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Is Your Life Insurance Policy Your Best Option? Maybe Not!

Published: August 1, 2018
by Andrea Thornburg

Don’t get me wrong – life insurance is good to have and is a part of my own portfolio.  Every person’s life situation is different and should be considered when buying insurance.  You must take in to consideration existing mortgages and loans, the needs of a spouse and children, and oh yeah…funeral expenses.  It’s very easy to assume that having a life insurance policy is the end of your financial concern.  But is it?  So many things have changed over the years, including laws pertaining to Medicaid, that it’s worth a glance to consider whether or not that insurance policy in the drawer is the answer to all of your loved one’s future financial needs as it pertains to covering your funeral related expenses.

It’s very common for funeral professionals to assist in filing for life insurance benefits on the behalf of the beneficiary.  After all, we do this for a living – we know who to call and how to complete and submit the required paperwork.  But what most people don’t realize is that it often takes several weeks if not between 30-60 days to receive payment from a life claim.  The problem with that is the funeral is usually over within a few days following the death.  Certain expenses are due and payable at the time of death – long before a traditional insurance policy will “pay off”.  This means it is very conceivable that family members will need to pay a little – or a lot – out of pocket at the time of the death.  While it is true that some funeral homes will advance that money and wait to be reimbursed by the insurance company, many more will not assume the risk and will require money up front.  In fact, a growing number of funeral homes are requiring all funds to be paid on or before the day of service and are not accepting life insurance as a form of payment due to privacy laws and the uncertainty of payment.  I saw one situation where a death benefit was not paid because the insured had incorrect information on the enrollment form.  Another time, the insurance did not pay enough because a loan had been taken out against the policy years earlier that had been forgotten.  Yet another time, the insurance did not pay because the insured had recently passed the age limit stated in the policy.

When you plan and pre-pay your funeral ahead of time the burden and uncertainty is eliminated because by Indiana Preneed Law all funeral home charges (for professional services and merchandise) are guaranteed which means not a penny more will ever be owed.  This is not true with traditional life insurance policies.  Also, don’t forget that a pre-paid funeral contract that is completed with a licensed funeral home becomes irrevocable after thirty days (in Indiana).  This means Medicaid or anyone else for that matter can never take these funds from you and can only be used for your funeral expenses.  There have been situations when families have been forced to surrender a life insurance policy due to unforeseen circumstances; when this happens, the money from the policy is basically, lost.  My point is that insurance policy in the drawer may or may not be there (or be enough) when your family will need it the most.

If you’re not sure please call me.  I will meet with you, free of charge, to review the status of your current policy.  Certain questions should be asked now so that problems don’t arise later.  You will not be under any obligation and only your best interest will be in mind.

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