What Is Preneed Insurance?

Insurance can be a complicated topic, full of technical jargon and legal language — perhaps you’ve found the same confusion with preneed insurance. If you’ve arrived at this post searching for information about preneed insurance in simple, straightforward terms, you’ve come to the right place. From the insurance definition to how to get started with your own funeral plans, we hope to clear up the process so you feel confident navigating your preneed journey.

Defining Preneed Insurance

You may know the phrase “preneed insurance” by other names, such as preneed funeral insurance, prepaid funeral plan, advanced funeral funding, prefunding, advanced funeral planning or prearranging. The names may vary, but the definition is the same: preneed insurance is a type of life insurance designed to pay for your funeral, burial or cremation expenses in advance.

Unlike general life insurance, which pays a death benefit to any beneficiary for any purpose, preneed funeral insurance covers specific funeral and burial costs. The funds usually go directly to a funeral home or funeral service provider.

Benefits of Preneed Insurance

Did you know that more than 50% of families report going into debt after the death of a loved one?* Preneed insurance allows you to have a plan in place to pay your end-of-life costs (such as funeral, burial or cremation and cemetery options) in full up front or over multiple years.

Preneed insurance can also avoid future cost inflation so by the time of your death, your family won’t incur extra inflation expenses. This lifts the financial burden from your loved ones, so they can remember and honor your life when the time comes — instead of worrying about paying for your funeral.

*According to the 2022 “The Cost of Dying” report published by Empathy.com.

Estimated Costs and Payment Options

The average cost of a funeral with casket and burial in 2023 was $8,300, according to a report by the National Funeral Directors Association — but it’s easy for that price to increase with other costs often associated with funerals like an obituary, cemetery fees, flowers, etc. This also fluctuates based on your location; you can get a breakdown of average cost of a funeral by state (as of 2021) in this article from The Zebra.

Remember: Every funeral is personal and unique. While some expenses are unavoidable, others can be customized to meet your budget, your wishes and your needs. Take a closer look at what contributes to the cost of a funeral in this blog post about funeral costs.

Payment options vary by preneed funding provider. For example, Homesteaders offers options so consumers can select the payment plan that’s right for their needs. The entire Homesteaders policy may be paid up front or, depending on age, the policy may be paid for over the course of multiple years. Find more information in this blog post of frequently asked preneed funding questions.

Speak with your funeral service provider for the most up-to-date and detailed cost and payment information.

How to Get Started

Consider Setting Funds Aside

Whether you decide to pay your preneed policy up front or over the course of multiple years, it’s always a good idea to consider setting aside a portion of your income each month. This way, you can prepare for whichever payment option you choose.

Work With a Funeral Home

To start planning, we encourage you to check out our funeral planning checklist and connect with your trusted local funeral service provider to start the planning process. They will walk you through the next steps as you gather your personal documents, record your final wishes and inform your family about your decisions. You can also read this step-by-step guide to funeral planning to start your planning journey.

Need help choosing a funeral home? Read our tips for selecting a funeral home that’s right for you.

Explore Your Online Planning Options

Ask your local funeral home provider if they offer online planning services, such as eFuneral*, or check eFuneral’s website to find providers near you. This funeral planning platform allows you to preplan your funeral, including viewing straightforward pricing options that work for your budget, selecting your arrangements and finalizing your choices.

*eFuneral is an affiliate of Homesteaders Life Company.

Questions to Ask Your Funeral Home Provider

If you haven’t arranged a funeral before, it may be difficult to know what to ask your provider. This blog post dives into more extensive questions you can ask, broken into topics like facility options, service details, pricing and about the funeral home. Below are some questions from each topic to get you started:

  • What facility options do you offer?
  • Can you accommodate special requests for the funeral service?
  • What should I be considering when preplanning my funeral?
  • What services are included in the final arrangement costs?
  • Is there anything not included in the final costs that I should consider?

Preplanning and prepaying for your funeral can feel daunting, but you now have the tools you need to navigate the preneed insurance journey, and we hope you feel more confident as you start the preplanning process.

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