If you've ever considered purchasing "pre-need" funeral insurance, think again.

Pre-need arrangements are typically made with mortuaries, cemeteries, and/or insurance companies, and more and more people are making them. The benefit of such plans is that when you move on to the great beyond, your loved ones won't have many arrangements to make. They'll be able to focus mainly on mourning, because plots will have been chosen and paid for, as will the funeral and burial. That's all very good.

The downside, and a reason to think twice before plunking down pre-need money, is that it tends to be a lot of money. And that pile of money will be out of your hands and earning interest -- for the people you paid.

Let's say you're 75 and you pay $5,000 for a cemetery plot and $10,000 to a funeral home to cover your casket and various services. That's well and good, but what if you're blessed and live another 20 years? You've lost the benefit of that $15,000 for a long time. If you'd invested it and earned 8% per year on it, you'd have $74,000! That would probably be enough to cover death expenses and would leave some shekels to your loved ones, as well. Another consideration is that you might actually need that $15,000 at some point before you die.

In an informative article, Nancy Dunnan warns us to be careful, because:

  • Pre-need plans are often nonrefundable.

  • Plans are often nontransferable, meaning you cannot change your mind or switch mortuaries.

  • Plans often have hidden fees, meaning your survivors could wind up paying even more when you die.

  • Plans can be mishandled.

Click into the article above for more details. Also useful are these sites: Funeral Consumers Alliance, Profits of Death, and the long but informative Funerals and Ripoffs.

And before you consider pre-need funeral insurance, make sure you have the coverage you really need, such as life insurance if people are relying on you and your paycheck. To see what you need, and how to get the best deal, visit The Motley Fool Insurance Center.