What Is Burial Insurance: Managing Your Final Life Expenses
End-of-life expenses can add up to thousands of dollars, especially if you include medical care and other relevant costs. These costs may ultimately fall on the shoulders of the grieving loved ones’ and put a strain on their finances.
This is where burial insurance comes in. If you’re looking for a way to cover the cost of your funeral arrangements and ease the financial burden of your family, this insurance policy may be right for you. In this guide, we’ll cover everything you need to know about burial insurance plans. We’ll explain how they work and why you might want one.
Defining Burial Insurance
Burial insurance is a type of life insurance policy. But instead of replacing the income of the deceased family member, it’s meant to pay for a funeral and other related expenses.
Unlike a traditional life insurance policy, the coverage amounts are usually much less, usually ranging between $2,000 and $50,000. Plus, when measured on a premium-to-coverage ratio, funeral insurance costs more than other life insurance policies. That's because it is often sold to individuals who might not otherwise qualify for life insurance.
Here are two key benefits that come with burial insurance.
Also commonly referred to as funeral insurance and final expense insurance, burial insurance is a whole life insurance policy locked in for your lifetime. It doesn't expire and will remain in force, provided you pay the premiums on time.
Also, the insurance company is not allowed to increase the premiums, nor can they decrease the coverage. Once you purchase your burial life insurance plan, no changes can be made to it. This ensures that your loved ones will have the money they need for your funeral expenses.
Burial life insurance policies accrue cash value over time. That means you can borrow the accumulated funds in case you experience financial difficulty.
When you submit your application, you can choose an option wherein you can make the cash value your safety net. It helps you avoid a lapse if you miss your payments and ensures your insurance policy remains in that position until you have enough cash value to sustain your payments.
How Burial Insurance Works
When you pass away, the insurance company pays your beneficiary a tax-free check. The amount that the insurance policy pays out will depend on how much you pay for the premiums throughout the life of the plan. It may then be used towards your final medical bills and other end-of-life expenses, such as burial or cremation service.
One good thing about a funeral insurance plan is that the death benefit payout is not allotted exclusively for funeral expenses. Your beneficiary may use the remaining amount however they want to. This feature allows for coverage of expenses that aren’t covered by the final expense policy, such as probate fees and outstanding debts.
Types Of Insurance For Final Expenses
Not all burial insurance policies are created equal. You can choose between the following types.
Simplified Issue Policy
This is generally limited to individuals without health risks. During application, you will need to provide your medical history, and you might be denied if you’re a smoker or have preexisting conditions.
Guaranteed Issue Policy
Almost everyone is qualified for this policy, even those with risk factors in their medical history. However, it’s relatively more expensive than a simplified issue policy. Keep in mind, though, that the guaranteed issue plan has a two-year waiting period. If you pass away during the first two years, the carrier will only refund the premiums paid in addition to interest.
Who Qualifies For Burial Insurance
Getting a burial insurance policy is fairly easy. It can be taken out by most people, even those over the age of 80. However, different providers have different age thresholds. So, check out a number of insurance companies first to be sure.
Most providers don't require a medical exam before you purchase a policy. An initial phone interview is usually conducted to verify that you don’t have a terminal illness. The provider will also have to confirm that you can pay the policy premiums. After that, you’ll be given your final policy documents so you can pay your first premium.
There are providers that don't even ask medical questions – these companies offer guaranteed acceptance life insurance, which is designed for individuals who can't qualify for any other type of life insurance because of poor health.
Benefits Of Burial Insurance
Planning for your funeral can feel very uncomfortable, but it’s necessary to avoid leaving your loved ones to deal with your final expenses. Burial insurance can help put all your affairs in order, so you can avoid that situation. Here are a few benefits of purchasing this insurance plan.
It Helps Ease The Grieving Family’s Anxieties
Your passing will certainly cause emotional distress for those you’ll leave behind. When that challenging time comes, it’s only rational for them to be kept from worrying about financial matters. With all the expenses being taken care of by your burial insurance plan, the whole grieving process will become a lot smoother.
