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What is Funeral Insurance and How Does it Work in Canada?

Funeral expenses can place a significant financial burden on families during an already challenging time. Funeral insurance in Canada aims to ease this burden by providing coverage specifically designed for funeral-related costs. In this blog post, we will delve into the details of funeral insurance, exploring what it is, how it works in Canada, and the key differences between funeral insurance and life insurance.

What is Funeral Insurance?

Funeral insurance, also known as burial insurance or final expense insurance, is a specialized type of insurance designed to cover the costs associated with a funeral and related expenses. To ensure your loved ones are not financially stressed when arranging a funeral, you might want to seek this policy.

How does Funeral Insurance work in Canada?

Funeral insurance works similarly to other types of insurance policies. You purchase funeral insurance coverage and pay regular premiums to the insurance provider. When the policyholder passes away, the designated beneficiaries receive a lump-sum payment. This payout is intended to cover funeral expenses, including the funeral service, burial or cremation, and other associated costs.

Types of Funeral Insurance

There are three types of funeral insurance which you can consider to buy:

1. Simplified Issue Funeral Insurance:

Simplified issue policies streamline the application process by omitting the need for a medical exam. However, the insurer evaluates your health by asking a few health-related questions, facilitating quicker approval than traditional life insurance. This option is ideal for those seeking a hassle-free application.

Note: Reasons that may result in the denial of the policy include pre-existing health conditions, involvement in risky activities, and smoking.

2. Guaranteed Issue Funeral Insurance:

With guaranteed issue policies, neither a medical exam nor health questions are required. Approval is guaranteed, making it accessible for individuals with pre-existing health conditions. Since there is no evaluation procedure, the type typically comes with higher premiums compared to other options. 

If a policyholder dies due to a natural cause and before the waiting period, the beneficiaries won’t receive the full benefit. The full benefit is only paid when the beneficiary dies and the cause is accidental. 

Note: The Payout for Guaranteed Issue funeral insurance is lower than the Simplified Issue funeral insurance. 

3. Pre-need Funeral Insurance:

Pre-need insurance is unique as it is purchased directly from a funeral home. This type covers specific funeral-related expenses and services, allowing individuals to pre-plan and pre-pay for their funeral. It provides peace of mind by establishing predetermined arrangements.

What does Funeral Insurance cover in Canada?

Funeral insurance claim form

The coverage provided by funeral insurance in Canada typically includes the following:

  • Funeral Service Costs: Everything related to a funeral ceremony, including the venue, casket, flowers, and other associated costs.
  • Burial or Cremation Costs: These are the costs of burial or cremation, including the plot, urn, or other burial expenses.
  • Transportation Costs: This refers to the transportation costs of the deceased, both locally and internationally.
  • Additional Expenses: Some policies may also cover additional expenses such as memorial services, obituary notices, and other miscellaneous costs associated with the funeral

Best Life Insurance Plans that suits your needs and budget

Funeral Insurance Vs. Life Insurance 

While funeral insurance and life insurance serve the common purpose of providing financial protection, they have distinct differences:

  • Specificity of Coverage: Funeral insurance is designed to cover funeral-related expenses, whereas life insurance provides a broader range of coverage, including income replacement, mortgage payments, and education expenses.
  • Payout Timing: Funeral insurance typically pays out quicker than life insurance, providing funds promptly to cover immediate funeral costs.
  • Age and Health Considerations: Funeral insurance is often more accessible for seniors and those with pre-existing health conditions, making it a viable option for individuals who may face challenges obtaining traditional life insurance.
Read Also: Life Insurance Payout Canada - Everything You Need to Know

The Bottom Line

Funeral insurance in Canada is a valuable tool to alleviate the financial strain associated with funeral arrangements. It provides peace of mind to you and your family, ensuring the final farewell is a moment of remembrance rather than financial stress. Understanding the nuances of funeral insurance and its distinctions from life insurance can help you make informed decisions to safeguard your loved ones during challenging times.

To understand whether you need funeral or life insurance, you must contact a reliable insurance provider. 

Get the Right Insurance Coverage at Life Simple

At Life Simple, we understand the importance of finding the right coverage tailored to your needs. Whether you're considering getting funeral Insurance or term life insurance, our experienced advisors are here to guide you. Secure your peace of mind and protect your loved ones by choosing the right insurance coverage with best insurance quotes.

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Frequently Asked questions

Does Life Insurance cover Funeral Costs?

While life insurance is not explicitly designed for funeral costs, the payout from a life insurance policy can be used to cover funeral expenses. However, the key distinction is that life insurance offers a broader scope of coverage beyond funeral-related expenses.

Is Funeral Insurance worth buying?

According to SunLife, the average funeral cost ranges from $5000 to $10,000. However, this typically depends on the location where it is held. Other factors that add to the cost are family rituals, funeral homes, and personal preferences. So, if you are on a tight budget, it is wise to get funeral insurance to help your loved ones handle all the major expenses without feeling burdened. However, if you have a budget, term life insurance is all you need.

Are there any waiting times for Funeral Insurance?

This depends on your policy and insurer. So, verifying the wait times with your insurer is highly recommended as some policies may have it.

What are the Disadvantages of Funeral Insurance in Canada?

Funeral insurance in Canada comes with certain drawbacks. Firstly, policies often have limited coverage amounts, potentially leaving families to cover additional expenses. The premiums can be relatively high, especially for seniors or those with health issues, raising concerns about long-term affordability. Other factors to consider are waiting periods before full coverage and the lack of cash value accumulation. Age restrictions, particularly for seniors, and potential exclusions or waiting periods for accidental death add further complexities. Individuals must carefully weigh these disadvantages against the benefits when considering funeral insurance options in Canada.