a possible added cost to do so . Historically , funeral homes would file the insurance claim and attach an assignment for the cost of the funeral . Unfortunately , as it now takes longer to receive certified copies of death certificates , which are needed to file the claim and the fact that an insurance company often takes 30 days after a claim is filed to pay out proceeds , funeral homes are now using third party re-assignment companies to advance the cost of the funeral . The re-assignment company charges a fee to the beneficiary for this service since the company is waiting for the claim to settle to get their money back .
Lastly , life insurance cannot protect you from inflation like a prepaid funeral contract can . When determining how much life insurance you would need for an event that will happen at a future , undetermined date it is a “ toss of the dice ” at best . But , by creating a pre-paid funeral contract , the exact cost is determined by you , based on what you want and when pre-payment is made , the price is frozen to you , the consumer . The pre-paid funeral contract can be paid all in one single payment or over time in equal monthly payments with no interest .
At the end of the day , having a plan in place , regardless of what that plan is , is much better than waiting until a death has occurred and leaving the burden of guessing what you would want and how to pay for it on a loved one . Pre-planning is a huge gift to your family , and it will provide an amazing peace of mind to you knowing that you have been responsible and have spared your family from added burden in addition to the difficulty of losing someone they care about .
Photo by Annie Spratt
DENTON COUNTY 43