The death benefit proceeds from a life insurance policy can be used however the beneficiary wishes. Similarly, if the owner of the policy takes cash value distributions via withdrawals and/or loans, use of the cash distributions from the policy is at the owner's discretion. Just as an editorial comment -- people who purchase "final expense" life insurance policies DO intend the proceeds to be used for their burial...
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
In most cases a life insurance benefit is simply a pool of money to be used in any way the beneficary decides to. The exception would be a pre-arranged plan where the insurance plan is specific to the services. So unless previously established, life insurance proceeds do not have to be used that way.
No your life insurance can be used for any purpose your beneficiary wants to use it for. It has nothing to do with a funeral. Unless it's a preneed funeral insurance plan purchased from a funeral home.
Actually a funeral preneed life insurance policy does not have to be used for a funeral either. The funeral contract can be canceled by you at any time and the life insurance proceeds can be left to the beneficiary of your choice. If you are on Medicaid assistance it would be just like any other life insurance if you canceled the funeral contract and would be exposed to counting as an asset.
Do not confuse final expense life insurance which is just simplified underwriting whole-life insurance and preneed funeral life insurance which has other features and guarantees than most any other life insurance. They are two different things.
Life insurance proceeds can be used to pay final expenses, a mortgage and other outstanding debt. Some funeral life insurance policies are directly connected to the burial service company offering the coverage. Final expense life insurance policies, although not directed to the funeral company, are targeted to pay burial costs and final medical expenses.
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Actually a funeral preneed life insurance policy does not have to be used for a funeral either. The funeral contract can be canceled by you at any time and the life insurance proceeds can be left to the beneficiary of your choice. If you are on Medicaid assistance it would be just like any other life insurance if you canceled the funeral contract and would be exposed to counting as an asset.
Do not confuse final expense life insurance which is just simplified underwriting whole-life insurance and preneed funeral life insurance which has other features and guarantees than most any other life insurance. They are two different things.