Burial Insurance Guide: How Does It Work?
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It is natural not to want to think about or plan for our final days. We have so much to live for and that we plan during our time on this Earth. Most families struggle with day-to-day life expenses never mind planning and paying for a death. Some folks can afford the additional costs of having a life insurance policy but a whole life plan can come with costly premiums. Another way families cover their final expenses is through a dedicated burial insurance policy. Is burial insurance worth it? We will look over the average costs of funerals and determine if burial insurance is best for what you need.
How Does Burial Insurance Work & What is It?
What is burial insurance? Burial insurance refers to a type of whole life insurance policy with a low death benefit. This benefit usually ranges from $3,000 up to $25,000 depending on how much the monthly premium is. People and families buy burial insurance plans in order to provide money and protection for funeral or burial costs.
Burial policies are designed to cover one person or an entire family’s final expense needs. The death benefit payment is directly paid to any beneficiaries upon the time of death or death confirmation with the insurance company. If arrangements are made prior, one could also set up a funeral home as the beneficiary so they get the funds immediately.
Coverage and Cost of Burial Insurance
What is covered under burial insurance? Having burial insurance allows you to cover any funeral and burial expenses. This could go towards the ceremony, wake, burial, or cremation. Burial insurance also covers the cost of a headstone, a plot in your cemetery of choice, and an urn should you need one for cremains. Like all other life insurance policies, the pay to beneficiaries is only granted after death. That means all medical expenses like medications, hospice care, and all end-of-life costs will not be covered before death.
Beneficiaries get the money you have been paying upon death. This person will have full control over the funds and can use them for whatever they wish. It is important to discuss with your beneficiaries before you pass what the funds should be used for. Because it can be used for anything after your death, it can go towards your funeral arrangements but also towards a mortgage, outstanding debts, or be donated to charity. They would not be legally obligated to use the fund strictly for its purposes so it is best to set expectations of what the funds are to be used for.
Types of Burial Insurance
Typical of other life insurance policies you will be asked general health and medical questions in other to determine the type of burial insurance plans you are eligible for. There is no medical exam so you are expected to answer honestly as they do verify your answers with medical records.
Simplified Issue
When you fill out the health questionnaire for burial insurance you typically know within minutes if you are accepted or not. The questions are designed specifically for determining what level of coverage you are eligible for, so the process is rather quick and efficient. Burial insurance companies will go through third-party sources to verify your information in order to determine if you belong under a simple issue policy.
Guaranteed Issue
Just as the name suggests, “Guaranteed Issue” burial insurance programs are guaranteed for everyone. Seniors who are accepted into this policy type either have health issues as indicated by the medical exam or have elected not to participate in the exam. While you cannot be denied, Guaranteed Issue Burial Insurance Plans often have a graded death benefit. Having a graded death benefit means that the face amount of the policy slowly goes up over time.
An example would be that during the life of your graded policy should you pass within the first year of the policy you are only entitled to 30% of the death benefit. In the second year, it would increase to 70% of the death benefit. In the final year and years afterward a person with this burial insurance plan would be entitled to their full death benefit amount. This does not apply, however, should you pass accidentally like in a car accident. You will get the full death benefit immediately.
Funeral and Burial Costs
Planning for a funeral is an expensive and stressful endeavor. The price for funerals has been increasing yearly, with the national average cost being roughly $8,000. Trying to be budget conscious while mourning a loved one is a difficult task. Even less expensive alternatives like cremation and tree pod burials will still cost in the thousands. A funeral cost calculator can help you to determine how much you need for a funeral and how you can determine the impact it will be on your wallet.
Pros and Cons ofa Burial Insurance Program
Pros
Guaranteed Coverage
Burial insurance plans are often guaranteed to mean that you cannot be denied coverage for health reasons. This makes it easier for seniors with pre existing conditions or other health issues to find coverage.
No Medical Exam
There are no medical health exams to get in the way of finding the perfect coverage for what you need. Simply answer a health questionnaire and you will know if you are accepted within a matter of days.
Protect Loved One’s
If you or a loved one is getting older and you worry about being able to afford a proper funeral to celebrate life, a burial insurance program is the best fit for your needs. You may not have other means or savings in order to pay for a funeral. It is an ideal option for those in need of coverage who are low on funds and have poor health.
