Cremation Insurance: What It Is, What It Costs and Whether You Need It

Short answer: Two ways to pay for a cremation ahead of time are a life insurance policy, such as a small burial (final expense) policy, and a preneed (prepaid) contract with a funeral home or cemetery. With life insurance, the Texas Department of Insurance (TDI) says the company pays “the person you name in your policy.” For prepaid funeral plans, the FTC suggests asking what happens to the money you’ve prepaid, whether you can cancel and get a full refund, and what happens if you move.

What is cremation insurance, really?

Insurance regulators describe these products in general terms. The New York Department of Financial Services describes pre-need insurance as coverage “for a small face amount, typically purchased to pay the burial expenses of the insured.” The Alaska Division of Insurance says burial policies are “also known as preneed policies” and are “marketed as a way to cover the cost of final expenses.” It lists “Cremation or embalming” among the things a burial or preneed insurance contract made directly with a funeral home may cover.

Two ways to pay ahead of time are:

1. A burial (final expense) life insurance policy. Of burial policies, the Alaska Division of Insurance notes that “Licensed insurance agents who work for a funeral home commonly sell these policies.” With life insurance, TDI says, “Your life insurance company will make payments after your death to the person you name in your policy,” and beneficiaries “can use the money to pay bills and living expenses, pay off debts, pay for college, and other things.” Learn the basics in What Is Final Expense Insurance?
2. A preneed cremation contract. An agreement with a funeral home or cemetery to arrange services, paid for in advance. The FTC notes that some state laws require the provider to put a percentage of the money “in a state-regulated trust or to purchase a life insurance policy with the death benefits assigned to the funeral home or cemetery.”

How much does cremation cost?

The National Funeral Directors Association (NFDA) put the national median cost of a funeral with cremation at $6,280 in its 2023 General Price List Study. That figure includes the funeral home’s basic services fee, use of facilities and staff for a viewing and ceremony, the cremation fee, an alternative cremation container and an urn. NFDA says the figure doesn’t include cemetery costs, a monument or marker, or cash-advance charges.

NFDA’s release doesn’t give a national figure for a direct cremation. The FTC defines direct cremation as “a disposition of human remains by cremation, without formal viewing, visitation, or ceremony with the body present,” and a funeral home that offers it must list a price range for it on its General Price List. To size coverage, get price lists from two or three local providers. For more on what drives the total, see how much a funeral costs, burial vs. cremation.

Prepaid cremation vs. a life insurance policy: what’s the difference?

For burial (preneed) insurance policies, the Alaska Division of Insurance explains the price-guarantee difference this way: “With a guaranteed policy, you are assured that funeral prices won’t change, but a non-guaranteed policy means that prices could escalate with the market.” It adds that if there’s no price guarantee, “the insured should insist on naming their own beneficiary instead of naming the funeral home as beneficiary.”

For a broader comparison of funeral-specific coverage and regular life insurance, see burial insurance vs. life insurance.

What are the risks of prepaid cremation plans?

The FTC says “Laws of individual states govern the prepayment of funeral goods and services,” and that “protections vary widely from state to state, and some state laws offer little or no effective protection.” It also points out that “over time, prices may go up and businesses may close or change ownership.”

Regulators flag cost, too. TDI says of prepaid funeral insurance, “An advantage of this insurance is that it locks in funeral costs at current prices,” but warns that “The amount you pay in premiums might end up being more than what the policy pays when you die,” and “many policies won’t pay the full cost of the funeral if you die before paying a required amount.” The Alaska Division of Insurance similarly advises: “Make sure the amount paid in will not quickly exceed the possible benefit.”

What are your rights when you arrange a cremation?

The FTC Funeral Rule applies whether you’re planning ahead or arranging a cremation after a death. The FTC says “The Rule’s requirements apply to both pre-need and at-need funeral arrangements.” Key rights for cremation:

• No casket required. “No state or local law requires the use of a casket for cremation.”
• Alternative containers. “A funeral home that offers cremations must tell you that alternative containers are available” and “must make them available.” They “might be made of unfinished wood, pressed wood, fiberboard, or cardboard.”
• No false casket claims. Funeral homes can’t say state or local law requires you to buy a casket for direct cremation, and the FTC says the Rule “prohibits crematories from requiring that a casket be purchased for direct cremation.”
• Direct cremation on the price list. A funeral home that offers direct cremation must show its price range on the General Price List, along with the alternative container disclosure.
• Prices by phone. “Funeral directors must give you price information on the telephone if you ask for it.”
• Buy only what you want. “You do not have to accept a package that may include items you do not want.”
• Bring your own urn. A funeral provider “cannot refuse to handle a casket or urn you bought online, at a local casket store, or somewhere else” or charge a fee to do it.
• No routine embalming. “No state law requires routine embalming for every death,” and the FTC says services like direct cremation don’t require any form of preservation.

