Insurance Assignment

Most funeral homes will agree to process an insurance assignment for full or partial payment of the funeral expenses.

The bill for services is sent to the insurance company once the insurance company confirms that the funds are available.
The remaining balance of the policy goes directly to the beneficiary.
Remember though, simply having life insurance will not make the important decisions that must be made in regard to your funeral – which funeral home will take care of the service, what type of service will be held, how much will be spent on the funeral service, etc.

Permanent Life Insurance

Final-expense policies are nearly always permanent life insurance policies. Most final-expense products are little more than ordinary whole life or universal life policies with low face values.

Face Amount

The majority of final-expense life insurance policies offer face amounts, the sum of money your beneficiaries receive when you die, in the range of $10,000 to $20,000. Final-expense products are not intended to replace lost income or leave a legacy, but rather to simply ensure that your family does not have to struggle to find money for your funeral.

Guaranteed Policy Issue

Many life insurance products marketed as final-expense policies require little to no underwriting. Since the face amounts are typically small, insurance carriers often forgo intense and exhaustive analysis of these policies.

To account for the increased liability of issuing coverage to nearly anyone who applies, insurance companies increase policy premiums to offset the added risk of potentially insuring an unhealthy or otherwise uninsurable person.

Graded Benefits

Just as insurance companies increase premiums to offset the cost of possibly covering an extremely unhealthy person, some carriers choose to sell “graded” benefit products as final-expense policies.

Graded benefit life insurance contracts stipulate that if your death occurs within the first few years after purchasing coverage, your heirs will receive a reduced payout. Your death benefit will increase to the full requested amount only after your policy has remained in force for a specified number of years, typically between two and four.

Preplanning Policies

Funeral homes often have the option of preplanning a funeral and ensuring that it is paid for through an insurance policy that names the funeral home as the beneficiary.

Waiting Period

Depending upon the individual policy, a covered person may not receive any benefits if he or she dies within a certain period after taking out the policy. This is usually two to three years.

Death Certificate

Before a life insurance claim may be processed, the beneficiary will need to provide a death certificate for the insured person who has passed away. The death certificate must be legal and notarized. A copy of the death certificate can be obtained from the coroner, funeral home director, or facility or the state health department where the death occurred. This certificate validates the death and insurance claim.

Policy Holder or Beneficiary

If an individual has taken out life insurance on an individual, he or she is the policyholder. In the event that someone passes away, the policy will be awarded to the beneficiary. The beneficiary is the person in whom the policyholder trusted to properly handle the benefits and funds awarded at the time of the policyholder’s death. Anyone who has not been named as the beneficiary will have legal troubles making a claim on the life insurance policy. Beneficiaries can be minors, however, the legal documents may not be signed until the minor reaches legal age.

Autopsy or Police Report

An autopsy or police report is needed when filing a life insurance claim. The reason being is suicide deaths are not covered under all life insurance policies. Some life insurance policies have what is called a suicide clause. The clause terminates the life insurance benefits immediately. This insurance will be voided under the suicide clause whether the insured was sane or insane at the time the suicide was committed.

Withdrawing Funds Before Death

Not all life insurance policies require the beneficiary or policyholder to pass away before a claim can be paid. The policy may be cashed in early, but there are disadvantages to doing so. If funds are withdrawn on a policy before death, the benefits will be lowered. Some withdrawals are not always income tax free. A claim will need to be filed, and the insurance provider will collect general information, such as reason for withdrawal and identification verification.