Cons
Low Death Benefit Amount
Compared to other life insurance policies, the face amount you get is relatively low. The most you may get out of any burial insurance plan is $25,000. It is more than enough for a burial or funeral but may not be enough to cover other final expenses.
Graded Policy Plans
With guaranteed acceptance plans come higher premium amounts for a smaller death benefit. Not only that but you will be subjected to a waiting period before you get the full death benefit that you are entitled to.
Is Burial Insurance Worth It?
This wholly depends on what you are looking to cover after death. Most burial insurance programs are designed to help with funeral expenses and not much else. Burial Insurance is worth it should you be in poor health and need a policy that you know will accept you.
Term life insurance is a better long-term option if you have 5-30 years to pay into premiums. The monthly premium amounts are cheaper but only if you are in good health and are considered low risk by underwriters. Term life insurance has a much larger death benefit that can be used as a small income replacement or be used towards other expenses such as medical bills and a mortgage. However, if you are not looking to pay premiums for more than 3 years and want to only cover funeral and burial expenses then burial insurance is absolutely worth it.
Alternatives to Burial Insurance Plans
Your needs may be beyond that of burial insurance and that is okay. There are a number of burial insurance alternatives that may be a better fit for what you need.
Whole Life Insurance
As the name suggests, whole life insurance is permanent life insurance that lasts your whole life. It builds a cash value over time that can be dipped into against the death benefit. It grows at a steady rate over time. The monthly premium amounts for whole life insurance can be far more expensive than burial insurance or a term insurance policy but it offers the largest death benefit amount.
Universal Life (UL) Insurance
UL Insurance is a type of permanent life insurance policy that lasts for the rest of your life, similar to whole life insurance. Each Universal Life Insurance policy gives you a cash value that are typically tied to an index like stock. Some allow you to change how much you pay in monthly premiums over time. There is great variability with a UL policy as it really depends on how well the market is doing.
Payable On Death (POD) Account
A POD is a dedicated account that allows you to save money for a funeral before you pass away. Like a burial insurance death benefit, the funds in a POD do not get stuck in probate and your beneficiaries cannot access the funds until after you pass.
Pre-Need Insurance
Pre-Need Insurance is a type of burial insurance plan that can be bought at a funeral home. This insurance allows you to pay the funeral home directly at the time of death within a contract. Pre-need Insurance locks you into one particular funeral home and you will not be able to change which home you sign the contract with. Also, the funds will go directly to the funeral home so you will not be able to use pre-need insurance to pay for other expenses like medical bills and a mortgage.
Savings Account
A regular savings account is an okay option if you cannot get a POD account. Unlike a POD, the funds are available before death and can be dipped into during emergencies. The downside to this is that anyone who is on the account can use the funds, so your beneficiary can use the money outside of its intended purpose.
The Best Burial Insurance Plans & How To Get It
Below is a chart of some of the best burial insurance options for a $10,000 insurance policy.
| Company | 50 y/o Male | 50 y/o Female | 60 y/o Male | 60 y/o Female | 70 y/o Male | 70 y/o Female |
|---|---|---|---|---|---|---|
|
$34 |
$27 |
$51 |
$40 |
$73 |
$58 |
|
|
$39 |
$34 |
$52 |
$41 |
$86 |
$65 |
|
|
$30 |
$24 |
$43 |
$32 |
$74 |
$53 |
|
|
$36 |
$30 |
$47 |
$37 |
$81 |
$60 |
|
|
$55 |
$38 |
$68 |
$53 |
$106 |
$80 |
These figures were obtained from the NFDA and are estimates only. For a detailed quote, please contact an agent.
Whether you find yourself in need of a limited pay life insurance policy, or a term policy, or just have questions about life insurance we are here for you. Our expert licensed agents are incredibly compassionate and are dedicated to providing you with the best service possible. At Final Expense Benefits, we treat all of our clients like family and will help you get the best possible rate with one of our top-rated insurance carriers.
If you are looking for trusted and affordable final expense insurance, the experts at Final Expense Benefits have got you covered. Call one of our talented agents today at 1 (866) 311-4338 to lock in the best premium rates.
Frequently Asked Questions
There are several federal programs that you can utilize to be able to afford a proper funeral. There are veteran’s benefits as well as government assistance programs if you do not have a burial insurance plan.
Beneficiaries do not have to use the death benefit they receive upon your death on the funeral expenses. It is paramount that you create a detailed plan with your beneficiaries so they can use the money to pay for any expenses you leave behind.