Checklist: before you buy cremation coverage

1. Get local price lists for direct cremation and for a cremation with a service. Call; under the Funeral Rule, funeral directors must give you prices by phone if you ask.
2. Decide what you want covered: cremation only, a memorial service, an urn, or placement in a cemetery.
3. Check what you already have. The Alaska Division of Insurance says a burial policy may be worth considering if you have no life insurance, can’t get term life insurance, or have limited savings with no other means to pay for your funeral expenses.
4. If you’re considering a preneed contract, ask the FTC’s questions: “Can you cancel the contract and get a full refund if you change your mind?” “What happens if you move to a different area or die while away from home?” “Are you protected if the firm you dealt with goes out of business?”
5. Ask whether prices are guaranteed and get the answer in writing.
6. If you’re considering a life insurance policy, ask whether it pays the full benefit from day one. NY DFS says some senior life (graded death benefit) plans provide “only for a return of premium or minimum graded benefits if death occurs during a specified period.” Also ask whether premiums stay level for life.
7. Check the license. TDI says to “Make sure the agent and company are licensed to sell insurance,” and TDI offers an online lookup for Texas. Ask your own state’s insurance department how to check.
8. Name a beneficiary you trust and tell your family where the policy or contract is kept.
9. Write down your wishes so your family knows you chose cremation.

The bottom line

Two ways to pay for a cremation ahead of time are a life insurance policy and a prepaid contract with a funeral home or cemetery. With a life insurance policy, TDI says the company pays the person you name. With a preneed contract, state laws govern how your money is handled, and the FTC says protections “vary widely from state to state.” Either way, start with real prices from local providers and ask the questions above before you sign.

If you’d like help comparing final expense coverage sized to your cremation plans, a licensed agent can walk you through your options. Here’s how calling RestAssured works.

Frequently asked questions

Is there such a thing as cremation insurance?

Two ways to pay ahead of time are a life insurance policy, such as a small burial (final expense) policy, and a prepaid (preneed) contract with a funeral home or cemetery. The Alaska Division of Insurance says a burial or preneed insurance contract made directly with a funeral home can cover “Cremation or embalming.” For prepaid contracts, the FTC says some state laws require the funeral home or cemetery to put a percentage of the prepayment in a state-regulated trust or to buy a life insurance policy with the death benefits assigned to the funeral home or cemetery.

How much does cremation insurance cost?

It depends on the policy, so get quotes and compare them with the benefit. The Alaska Division of Insurance advises, “Make sure the amount paid in will not quickly exceed the possible benefit,” and the Texas Department of Insurance warns that with prepaid funeral insurance, “The amount you pay in premiums might end up being more than what the policy pays when you die.” To size the coverage, start with your local funeral home’s price list; NFDA’s 2023 median for a funeral with cremation was $6,280.

Do I need cremation insurance?

The Alaska Division of Insurance says you might consider a burial insurance policy if you have no life insurance coverage, can’t get term life insurance, have limited savings with no other means to pay for your funeral expenses and outstanding debts, or want a separate policy to specifically cover your final expenses.

What's the difference between prepaid cremation and life insurance for cremation?

With a prepaid (preneed) contract, you arrange and pay a funeral home or cemetery in advance, and the FTC says state laws govern how that prepayment is handled. With a life insurance policy, TDI says the insurance company pays “the person you name in your policy,” and that beneficiaries “can use the money to pay bills and living expenses, pay off debts, pay for college, and other things.”

Do you need a casket for cremation?

No. The FTC says no state or local law requires a casket for cremation, and a funeral home that offers cremation must make alternative containers available, such as unfinished wood, fiberboard or cardboard.

Sources

• NFDA: 2023 General Price List Study (released Dec. 8, 2023)
• FTC: The FTC Funeral Rule
• FTC: Planning Your Own Funeral
• FTC: Complying with the Funeral Rule
• Alaska Division of Insurance: Burial insurance
• New York Department of Financial Services: Types of life insurance policies
• Texas Department of Insurance: Life insurance guide

This article is for general education. Policy features, prices and eligibility vary by insurance company and state; your agent will explain the specific terms of any policy before you apply.