It Provides The Family With Funds For The Final Expenses
Burial insurance saves your loved ones from having to withdraw from their savings account, or even selling their assets, to come up with the money needed for your end-of-life expenses. They won't have to worry about paying for the casket, embalming, cremation, or funerary services. Your policy takes a big load off their backs as it protects them from having to pay those for expenses out of pocket.
Depending on the type of policy, your family will receive an immediate cash payout after death has been certified. In case of accidental death, your loved ones may receive three times the death benefit amount.
It Allows The Policyholder To Choose Their Beneficiary
Most burial insurance plans allow you to select a beneficiary who will carry out all your wishes. Ideally, it’s a family member who will make sure that any leftover funds are put into good use, such as paying for pending credit card payments and other debts.
It Gives the Policyholder The Option To Choose A Funeral Home And Other Final Arrangements
A final expenses insurance policy allows you to take care of all the final arrangements ahead of your passing. You may even want to assign it to your funeral home of choice. Any remaining proceeds will be paid to your loved ones after all services are performed.
How To Know If Burial Insurance Is For You
Practically anyone can get insurance for burial services. But if any or all of the following circumstances apply to you, it's highly recommended that you purchase a plan:
Your savings is not enough to cover your end-of-life expenses.
Your life insurance policy is not large enough.
You don't plan on paying for your funeral expenses in advance.
How Much Burial Insurance Do You Need?
Before choosing a burial insurance plan, determine how much you expect your funeral expenses will be. The overall costs may vary depending on the arrangements you want.
To give you an idea, the median cost of a funeral is about $7,640, while the total median cost of cremation is about $6,645. These figures don’t include other associated expenses, such as building a tomb, posting an obituary, and buying flowers. Ideally, the best burial insurance policy will cover all the costs you have in mind, so your loved ones won’t have to dip into the family’s nest egg.
While the funeral cost is the largest single expense to consider, you also need to think about other relevant expenses, such as medical bills, legal fees, and other end-of-life expenses. Add up all these costs to determine how much burial insurance you will need.
What Is The Cost Of Burial Insurance
Since there’s no medical exam involved, and it is usually reserved for older or less-healthy individuals, the cost of burial insurance is higher than term life insurance. But, there are three other factors that will determine the insurance cost. These include age, health history, and tobacco usage.
Generally, the younger you are, the less your final expense insurance policy will cost. That's because the older you get, the greater your chances are of having health issues. And the more health issues you have, the higher your burial insurance costs will be.
Tobacco usage is another factor that will affect your insurance cost. As smoking increases a person’s chance of developing various diseases, smokers are considered higher risk applicants than non-smokers.
How To Find The Best Burial Insurance Policy
Once you have your funeral budget in mind, it’s time to shop for a burial insurance plan. Try to get a simplified issue policy first since it’s more affordable and will save you a lot of money in insurance premiums. If you choose to obtain a guarantees issue policy, be mindful of the two-year waiting period.
Request Quotes From Multiple Carriers
If you already have an insurance agent, request a quote from them. However, if you can get a better quote somewhere else, you can choose to go with that company instead. It’s best to request quotes from other insurance carriers so you can compare the prices, benefits, and coverage they offer.
Read The Fine Print
Once you have received their quotes, read the policies, and do not hesitate to ask questions if there’s anything you don’t fully understand. Make sure the insurance policy gives you exactly what they claim to be offering, especially the death benefit. If you feel that you’re not getting straight answers from a potential provider, move on to another one.
Choose A Provider With A Good Payment Plan
Most funeral insurance plans are paid on a monthly basis. But you can also choose to make a payment once per year. That might give you cost savings in the end.
Losing a loved one can be an extremely distressing experience – and not having the resources to take care of the expenses can make it a lot worse.
One of the best things you can do for your family is to make sure that they will not struggle financially after you’re gone. Provide them with the resources they need to take care of your funeral costs.
If you don’t expect to have available funds to cover your end-of-life expenses, then it’s best to get a burial or final expense insurance plan.
Have any questions? Talk to a Wesley LLC representative today to learn more about your options.