Does Life Insurance Have To Be Used To Pay For A Funeral? 
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 . 