The Ultimate Guide To Funeral Insurance In Canada
By Anna Sylvia | Published on 29 Jun 2023
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People often say there are only two sure things in life-death and taxes. When facing inevitable things, planning can be your best friend. While no one likes to discuss their mortality, one thing you can do to help your loved ones is to plan for it.
The funeral arrangements and costs associated with your passing can overwhelm your loved ones who will be grieving. This guide looks at ways to prepare for your end-of-life expenses, including funeral insurance, prepaid funerals, and life insurance. We’ll also look at government support available to help cover the costs of your funeral or celebration of life.
Why Would I Need Funeral Insurance?
Funeral insurance is an insurance life product tailored explicitly for handling end-of-life expenses. The standout advantage of funeral insurance is its swift payout. This speed eases the pressure on those who stand to inherit, as they’re saved from personally fronting funeral expenses while they wait for the disbursement of traditional life insurance.
Not everyone qualifies for traditional life insurance, especially as one ages or if certain health conditions are present. In these cases, funeral insurance can be a more accessible and practical option. Even if you have a condition that shortens your life expectancy, you can still secure funeral insurance. This policy ensures that your loved ones won’t bear the financial responsibility of your funeral costs, providing them with much-needed financial relief during a difficult time.
While funeral life insurance could be a good fit for your needs, a traditional life insurance policy or a prepaid funeral package might be better, depending on your circumstances. Before making a decision, define your goals and assess your financial situation. Doing this will help you make the best decision for your final expenses.
How funeral insurance work in Canada?
You might be wondering what funeral insurance in Canada is and what it’s for. Funeral insurance aims to provide funds to cover your funeral and end-of-life expenses. Funeral insurance is sometimes called final expense, burial, or end-of-life insurance.
It can cover medical expenses and the cost of your funeral, cremation or burial. When you pass away, funeral insurance pays the policy’s value as a lump sum to your beneficiary or the funeral home.
There are two common types of policies you can get for funeral insurance. The first is a simplified issue life insurance, and the other is a guaranteed issue life insurance. Neither policy requires a medical exam.
Simplified issue funeral life insurance
Simplified issue life insurance will ask you to answer some medical questions and questions about your lifestyle. Your answers to these questions will form the basis of their approval or denial of your policy. The insurer can deny your coverage if they determine you are too great a risk.
Most simplified issue life insurance policies don’t pay a benefit if the policy hasn’t been in place for at least two years. Instead, it will refund the premiums paid.
Guaranteed issue funeral life insurance
Guaranteed issue life insurance offers guaranteed approval. There are no health or lifestyle questions. People who are elderly or have serious illnesses may opt for these policies because approval is guaranteed.
However, because the insurance company is taking a more significant risk without knowing about your health or lifestyle, the premiums are higher than a simplified issue life insurance policy, but the death benefit is lower.
Like simplified issue life insurance, guaranteed issue life insurance does not pay a benefit if you pass away within two years of taking the policy. The insurer will refund the premiums instead.
How much funeral insurance should I get?
Funeral insurance policies typically have limits ranging from $5,000-$50,000. The amount you choose will depend on two factors. The first is the amount of premiums you feel comfortable paying. Most funeral insurance is life-long, so you will pay premiums until you pass away.
The second is how much you want to spend on your funeral. Pre-planning your funeral with a funeral home will give you an idea of how much your loved ones can expect to pay for the type of funeral you want.
Some expenses are a casket or urn, a burial plot or cremation, a visitation, a headstone, and transportation to the funeral home. You can factor in additional items like the cost of food, music, funeral bulletins, flowers and an officiant. You can also include any end-of-life expenses you anticipate, such as medical expenses.
Who gets the money from the policy?
Most policies will pay the proceeds to a designated beneficiary. The person receiving the funds will use the money to pay your funeral expenses. Other policies will pay the funeral home directly. Having the funds go to the funeral home can make it easier for your family by removing the stress of paying bills when they are grieving.
How is the money paid out?
In most cases, the money is paid out to a beneficiary or to the Executor who is handling your estate. They, in turn, will use the funds to pay for the funeral and any medical costs that remain when you pass away.
The proceeds may also be paid directly to the funeral home. Having the money go to the funeral home can help reduce the stress of your loved ones because they won’t have to worry about paying the funeral bills.
Where do I buy funeral insurance in Canada?
Several insurance companies provide funeral insurance in Canada. You can talk to your agent or a broker or purchase it from a direct insurer online.
The price of your policy depends on your age, gender, and if you’re a smoker. A young female non-smoker will have a lower premium than an older male smoker. The cost of your policy will vary between companies. To get the best price, it’s essential to comparison shop for your funeral insurance. Using a site like Insurdinary will help you get a few competitive quotes in a few click.
Funeral Life Insurance Alternatives in Canada
In the landscape of end-of-life financial planning in Canada, funeral life insurance is one of several options to consider. However, depending on your personal circumstances and financial goals, you might find that alternatives such as traditional life insurance policies or prepaid funeral packages offer a better fit. Let’s explore these different options and how they can effectively address your final expenses.
Savings or investments to pay for your funeral
Your beneficiaries can use the money in your estate to pay for your funeral expenses. Using your savings or investments can cause issues for your heirs because settling an estate and distributing the funds will often take over a year. Someone will need to pay for the funeral services in the meantime.
