Burial Insurance: Everything You Need to Know

If you have an elderly loved one, you may be considering burial insurance. This is a type of life insurance that specifically covers final expenses. A 2020 report on life insurance policyholders found that 84% of those that buy life insurance, do so to cover end-of-life expenses. Considering that the majority of people who have life insurance use it to pay for funeral expenses, it’s no wonder that burial insurance – which is a type of life insurance or can be included in life insurance policies – can be a great option. This article hopes to present you with all the necessary information about burial insurance and how it can help seniors and their families. 

The main aspect of burial insurance that differentiates it from other types is that burial insurance is sold in small amounts ($5,000, $25,000 or similar). Burial insurance is usually not for people who are raising families or need loans for mortgage, college tuition, or other similar issues. Instead, burial insurance is for older customers and their families who will eventually need assistance paying for a funeral. Burial insurance is also perfect for those families that are on a tight budget and have elderly loved ones, whose funeral expenses they need to take care of. In addition, those that don’t have preexisting life insurance or savings may want to consider burial insurance. 

What is burial insurance?

As mentioned before, burial insurance is a type of whole life insurance policy that usually stands in the range between $2,000 to $40,000 and provides death benefits. You and your elderly loved one may consider such a policy in order to pay for burial and other end-of-life costs. 

How do you apply for burial insurance?

Burial insurance is sometimes also called final expense insurance and the application process is quite simple. Medical exams are not required. All applicants need to do is answer a questionnaire on health-related topics. The questionnaire could include questions about the applicant’s living situation (whether or not they currently live in a nursing home) and their pre-existing health conditions (if they have HIV). It’s important to remember, however, that though these questions are simple, saying yes to any of them could disqualify applicants from obtaining the insurance. For some, serious health issues can be a reason for disqualification. In addition, since applying for burial insurance is not necessary, rates are based on age and gender. 

Another disadvantage of the simple application process is that applicants will usually receive policies where death benefits are graded. Different kinds of death are covered in varying ways. For example, accidental deaths are usually covered in full but other kinds of death sometimes mean that only your premiums will be refunded or a small amount of the policy coverage will be given to the beneficiaries. 

What is important to note before buying burial insurance?

There are some details that customers often overlook. Here are some aspects of burial insurance you should remember before making the decision to purchase it:

1. Burial insurance builds cash value that you can later borrow from
2. It is guaranteed that the policy will not expire
3. It is also guaranteed that the coverage will not decrease
4. Rates  – in general – are set and will not change
5. You can name a person or a funderal home as your beneficiary
6. Death benefits will be paid to whoever you designate through tax-free checks.

Another important aspect of the insurance policy is that once the benefits are paid out, the insurance company does not have any say in how that money is spent. You can use death benefits for funeral expenses, debts, medical costs, or anything else beneficiaries find appropriate. 

How much do funerals cost?

According to the National Funeral Directors Association, in 2019, the average cost of a funeral in the United States that includes a burial and viewing was between $7,640. This cost does not include vault or cemetery costs which can bring up the total price to $9,135. 

If instead of burial, customers choose cremation, then caskets and urns can cost $6,645 in total. There are many expenses not included in these prices, so it’s important to consider things like flowers or obituaries before making your purchase. 

What does burial insurance cover?

You probably already have a good idea of what exactly burial insurance can cover. Most individuals use burial insurance to pay for final arrangements, caskets or urns,  burials or cremations, and memorial services of their choice. If there is any money leftover from the death benefits, it is left with beneficiaries who may want to pay other expenses such as bills, loans, and anything else that was left behind. 

What other approaches are similar to burial insurance?

There are other programs and arrangements that are similar to burial insurance. For example, you may also consider pre-payment for funeral expenses and related events. This arrangement allows customers to choose all aspects of the funeral – type of service, casket, funeral home, headstone, burial plot, costs related to the grave, flowers, etc.  – and pay in advance for these, effectively setting the prices early. 

How is burial insurance different from pre-need funeral insurance?

Though they are often used interchangeably, pre-need funeral insurance and burial insurance are two different products. If burial insurance pays out the death benefits directly to the beneficiary, pre-need funeral insurance requires that you have your funeral details arranged and covers these costs directly. So, if you wish for your policy to be flexible, burial insurance is the better option. 

Burial insurance is most commonly purchased from an insurance company. If necessary – due to a move across state lines – beneficiaries can pay for all expenses in a different city or state. Beneficiaries can also spend the payout in any way they choose to since it is given to them directly. 

If you would rather purchase pre-need funeral insurance, you can do so from a funeral home. This means that all final expenses are arranged in advance and paid for ahead of time. This also means that changes are difficult to make, if the need arises later on. You may also need to avoid moving to a different city or state. 

How much does burial insurance cost?

With burial insurance, the premiums are payable on either a weekly or monthly basis. These premiums can be very low – $2 – $3 per week – and the death benefit is whatever the premium manages to buy, depending on the age of the insured. The same premium will lead to a lower amount in death benefits as the age of the insured increases. In addition, entire families or individuals can have coverage under one burial policy. 

In most cases, social security will also pay $225 to those surviving spouses that live with the insured person. If the insured person does not have a surviving spouse, then children will be paid instead. The exact costs will vary depending on the needs of the person purchasing insurance, their age, gender, and health. 

Pros and cons of burial insurance

Like with any other insurance policy, there are benefits and disadvantages to burial insurance. If you are in the process of deciding whether or not burial insurance is right for you, here are some pros and cons to consider.

The benefits of burial insurance include the fact that health exams are not required, the application process is simple, and certain policy types ensure that applicants cannot be turned down. Unfortunately, since no health exam is required, there are no discounted rates for good health, costs can be high depending on what kind of policy you need, and there are graded death benefits that disadvantage those who pass away within several years of buying the policy. 

Best burial insurance plans

Here are several companies that we suggest you research if you’re in the market for a burial insurance policy:

1. Baltimore Life
2. Liberty Bankers Life
3. Transamerica
4. Foresters Financial
5. Royal Neighbors of America
6. AIG
7. Prosperity Life
8. Americo
9. American Amicable
10. Aetna

How to choose burial insurance

If you are wondering about how to choose burial insurance, we recommend that you research and reach out to several providers with questions specific to your situation and needs. Make sure that you contact different funeral homes and find out how much the funeral expenses are going to add up to, so that you know what sort of policy you need. 

When speaking to the funeral home, think about whether or not your policy needs to cover transport to the cemetery, what the cost of casket or urn is, how long you can use the funeral home facilities, and how many guests you can have at the facility. Think about what sort of funeral service you wish to have for your elderly loved one and if the funeral home can accommodate your needs. 

Conclusion

Burial insurance is a pretty simple concept and if you think your family needs urgent help for covering funeral and end-of-life expenses, it can be a good choice. We hope that this article has helped you understand your options and will make the process of paying for funeral expenses much easier. 

Source:

1. Health Insurance in the United States, Economic History Association, www.eh.net