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When choosing a beneficiary for your life insurance policy, if you purchased the policy for the purpose of final expense planning then you may be tempted to name a local funeral home as your policy’s beneficiary. It's possible however, that naming the funeral home as your beneficiary is a mistake.

Death Benefit versus Actual Costs

If your funeral expenses end up being less than the amount of your policy, it can be difficult for your family to get back the difference. They may need to wait until the funeral is over before the company mails the estate a refund check, and then because it is paid to the estate, it could be subject to estate taxes.

When giving the entire sum to the funeral home it can also make it more difficult for your family to manage the expenses that they're being charged. It’s possible that a funeral home that’s privy to the amount of your death benefit proceeds will not understand that your estate needs any unused amounts for other expenses and will attempt to up-sell your funeral organizers.

Flexibility and Liquidity

When you give a funeral home control over your death benefit proceeds, you take that control and the benefits it creates, away from your heirs. So instead of having the ability to choose a funeral home that is easier or more convenient for them to work with, they are forced to work with the one you named beneficiary. In addition, if the estate should have any bills that need to be paid, your family will not have the benefit of your life insurance policy proceeds to assist in paying them, as the entire benefit will go to the funeral home first.

An Easier Solution

None of this means that you can't name the funeral home has your insurance policy’s beneficiary, just that you should reconsider how you want to do that. You can always name more than one beneficiary and assign a certain percentage of the death benefits to each. If you assign a small percentage of your death benefit to a funeral home, you can help your other beneficiaries by basically creating a down payment for your final expenses without tying your family’ hands completely.

If you have questions about your Regina life insurance policy, your beneficiaries, and what expenses you should consider when choosing a death benefit give us a call at Heritage Insurance.

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