Losses are a part of human lives. We do everything in our hands to avoid them, but some of them are bound to happen. As a result, we must face the consequences. But man has devised other ways to cover the losses. Insurance is one of such ways which is used by individuals throughout the world to protect themselves from financial losses.
Insurance is like a pre-emptive approach that is taken in advance to cover the expected loss. The process involves two individuals. The one who wants to cover his future expected losses and the one who intends to cover those losses for him in the future if they happen. The latter one is the insurance company or insurer, and the one who gets the losses covered is the insured.
The insurance process is not very simple. The insurance company offers different types of policies to cover different types of losses. Then the individual who wants insurance regarding something contacts the company and gets to know the policy. The policy involves the conditions under which the insurance company will pay the insured in case of loss.
Also, insurance policy involves the amount that will be received by the policyholder in future. After taking the policy, individuals must pay a certain amount of money over a certain period to the insurance company, which is then returned by the company if the loss happens. This amount is known as premium.
Usually, the insurance company lets the policyholder decide how he wants to pay the premium, that is fortnightly, weekly, monthly or annually. But in some cases, policyholders do not have this freedom and have to act according to the strict policy guidelines.
Types of Insurances
Any expected future loss that can be quantified can be insured. Large multinational companies ensure their assets so that in case of an accident, they will not have to face a difficult situation. Automobile insurance is also a common practice. Property insurance is taken by large companies as well as individuals alike.
The most common type of insurance is life insurance. In this type, individuals pay a certain amount to insurance companies. Insurance companies then pay the amount of policy to the persons nominated by them in case of their sudden death. Similarly, health insurance is also very common. Policyholders pay the premium so that they can avoid medical expenses if needed.
There are also many other different types of insurances such as credit or liability insurance, gap insurance and funeral insurance.
Funeral insurance might sound a bit odd, but many elderly people opt for this insurance to save their descendants from this type of expense. They pay a premium in their lives to insurance companies so that when they pass away, their family members do not have to worry about how to hold a decent funeral for them.
Most of us do not pay attention to it but funerals are generally very expensive. In the United States, the cost of funerals may vary from 5000 US dollars to as high as 20000 US dollars. This is a very huge amount. So, this is the reason why elderly people tend to buy funeral insurances so that their descendants do not have to spend this much hefty amount in their funeral ceremonies.
Usually, people confuse this insurance policy with the life insurance policy because both are paid after the death of the policyholder. But these two are a lot different. The life insurance policy usually provides the beneficiaries of the deceased individual a large amount of money. While in this policy, the insurance company only pays the amount of money spent by the beneficiaries on the funeral of the policyholder.
What costs does it cover?
This insurance policy is also known as burial insurance. Generally, people purchase this policy to cover the costs that will be incurred in arranging a funeral for them. However, this insurance amount can also be used to cover the medical bills, credit card bills, loans and any other type of money that the deceased individual owes to anyone.
If such a policy is not taken, then the loans of the deceased individual are paid from the estate he leaves behind. In case of a will, the person nominated as responsible for his estate must pay the bills from the estate. But it is a wise choice to decide on one’s own life to take care of any such expenditure that might arise after he has passed away.
Read More: What is the Cost of Dying in the US?
Considerations before Making a Decision
Purchasing an insurance policy might sound a very simple process but, it is opposite to it. This process is very complex, and you might need to hire a lawyer to complete the process for you. You need to be very careful while making this decision. You should consider the following points before purchasing this insurance policy.
This might sound absurd, but this is an important factor in making this decision. You can estimate this cost by thinking about what type of funeral you want for yourself. A simple funeral might cost up to $2000. But if you want a memorial service, then it might be around $15,000.
You should also analyze other expenses that your beneficiaries might have to pay after you. You should consider if your estate is enough to pay the bills. If not, then this insurance policy is perfect for you. In this way, you can save for your expenses without a large amount at once.
Affordability of Insurance
Individuals should consider this factor while purchasing any types of policy.
Since only old people purchase a funeral insurance policy. They need to consider the fact that they will have to pay the premium for the rest of their lives. If they have only one fixed source of income, then they should estimate their other expenditures. They should also consider that will they be able to afford the policy if the company increases the premium rate?
Usually, seniors depend upon their pensions. And if they decide to not pay any further premium because of increased rates, they will lose the entire amount.
Does Health Matter in Funeral Insurance
What is meant by Health?
It is of utmost importance to consider that does health matter in funeral insurance. This type of insurance is generally purchased by men and women aged above 50. According to many studies, funeral insurance is most of the times purchased by people who are between 50 and 85.
Health means the overall medical condition of the expected buyer of the company’s policy at the time he is purchasing the policy. This is important because the company wants to know whether the person is facing a severe medical condition or not. This helps companies evaluate how much amount the insured person can pay and how much amount will be required to settle the claim.
Therefore, while offering insurance policies insurance companies pay special attention to the health of individuals. So, it can be said that health does matter in financial insurance. Most of the companies want their future clients to go through a complete medical checkup and get a clearance certificate by a well-reputed hospital.
Does Health Matter in Funeral Insurance
Eventually, the expected policyholder takes the final decision. They decide if they want to purchase the policy after going through a complete medical checkup procedure or not. They might want to purchase the policy without revealing their medical conditions. In such a case the company respects the wishes of the customers, but they offer different premium rates to such people.
The insurance company asks for a comparatively lower insurance premium from the individuals they consider fit based on their health report then the individuals who do not provide their health reports to the companies.
Funeral insurance is a very ideal plan for you if you want to save your descendants from paying a hefty amount for your funeral. However, you must have enough current income to fulfil the policy. Otherwise, if you fell short of payments after purchasing the policy and want to end the policy, you would lose all the amount you have paid earlier on and there would be no payout after you have passed away.
Your current health is an important point that you should consider before buying such a policy. If you are fit and do not have a fatal disease, you should avoid purchasing such a policy because you might be paying the premium for a long time. However, in case of a fatal disease, you can opt for this policy and help your descendants by paying your final expenses by yourself.