How do funeral homes work

Funeral provisions: Less burden for relatives after a death

Funeral provisions are measures that every consumer can take to relieve relatives after their death. Funeral care can basically be done in two different ways:

Organizational precautionary possibility

With this form of funeral care, you organize during your lifetime which undertaker will take over your burial or which gardener will be responsible for looking after the grave. Common pension options are:

  • Funeral order: In this declaration of intent you state how your funeral is to be organized and whether, for example, a funeral insurance has been taken out. In this way, you relieve your relatives of the planning and administration of your funeral to a large extent.
  • Escrow account: The "organization" around the funeral is of course also associated with costs. The cost recovery takes place in turn in different ways. For example, cemetery gardening can be paid for via a trust account that is set up specifically for the purpose of tending the grave and to which relatives have no access after death.

Financial security

There are various ways in which surviving dependents can be financially protected after a death:

  • Pension contract: With a pension contract, a contract is concluded with an undertaker while you are still alive. It specifies details of the burial, such as the selection of the coffin or the grave decorations as well as the cemetery. The funeral costs are paid to the undertaker in advance under this contract. There are no further costs for the bereaved after the death of the relative.
  • Death benefit insurance: This insurance can cover the cost of the funeral. It takes effect after the death of the policyholder. In this case, the beneficiaries are the direct heirs who are responsible for the funeral.
  • Savings book: A classic form of financial funeral provision is a separate savings account that is set up for funeral expenses. The potential heirs receive extensive power of attorney so that they can use the money for the funeral before the will is opened.

Seek conversations with relatives

Death is a sensitive and serious subject that people don't like to talk about. Nevertheless, it is advisable to discuss things like your own funeral with your close relatives. In this way, you can precisely specify your wishes or ideas in advance.

On the other hand, you can inform your relatives that you have, for example, signed a pension contract with an undertaker or a death benefit insurance.

Provision at the funeral home

Consumers can conclude a so-called "provision contract" with an undertaker of their choice at any time. In this contract you can discuss all the details of your funeral with the undertaker and contractually stipulate that it will be carried out exactly according to your wishes. The specifications can include the following details:

  • Type and equipment of the coffin or urn
  • Type of burial
  • Music wishes for the funeral service
  • Type and extent of the grave decorations
  • Burial place

There are no precise specifications for the content of the contract. Ultimately, you have to agree with the undertaker on a price that he would like to receive for the imposed duties after your death.

Trust account as important security

If you conclude a pension contract with an undertaker, the money estimated for the undertaker's work will be deposited by you in an escrow account during your lifetime. On the one hand, the escrow account ensures that your relatives can only spend the money after your death as part of the funeral provision.

On the other hand, the paid-in capital is also protected in the event of the insolvency of the funeral home. If no escrow account is set up, your prepaid money will otherwise flow into the bankruptcy estate.

No advance payment to the undertaker

When concluding a pension contract with an undertaker, insist on an escrow account and do not make any prepayment or prepayment.

Legal features of pension contracts

Provisioning contracts with an undertaker have a so-called "transmortal contractual effect". This means that the contract concluded during lifetime is effective after the death of the contractor. These contracts are also binding in accordance with German funeral law.

In the case of pension contracts, objections by third parties are also not possible. In addition, the contract is not tied to death benefit insurance. In practice, this means that heirs have no influence on the funeral procedures set out in the contract.

In addition, the contract holder does not have to worry about the financing of the desired funeral in the case of a pension contract or a funeral order. However, most of them actively operate funeral provisions in advance in the form of savings accounts or death benefit insurance.

Funeral provision and social welfare law

According to Paragraph 90 of the Social Security Code XII, anyone who receives social assistance benefits must use their assets to earn a living. Funeral provisions or death benefit insurance are an exception. The assets from these contracts can only be used within the meaning of the law if, according to a ruling by the Federal Social Court on March 18, 2008, they exceed an “appropriate amount”. If the contributions are appropriate, a hardship rule applies, which means that the assets from death benefit insurance or funeral provisions do not have to be affected. The respective offices are also not allowed to terminate such contracts or request the beneficiaries to terminate them.

Leave the funeral order with the undertaker

From a legal point of view, a funeral decree is a declaration of will by a person. During his lifetime he lays down exactly what will happen to his remains after his death. A funeral directive can be part of a will.

However, it is advisable to deposit this disposition in a place that is quickly accessible to the heirs or with a notary. Because often the wills are opened only after the burial. It would then be too late to read out the ruling.

Differences to funeral provisions

With a funeral provision or funeral decree, you can regulate exactly what should happen to your corpse in the event of your death while you are still alive. You can set all the details of your funeral bindingly. The big difference between funeral provisions and funeral directives is that the disposition is a declaration of intent, but it does not contain any financial security. In this way, the declaration of intent can be expressed without the need for appropriate insurance or a savings account.

Funeral provision, on the other hand, provides that surviving dependents are not only released from administrative tasks, but are also financially secured through appropriate provision contracts or insurance.

