Funeral insurance vs funeral bond

July 27, 2022

The average cost of a funeral in Canada is around $10,000. That can feel like a lot of money to your loved ones as they mourn their loss. But there are ways that you can ease this financial burden.

Planning ahead for your funeral is key. You can buy funeral insurance or a funeral bond to help your family pay for your final costs.

What is funeral insurance?

Funeral insurance or burial insurance is a contract between you and your insurance company. So long as you keep paying your premiums, the insurance company will give your family money for your funeral after you pass away.

One of the advantages of funeral insurance is that your benefit is guaranteed, no matter how long you’ve been paying your premiums. With a prepaid funeral plan, if you pass away before you finish paying the installments, your family will have to cover the difference.

There are two types of funeral insurance. These are:

Final expense insurance

This is the simplest kind of burial insurance. It pays a benefit to your beneficiaries when you pass away based on the type of plan you selected. The money that your beneficiaries receive can be used for your funeral, burial, credit card debt, or other final expenses.

This is the simplest kind of burial insurance. It pays a benefit to your beneficiaries when you pass away based on the type of plan you selected. The money that your beneficiaries receive can be used for your funeral, burial, credit card debt, or other final expenses.

Pre-need insurance

This insurance policy will only cover the expenses of a funeral or burial. Any other final expenses will need to be paid from your estate or by your loved ones. And the benefit is paid out to the funeral home. The benefit of pre-need insurance is that it will cover the costs of inflation.

What is a funeral bond?

A funeral bond is a form of investment offered by life insurance companies. It allows you to save money for your funeral. Similar to life insurance, the payment will be issued after you pass away.

How do funeral bonds work?

Similar to other life insurance products, you can put money into your funeral bond with monthly payments. These funds will be invested under your name and saved to pay for your funeral.

After you pass away, the insurance company will release the funds and your loved ones can use them for your funeral costs. If there is any money left over after paying the final costs, it goes to your estate.

Benefits of funeral bonds

There are several advantages to investing in funeral bonds, such as:

Avoid the uncomfortable

Not everyone is comfortable planning their own funeral. But we all want to ensure our families don’t suffer financial hardship when we’re gone. A funeral bond allows you to save for the inevitable and you won’t have to give it too much thought.

Grow your money

A funeral bond is an investment, which means you have an opportunity to see your money grow. When it comes time for your loved ones to cash in on your investment, there should be more money in the account than what you paid in. And any money that is not needed for funeral costs will go towards your estate and your heirs.

Pick your funeral director

With a funeral bond, you can decide who is in charge of your final farewell. Funeral bonds allow you to appoint a funeral director for your service. And if you change your mind, you can always appoint a different funeral director in the future.

Drawback of funeral bonds

While they are great options for saving, funeral bonds do have a drawback.

Limited funds

The money you put into a funeral bond today, may not be enough to cover your funeral expenses when the time comes. Like other industries, the cost of funerals continues to go up. However, you can account for these rising prices when you invest in your funeral bond. Consider putting aside a little extra if you can to ensure your family will have enough.

Funeral insurance vs funeral bonds

Funeral insurance and funeral bonds are both ways that you can plan for the costs of your funeral after you’ve passed away. But they work in different ways.

A funeral bond puts money aside in your name. So, it will be there for your funeral when it’s needed. Funeral insurance is an agreement between you and your insurance company that they will provide funds to your family to cover funeral expenses.

With a funeral bond, there is the potential your investment returns will increase to cover inflation. It is an added level of security that your family will have enough to cover funeral expenses.

The costs of funeral insurance premiums will increase as you get older. This can be a financial hardship after you retire. However, if you cancel your policy or fail to pay your premiums, you’ll lose your coverage. That means you’ll have to find another way to pay for your funeral.

Another difference is that with funeral insurance, you’re loved ones will likely need to pay your funeral costs upfront and wait for the insurance company’s payout. With a funeral bond, the money is released after you pass away.

Prepaid funeral plans: Another alternative

In addition to funeral insurance and funeral bonds, you can plan and pay for your service with a prepaid funeral plan. But it does mean that you’re in control of your service. With a prepaid funeral plan, you can decide what kind of service and details you want at your funeral and make payments to secure your plans.

With prepaid funeral plans you’ll help your family avoid tough decisions and conflicts when it comes time to plan and pay for your final goodbye. Rather, you can plan and pay for it all with a prepaid funeral and let them get on with the grieving process.

Why Shelter Bay?

At Shelter Bay, we know insurance. Our team has over 200 years of collective experience in the insurance industry. From health insurance to life insurance to funeral insurance, if you have questions, you’ve come to the right place.

As insurance brokers, our commitment is to help you find the best insurance solutions for your needs. We have families too and we understand your desire to protect and provide for them.

If you want to know more about the best insurance options for you, contact the team at Shelter Bay.

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