What is Funeral Insurance?
Most Canadians don’t like to think about funeral expenses. It’s understandable – planning for your own death feels uncomfortable, even morbid. But the reality is that funeral costs can create a serious financial burden for the people you leave behind.
Funeral costs in Canada can range from $1,000 to $20,000 depending on the services you choose. The national median cost of a burial with funeral and viewing was $7,640 in 2019 (not including cemetery costs). With cemetery plots in places like Toronto becoming increasingly expensive as availability decreases, these expenses continue to climb.
Consider what your family would face if you passed away unexpectedly. Would they have the funds to cover your funeral expenses on top of dealing with their grief?
Funeral expense insurance (also called burial insurance or final expense insurance) addresses this concern directly. This type of permanent life insurance typically offers coverage ranging from $5,000 to $25,000. Unlike traditional life insurance policies, you can purchase burial insurance in smaller amounts such as $5,000 or $10,000, which makes the premiums more manageable for many people. The coverage lasts your entire lifetime as long as you maintain premium payments.
What is Funeral Insurance and How Does It Work?
Funeral insurance is a specialized type of life insurance designed specifically to cover end-of-life expenses. Unlike traditional life insurance policies, funeral insurance (also called burial insurance or final expense insurance) focuses on covering the costs associated with your funeral, burial, and other related expenses.
Here’s how it works: You pay regular premiums, and when you pass away, the policy pays out a death benefit to your beneficiaries. The payout is typically delivered quickly, often within 24 hours of receiving completed claim forms.
There are two main types of funeral insurance you can choose from:
Final expense insurance pays a flat amount to your chosen beneficiary who decides how the money is spent. This can cover funeral costs, medical bills, credit card debt, and other final expenses.
Pre-need insurance covers only expenses associated with a pre-planned funeral. The benefit is paid directly to the funeral home chosen by the policy holder, and funeral costs are locked in at current prices.
One advantage of funeral insurance is that it typically doesn’t require a medical exam. Most applicants can qualify after answering a few health questions, making it accessible for seniors or those with health issues. Applicants are usually between 40 and 80 years old.
Once issued, your funeral insurance premiums remain fixed for the duration of your policy. The coverage lasts your entire lifetime, provided you maintain premium payments.
Your beneficiaries can use the payout for various end-of-life expenses including:
Cremation or burial costs
Memorial services
Funeral director fees
Flowers and transportation
Outstanding debts or taxes
For many families, funeral insurance offers peace of mind knowing that loved ones won’t face financial strain during an already difficult time.
Types of Funeral Insurance Policies
Funeral insurance comes in several forms, each designed to meet different needs and circumstances. Understanding your options will help you choose the right coverage for your situation.
Final Expense vs Pre-Need Insurance
The two main categories of funeral insurance work differently.
Final expense insurance pays a flat amount—typically between $5,000-$25,000—to your chosen beneficiary. This benefit can be used for funeral costs, medical bills, credit card debt, or any other final expenses. Your beneficiary decides how the money is spent, though there’s no protection against inflation.
Pre-need insurance works differently. It covers only expenses associated with a pre-planned funeral. The benefit goes directly to the funeral home you’ve chosen, and funeral costs are locked in at current prices to protect against inflation.
Term vs Permanent Coverage
You can also choose between term and permanent funeral insurance policies.
Term policies may cost less upfront but have a limited timeframe and don’t protect against rising funeral costs. If you outlive the term, you’ll have no coverage when you actually need it.
Permanent (whole life) insurance remains in force until death, guaranteeing a payout. While premiums are higher, you know your beneficiaries will receive the death benefit regardless of when you pass away.
Medical Requirements
Funeral insurance policies fall into different categories based on what health information is required:
Medically Underwritten Policies require health information but offer higher maximum benefits for those in good health. If you’re healthy, these policies typically provide better value.
Simplified Issue Life Insurance skips medical exams but requires answering health questions. This option works well if you’re willing to pay higher premiums to avoid medical tests.
Guaranteed Issue Life Insurance approves almost everyone, making it ideal for those with terminal illnesses or severe medical histories. No medical exams or health questions are required, but coverage amounts are typically lower and premiums higher.
Most funeral insurance policies provide coverage ranging from $5,000 to $25,000, although some offer up to $50,000.
Keep in mind that funeral insurance builds cash value over time. You can withdraw money or borrow against it, though this reduces your policy’s death benefit.
Costs, Coverage, and Choosing the Right Plan
How much will funeral insurance cost you? Several factors determine your premiums, with age, health condition, and desired coverage amount being the most important. A 40-year-old woman might pay approximately CAD 73.46 monthly for CAD 34,834 coverage, while a 40-year-old man would pay around CAD 98.84 for the same coverage. The difference reflects statistical risk factors that insurance companies consider.
Your location in Canada also matters. Funeral costs vary significantly across provinces.
Keep in mind that funeral insurance premiums tend to be higher than traditional life insurance for smaller payouts. You should calculate how long you might pay premiums – if you live many years beyond your policy purchase, you might pay more in premiums than the actual payout.
When you’re ready to choose a plan, compare different providers based on:
Death benefit amount that sufficiently covers funeral expenses
Payment terms that fit your budget
Policy exclusions
Company reputation in the funeral insurance industry