In contrast to the pension contract, which is concluded with an undertaker and deposited there, the funeral order can also be deposited with a notary. In this case, additional notary costs for the disposition must be taken into account.

Of course, a funeral decree can be deposited and at the same time the funeral can be financially secured with appropriate insurance contracts or savings accounts. For example, the funeral decree can also contain a reference to any existing pension or insurance contracts.

Formal aspects of a funeral order

There are no special formal requirements for the design of a funeral decision. Both the handwritten form and a printed order, which has been certified by the family doctor or a notary, for example, are possible. It is also possible to deposit the decision with a web service provider.

It is important that the exact will of the author emerges from the disposition and that he wrote the document without the influence of external pressure and with the full strength of his intellectual abilities.

This can be recorded in a funeral decree

A funeral order can be very extensive, depending on how many details are recorded there.

Central elements of the funeral order are:

  • Place of creation and the date
  • Author's signature
  • Name, address and date of birth of the author
  • Information on the desired location and the desired type of burial
  • clear heading, for example "funeral order"

Further possible details:

  • Notes on the type of funeral service
  • Reference to any insurance or accounts that can be used for the funeral
  • Information on the extent of the burial
  • Notes on the mourners
  • Information on possible decision-makers in the event of a funeral
  • References to important documents for the funeral such as wills, family records or insurance policies
  • Information on a desired grave site
  • Wishes for the music and the design of the funeral service

Other dispositions you can make before you die

  • Cremation order: If a cremation order is deposited, you can express your will in it that you want a cremation. This decree can be part of the funeral decree.
  • Burial order at sea: With this declaration of intent you wish to have a burial at sea. Such a decree can also be part of a funeral decree.

Take out funeral insurance

With a funeral insurance, the costs in the event of a funeral can be covered by the insurance. These insurances are often offered by health insurers as additional coverage. However, there are also separate policies.

The funeral insurance takes effect in the event of the death of the policyholder and pays a contractually agreed sum to the surviving dependents. This money can be used to pay for the funeral. Funeral insurance therefore works in a similar way to term life insurance.

Benefits of funeral insurance

If funeral insurance is taken out, the insurance cover applies immediately or after a certain waiting period. The waiting times can be between six months and five years, depending on the provider. In the event of a claim, however, it does not matter how long the policyholder has paid into the policy. In any case, the insurance will cover the agreed costs.

It is also customary for policyholders to continue to be insured free of charge from a certain age. With some policies, this is the case from the age of 70. When the non-contributory phase begins also depends on when you started the funeral insurance.

You can cover this with funeral insurance

  • Type of funeral service
  • Type of tombstone
  • Type of coffin
  • Type of burial

Policies with or without health check possible

In order to get funeral insurance, you will usually have to answer health questions. On this basis, the insurer calculates the risk and the possible contributions. However, you can also take out appropriate insurance without any health issues.

In this case, however, you have to expect higher tariffs and longer waiting times. Tariffs without waiting are also possible. In these cases, however, higher costs are usually possible.

Funeral insurance can usually be canceled at any time. In this case, however, you must expect a reduced surrender value.

Often the maximum age to start with funeral insurance

Note that funeral insurance with insurers is usually linked to a maximum entry age.

Take out death benefit insurance

Another variant of funeral provision is the conclusion of a death benefit insurance. This policy works like a capital life insurance in a smaller version.

The policyholder pays a small amount into the policy every month. In the event of death, the sum insured is then paid out to the surviving dependents. This policy does not provide for any special funeral provisions. It only consists of a lump-sum payment. Most insurance companies offer death benefit insurance. They have their forerunners in the so-called “death funds”, which have been used by consumers for many decades.

It is still possible to take out death benefit insurance into old age. However, policyholders then have to accept higher premiums.

Funeral vs. death benefit insurance

Funeral insurance and death benefit insurance have in common that they work like life insurance. In the event of death, a fixed sum insured is paid out to the surviving dependents under both policies.

In contrast to death benefit insurance, funeral insurance is usually a health insurance benefit. Death benefit insurance is a separate policy.

While death benefit insurance only provides for a lump sum, funeral insurance can specifically be linked to cash benefits for certain aspects of the funeral, such as the coffin or the funeral service.

Advantages and disadvantages of death benefit insurance

  • Immediate insurance coverage possible
  • Tariffs possible without waiting
  • Protection of specific cost items after death
  • Small monthly payments with early entry
  • Contributions are tax deductible
  • Usually not attachable by the social welfare office
  • Cancel anytime
  • Use mostly tied to a specific purpose

Advantages and disadvantages of funeral insurance

  • Insurance can be taken out well into old age
  • Tariffs possible without waiting
  • Small monthly payments with early entry
  • Contributions are tax deductible
  • High costs when signing a contract in old age
  • Capital does not have to be used for the funeral
  • Ordinary early termination is not usually possible