Many of us want to give our loved ones peace of mind after we’re gone, which often means protecting them from having to pay costs associated with our passing, such as funeral fees, burial costs, lawyers, and more.
One of the primary reasons for end-of-life financial planning is managing costs before and after you pass. And that’s where funeral planning and funeral insurance can help.
In this article, we’ll look at the differences between funeral insurance and general life insurance, the average funeral costs in Canada, and the peace of mind that comes with making an estate plan and being prepared.
What is funeral insurance?
Funeral insurance, also called burial insurance, final expense insurance, or end-of-life insurance, is a type of permanent life insurance product.
In a traditional permanent life insurance policy, your family would receive an income replacement when you pass away which they can use as they wish. With funeral insurance, your family or the beneficiary of your insurance instead gets a lump sum payment specifically to cover your end-of-life expenses such as funeral services and burial costs.
Life insurance vs funeral insurance
Since funeral insurance is a type of life insurance, both offer a death benefit, which is a payout that occurs when the insured person passes away. So what’s the difference between getting a full coverage life insurance plan and getting funeral policy coverage?
Here’s a breakdown based on a list of considerations:
The importance of funeral insurance in estate planning
When you’re estate planning in Canada, funeral insurance can actually work as a shortcut for paying for funeral and burial costs, because beneficiaries can quickly get the payout for the insurance claim within a week or two.
But how can funeral insurance help if you’ve already written a will? Well, whether you’ve written a handwritten will, traditional will, online will, or digital will, funeral insurance helps you decide who covers your funeral fees – you or your estate.
For example, let’s say you have a will and inside it, you’ve named an executor, designated beneficiaries, and documented your funeral and burial wishes. In the event of your passing, your funeral and burial fees would usually be covered by your estate. But that means these fees will eat into assets which would have otherwise gone to your beneficiaries.
If you have funeral insurance and a will, you preemptively cover your own end-of-life fees now so that the assets left in your estate later can go to your beneficiaries directly rather than being used to cover your funeral costs.
But you don’t have to make this decision alone. Talking with loved ones about your or their estate plan can be really helpful, so here are some tips for speaking to your family about estate planning.
Make your estate plan easily. Use Willful today →
Average funeral costs in Canada
Funeral costs in Canada can range widely depending on where it takes place and what services you want. The price range is very broad, with the lower end being around $1,000 and the higher end being closer to $20,000.
The climate also plays a factor in costs for funeral and burial wishes. Cold or frozen ground is much more difficult to break through and may need different machinery, which could cost more.
Other factors that influence the cost of your funeral or burial service include:
- Caskets
- Embalming
- Funeral and reception service (may include the fee of reserving a place of worship for the service based on your beliefs)
- Burial or cremation
- Urns or headstones
What is the most expensive part of a funeral?
The most expensive part of a traditional funeral is often the fee for funeral home services. If you do not plan to have a paid service, the single most expensive cost for the funeral may be either the casket itself (depending on type) or the burial plot (depending on burial location).
For example, in Toronto, plots in cemeteries are becoming increasingly more expensive as plot availability decreases and land becomes more expensive.
How much does it cost to have a funeral in Canada?
Funerals in Canada can cost anywhere from $1,000 to $20,000, sometimes even more. But there are multiple factors that contribute to costs, including location, types of services, funeral homes, and how quickly you need the funeral services.
Who is legally responsible for funeral costs in Canada?
The executor of a person’s estate is responsible for their funeral, covering funeral and burial costs with assets from the estate. Insurance payouts for funeral insurance can also cover these costs, whether the deceased had a will or not.
Does the Canadian government help with funeral costs?
Yes, the government can help with covering funeral costs. As long as the deceased contributed to the Canada Pension Plan (CPP) for at least three years, their executor can apply for a CPP death benefit, which is a one-time payment of $2,500 to help with funeral costs.
However, the executor must apply for the benefit within 60 days of the deceased’s date of death.
Learn more about who reports the CPP Death Benefit on their taxes →
Choosing the right funeral insurance policy
There are many things to consider if you’re trying to find the right funeral insurance policy to suit your needs.
- Coverage Limits and Costs: Consider the costs associated with funeral services in your area and make sure that the policy you choose provides enough coverage as you prepare for funeral expenses. See the next section for more on costs.
- Policy Types: Funeral insurance comes in various forms, including term life insurance, whole life insurance, and burial insurance. There may also be options for family coverage as well. Choose a policy that aligns with your preferences and financial situation.
- Exclusions and Limitations: Certain pre-existing conditions or circumstances may also affect coverage options, so carefully review the exclusions and limitations of each policy.
- Underwriting Process: Underwriting is the process of evaluating risks in insurance and setting a price based on these risks. Some policies may require a medical exam, while others may offer more simplified underwriting. Pick a process that suits your health status and personal preferences.
All in all, it’s best to choose a funeral insurance policy that compliments your personal situation, your estate plan, and your end-of-life wishes.
How much does funeral insurance cost?
Funeral insurance costs in Canada can vary significantly based on several factors:
- Age: Premiums generally increase as the policyholder gets older, because they are considered higher risk. For example, a 40-year-old may pay $52.72 per month for $25,000 in coverage, while a 60-year-old may pay $100 or more per month.
- Policy type: There are different types of funeral insurance policies, including term life insurance, whole life insurance, and guaranteed issue/no medical policies. Whole life policies tend to have higher premiums than term life.
- Coverage amount: The death benefit amount selected will impact the premium. Higher coverage amounts, such as $25,000 or $50,000, will result in higher monthly costs.
- Smoker status: Because of increased risk, smokers can expect to pay higher premiums than non-smokers for funeral insurance.
- Medical underwriting: Policies that require medical exams or questionnaires may have lower premiums than guaranteed issue policies that do not require medical underwriting.
What is not covered by a funeral plan?
Funeral homes often provide a variety of services, which can be covered by a funeral plan with the funeral home. If you get a plan with a home but instead use a different provider for certain services, those service costs may not be covered by your plan.
Here are some examples of services that may not be covered if you use another provider:
- Flowers and catering
- Death certificate fees
- Sales tax for additional goods
- Placing obituaries in newspapers
- News covered of the funeral
- Police or security escorts
- Legal permits
Integrating funeral insurance with online wills
There’s comfort in knowing your loved ones are covered in the future. That’s why making your will, creating your estate plan, and looking into more ways to help look after your family after you pass away can be so important.
Funeral insurance is just one way to do this, but if you haven’t already, a solid estate plan always starts with a legal will, which you can do easily with Willful.
Start your will for free today →
Additional info: Here's a guide on what to do if a loved one has just passed away
