Burial insurance is a specific type of whole life coverage that provides a relatively low death benefit of $5,000 to $25,000 on average. Also known as funeral insurance, this type of coverage is designed to pay for final expenses to spare loved ones the financial burden of a funeral.
This type of insurance is often marketed to seniors who want to ensure loved ones are not left paying hefty funeral expenses. Most people can qualify for burial coverage, even with health problems, because no medical exam is required. While it is possible to be denied coverage, this is uncommon and only occurs due to specific issues like a cancer diagnosis.
Burial coverage may be sold by insurance companies or funeral homes as part of pre-need packages with custom plans to choose funeral details. Choosing coverage through a funeral home may come with benefits like a locked-in rate for a funeral, but there may be many exceptions to coverage and it may not be possible to get a refund or take the coverage to another funeral home. Purchasing funeral insurance through an insurer means coverage can be taken to any funeral home or paid directly to beneficiaries.
You Can Create Your Own Burial Insurance
There are many ways to ensure loved ones have money on hand to pay for final expenses. While burial coverage may be a good option if you do not have the money upfront to pre-pay a funeral, there are still options that allow you to pay these expenses yourself over time.
A regular term or whole life insurance policy typically offers a higher death benefit with fewer restrictions if you qualify. Premiums for a term life policy also tend to be much lower than burial coverage. Most people can get $50,000 in life coverage for less than the cost of $10,000 in burial coverage due to the underwriting process. This type of policy can be used as funeral insurance by choosing an amount that will at least cover final expenses. The beneficiary can be a family member or the funeral home.
Another option is purchasing a pre-need policy from a funeral home. This is a type of whole life policy with coverage that corresponds with the cost of the funeral arrangements of your choosing. Many funeral homes will also lock in the price when you buy a policy. Pre-need policy premiums can usually be paid all at once or over time.
You Can Pre-Pay Funeral Expenses Instead of Buying Burial Insurance
It’s possible to pre-pay for a funeral. The money can be held in a trust established by the funeral home and it will be immediately available to pay final costs. Another option is an arrangement in which the funeral home purchases an insurance policy naming itself as the beneficiary.
The downside to this option is a detailed contract is important to determine when the contract can be canceled, how and if refunds are made, where prices are guaranteed, and whether the contract can be transferred to a different provider. The upside is custom plans are available to choose every detail of your funeral. If you choose a prepaid funeral, make sure loved ones know about your plans and that your funeral has already been paid for, at least partially.
Discuss Your Plans with Family and Loved Ones
Don’t assume that loved ones will be automatically notified of your policy benefits. While no one enjoys the difficult subject of their own death, it’s an important conversation to have to ensure loved ones know your funeral wishes and any policies you have purchased. Don’t make the mistake of making your wishes known in your will or documents in a safety deposit box. While your loved ones will likely find these documents, it will probably be months after the funeral.
The best way to make sure loved ones have access to your policy benefits is providing copies of your policy documents or a document stating the policy number, insurer, and benefit amount that is kept somewhere loved ones will find it quickly.
Burial Insurance for Seniors
Funeral coverage is a popular option for seniors because coverage is guaranteed with no medical exam. Premiums for this type of insurance also tend to be affordable, even for seniors in their 70s and 80s. While healthy, younger people can qualify for a better deal through a fully underwritten life product, this type of coverage may also be the only insurance product available for seniors to ensure loved ones aren’t paying for final expenses.
Many burial coverage providers specialize in policies for older adults, although there is usually an age restriction of 80 to 85. Most older adults benefit from a graded benefit policy which includes a 24-month waiting period before the policy’s full face amount is in force. If death occurs during the waiting period, carriers typically return premiums paid plus interest to beneficiaries.
Average Costs for Burial Insurance
Most final expense policies offer a benefit of $5,000 to $25,000, but some companies do offer policies with up to $50,000 in benefits. As with other forms of insurance, your health and age when you buy the policy dictate how much you will pay. Because final expense insurance offers guaranteed approval without a medical exam, the cost tends to be higher than with a standard life policy.
A 50-year-old female may have premiums around $24 to $30 per month for $10,000 in coverage while a man of the same age may pay $29 to $40. By the age of 60, monthly premiums can range from $40 to $60. Seniors who are 70 or older may pay premiums of $50 to $90 per month for the same amount of coverage. These are only average costs, however; your premiums may be much lower or much higher.
Advantages of Burial Insurance
There are many potential advantages to funeral insurance compared to other options. One primary benefit is the fact that coverage is guaranteed with no medical exam necessary. Because you do not need to qualify with a medical exam, you can get funeral coverage regardless of your current health.
If you choose a policy through a funeral home, you can also choose the details of your funeral to ensure you get the exact amount of coverage loved ones will need for your chosen funeral type.
Burial coverage will ensure that loved ones have money to pay for or offset the cost of a funeral, which may also include a headstone, casket, grave liner, and services.
Differences Between Burial and Life Insurance
Burial coverage is a type of whole life policy, although there are several important differences between these two forms of coverage. A burial policy is designed to pay only final expenses, whereas a life policy offers a specific death benefit that can be used for any purpose. Loved ones do not receive a lump sum of money with burial coverage and there are strict rules on how the money can be used.
Another key difference is burial coverage is very easy to get with no medical exam and guaranteed acceptance. This is one of the benefits of this type of insurance as you are guaranteed coverage even if you are considered high-risk and can’t qualify for a whole or term life policy.