What is Burial Insurance?
‘Burial insurance’ and ‘funeral insurance’ are other names for ‘final expense’ insurance. Final expense insurance is a form of whole life insurance that has a low face value, issuing a death benefit ranging from $1,000-$50,000 with the intention of covering funeral expenses - be it for a full-service burial or a more simple cremation. However, beneficiaries can use the death benefit for any purpose.
Final expense insurance is often marketed to seniors since the smaller death benefit makes the monthly premiums more affordable. The policy, unlike a term-life insurance policy which has a distinct end date, is permanent. That means your premium will not change over time and no matter when you die, your heirs will get the death benefit you want them to have, so long as you’ve paid your premiums.
How to Qualify For Burial Insurance
Burial insurance does not require rigorous health screenings so seniors with varying degrees of health can still qualify. The application process may only include a questionnaire and prescription history at most, not a medical exam, as is typical with standard life insurance policies.
According to Investopedia, “as with any type of life insurance, the premiums for final expense insurance depend on your age and health; where allowed by state law, they may also depend on your gender. The older and less healthy you are, the higher your rates will be for a given amount of insurance. Men tend to pay higher rates than women because of their shorter average life expectancy. And, depending on the insurer, you may qualify for a lower rate if you do not use tobacco.”
Guaranteed Issue Life Insurance
A special type of final expense insurance is called "Guaranteed Issue" (GI). These policies do not require medical questions, an exam, or medical records and may be the only policy available to those with poor health. As such, guaranteed-issue policies typically have higher monthly premiums as well as a two to three year waiting period before benefits will be paid.
Thus, if the insured dies during the waiting period, the beneficiaries will not receive the policy’s death benefit. They will, however, receive a return of the premiums the policyholder paid—plus interest, usually at an annual rate of 10%.
Do You Need Burial Insurance?
There are some valid reasons to consider a smaller face-value life insurance product, like burial insurance, to cover funeral expenses. However, for some people, it’s not necessary.
For instance, if you already have a life insurance policy that you purchased on your own or that you receive from your employer, there is likely enough death benefit to cover your funeral expenses. There is no need for a policy just for your funeral expenses.
Another example when burial insurance is not necessary is if you would like a simple burial or cremation. A direct cremation, the simplest of cremations, can often be purchased for only $1,000-$1,500. In many states, you can even find it for less than $1,000. HINT: Find prices for Cremations and Burials in Funerals360’s Vendor Marketplace. Upgrade to a Premium Membership to create custom funeral cost comparisons and to get assistance with gathering prices in new areas.
We would argue that in these instances, you may be better off simply setting aside the funds in a Payable On Death (POD) bank account. If you are diligent with setting aside $100 per month, you can have enough to cover cremation costs in as little as one year. With a POD account, your family can immediately access those funds and does not need to submit a claim to an insurance company, making it even easier to pay for funeral expenses.
However, if you prefer a more elaborate send-off, don’t have an existing life insurance policy, and are worried about the expense for your family, and don't qualify medically for a standard life insurance policy, a final expense policy could be a good solution for paying for those expenses.
A Few Tips When Shopping for Burial Insurance
Be sure to shop around. Use Funerals360’s Burial Insurance Quoter to compare policies and providers. Find the quoter on all Blog Pages and Vendor Profiles.
Consider a regular life insurance policy if you are younger and healthier and don’t mind the medical exams. It will be less expensive and provide coverage beyond funeral expenses.
Work with a trusted agent who represents a number of different carriers and products and can advise you on the differences between the products to find one that is right for you.
If you would like even more information on Final Expense or Burial Insurance, check out this article from Investopedia.