Life insurance proceeds
If you have a life insurance policy, your estate or beneficiaries can use the proceeds to pay for your funeral or celebration of life. Life insurance policies are usually paid out reasonably quickly unless the insurer has a reason to investigate or deny the claim.
| Funeral Insurance | Life insurance |
| No medical exam required | Medical exams are required in most cases |
| The maximum payout amount is usually $50,000 | The maximum payout can be $1,000,000 or more |
| The money is to pay for funeral expenses | Money is for beneficiaries to use as they wish, so you may need to increase your policy to cover end-of-life expenses |
| Premiums can be higher than life insurance for the same amount | Premiums can be lower than funeral insurance for the same amount |
| Easy to qualify | It can be more challenging to qualify |
Prepaid funeral
Another option is to prepay your funeral. Funeral homes offer services you can purchase in advance. There are several benefits to prepaying your funeral. First, it takes the stress off of your loved ones. They won’t have to make decisions while they are grieving.
Next, prepaying your funeral locks in your costs at today’s prices, protecting you against inflation. In addition, you can choose to pay for it in a lump sum, or many funeral homes offer payment plans.
Finally, your family won’t struggle to find the funds to cover your funeral. This is important because funeral homes usually want immediate payment.
Prepaid funerals cover most but not necessarily all expenses. Your prepaid funeral may not cover the entire cost of items such as food, flowers, an officiant, or other things if they increase in price. This is because the funeral home has no control over external costs.
| Funeral Insurance | Prepaid funeral |
| Easy to qualify for | No need to qualify |
| Premiums are ongoing until you cancel the policy or pass away | A prepaid funeral can be paid in full or in installments. There are no more payments after you pay it off |
| Policy proceeds can cover extra expenses such as music, flowers, and food | Prepaid funerals may not cover the total cost of extras such as music, food, and flowers |
| The risk that if costs increase, your policy won’t cover all your expenses | You lock in the prices at the time you buy your prepaid funeral, which protects you against inflation except for external items the funeral home can’t control |
| Allows your funeral or celebration of life to be held anywhere | A prepaid funeral may limit you to a specific funeral home |
Does the Government in Canada Help With Funeral Costs?
The government does help with funeral costs in Canada. The federal government offers a death benefit through the Canada Pension Plan (CPP), and each province and territory provides assistance as well.
Canada Pension Plan death benefit
If you have paid into the Canada Pension Plan, you could be entitled to a $2500 death benefit when you pass away. The CPP death benefit is paid to your estate to offset end-of-life expenses.
To be eligible for the CPP death benefit, you must have paid into the CPP for at least 10 calendar years or “one-third of the calendar years in their contributory period for the base CPP, but no less than 3 calendar years.” The CPP death benefit is not income tested. You will receive it as long as you meet the criteria.
Provincial assistance with funeral expenses
Each province and territory offers assistance to low-income individuals to help with funeral expenses. They have their own specific criteria to determine who can receive assistance with funeral expenses. Also, the amounts vary between the provinces and territories.
| Province | Amount |
Alberta | $4000 maximum for cremation and remains not placed in a cemetery-$6000 maximum if remains buried or cremated and placed in a cemetery |
| British Columbia | Up to $2300 for various services |
| Manitoba | It depends on the financial resources of the deceased and the types of services provided |
| New Brunswick | Amount based on the financial situation of the deceased and the family of the deceased |
| Newfoundland | A maximum of $2338 plus additional for extra expenses |
| Northwest Territories | Eligible expenses subject to approval |
| Nova Scotia | Up to $3800 plus taxes |
| Nunavut | Benefits for age 60 or older to cover specified funeral services |
| Ontario | $2250, but the caseworker has the discretion to increase the amount |
| Prince Edward Island | Up to a maximum of $6000 |
| Quebec | Maximum of $2500 |
| Saskatchewan | $2100, according to the SIS policy manual of 2020 |
| Yukon | Funeral and burial costs up to $3500; repatriating the deceased up to $6000 |
Contact your provincial government or local municipality to find out if you qualify for assistance if you pass away.
FAQs About Funeral Insurance In Canada
Life insurance does not cover funeral costs directly. The proceeds of the policy will go to your beneficiaries or your estate. The beneficiaries of your policy or executor of your estate will decide whether or not to use the life insurance funds to pay for your funeral costs.
If a person is killed in a car accident, car insurance can pay for some funeral expenses. In Ontario, for example, up to $6,000 in funeral expenses could be covered for a person killed in a car accident. The Ontario Statutory Accident Benefits (SABS) provides details on this.
Funeral insurance is a policy to cover the cost of your funeral or celebration of life. You choose the amount based on how much you want to spend on your funeral. Policies usually range from $5,000-$50,000. When you pass away, the policy proceeds are either paid to the beneficiary to cover the cost of your funeral or directly to the funeral home.
Like most things, the costs will vary depending on what you or your loved ones want. The average cost of a cremation in Canada is between $2,000-$5,000, while a burial costs between $5,000-$10,000 on average. These averages typically don’t include extra charges like an urn, burial plot, or headstone.
Funeral insurance is a niche product that accomplishes a specific goal. It can be an excellent tool for making sure your end-of-life expenses are paid while your other assets go to the people and causes you value. The funeral home is paid immediately, so your loved ones don’t have to worry.
While premiums can be higher and payouts lower than life insurance policies, funeral insurance can be a solid option for some. Seniors, people who are ill, or people who don’t want to purchase a life insurance policy but want money available to pay for their funeral can benefit from funeral insurance.
You will need to contact the insurer regarding this, but in most cases, you can get life insurance for someone else. The insured must acknowledge they are aware of the policy. Examples are a spouse that provides the income you need or a key business partner.
It depends on the funeral home, so discussing payment arrangements with the service provider is important. Some may want full payment immediately. Others will take a deposit and allow 30 days (or possibly longer) for the rest. They may send your account to collections if the funeral home is not fully paid by the due date.
Like most things, the costs will vary depending on what you or your loved ones want. A cremation in Canada costs between $2,000-$5,000, while a burial costs $5,000-$10,000 on average. These averages typically don’t include extra charges like an urn, burial plot, or headstone.
