When Should You Get Burial Insurance? A Planner’s Guide
Burial insurance is intended to help older individuals set aside some money for their funeral expenses and associated costs, but does that mean only people of a certain age can buy these policies? Financial experts recommend buying insurance while you’re young, so when should you get burial insurance? Is there a right time for everybody?
This guide not only answers the question of when but also defines basic terms involved with burial insurance and outlines available policies. Read on to find out how to make the best decision for your family!
What Is Burial Insurance?
There are many names for burial insurance, such as “funeral insurance” or “final expense insurance,” but they all mean the same thing. They all refer to a type of life insurance designed to help you cover your funeral-related expenses or other final costs, so your loved ones won’t have to.
Qualifying for burial insurance is considered very easy since insurers don’t conduct medical exams – the downside is that the payouts are relatively small. Despite the smaller payouts, burial plans are considered a good option for older people to alleviate their families' potential financial obligations.
However, not all burial plans are created equal. There are options for those with poor physical health, folks that don’t qualify for other plans, and families that want a bit of financial security. Despite the variety of plans available, most funeral policies have a few things in common:
Many companies offer final expense insurance to people between the ages of 50 - 85 years old.
A death benefit is paid out to your loved ones upon your passing. Its value can range from $5,000 - $25,000, which is less than a life insurance payout.
Your beneficiaries or loved ones may choose to use the money in any way they deem suitable, whether it's for funeral expenses or otherwise.
Burial Plan Coverage
In short, burial insurance or final expense insurance helps cover costs associated with the insured person’s final arrangements. Coverage includes the memorial service, casket, urn, and burial or cremation fees. In some instances, families may find some money left over from the funeral policy once final arrangements have been made.
If this is indeed the case, the beneficiary may opt to pay off any of the deceased’s outstanding loans, medical bills, or legal bills. However, some families may also be able to use any leftover funds for personal purposes.
One of the main advantages of buying final expense insurance is that it’s comparatively easier to qualify for than most life plans. Unlike other policies, there is no medical exam and hardly any questions about your family’s illness and hospitalization history.
On top of this, buying funeral insurance makes the logistics of a funeral much more manageable. Namely, an insurance company or funeral home may have options that allow funeral services to be pre-arranged and prepaid. Finally, many plans accumulate a cash value that can be borrowed from while the policy is active.
On the other end of the spectrum, there are some drawbacks to buying final expense insurance. One of the most significant disadvantages is that the death benefit pays out significantly less than other life insurance types.
Individuals in excellent health may also find that they don’t receive discounted rates like a traditional life insurance plan. This discrepancy is because an insurance company or funeral home may opt not to conduct a medical exam or ask health-related questions. As a result, customers pay the same rates regardless of their health. Finally, in some cases, folks might pay more in premiums than they would have for just the funeral expenses.
When To Get Burial Insurance
Maybe you’ve asked yourself if now is the right time for you to be getting burial insurance, and the short answer is that it depends on your situation.
Folks from all kinds of backgrounds can apply for a burial policy, but time is of the essence once you’ve crossed the threshold into your 50s. Most insurers tailor their plans for individuals between 50-85 years old, making it the more comfortable choice for older folks looking to set aside a bit of money for their end-of-life expenditures.
To give you a better idea, we’ve outlined some scenarios where you might want to consider getting a final expense plan for yourself:
When You Hit Your 50s
Some people may think that 50 is much too early to plan for a final expense or funeral. However, one of the major advantages of buying a life insurance plan at 50 is that you’re less likely to have experienced a significant health complication. As a result, your premiums will be much lower than if you applied at 60 or 70, and you’re less likely to have a waiting period on your policy.
But the advantages don’t stop there. One other reason why people may get final expense insurance in their 50s is to lock in lower prices for a funeral home’s services. Costs associated with funerals and burials get more expensive over time, but some prepaid funeral plans can secure substantial discounts.
When You’re Approaching Your Sunset Years
Applying for traditional plans like term life and whole life insurance policies in your 60s-80s can be quite tricky – as a result, many people opt to buy funeral plans instead. This is because funeral insurance plans are an accessible option for people with medical issues or health complications due to aging. It’s never too late to safeguard your family’s future by making arrangements with an insurance company and funeral home ahead of time.
However, as you age, insurers may become more cautious. Here are a few things that you need to keep in mind when shopping for a plan after 60:
Some companies may put a cap on the amount of coverage you can obtain based on your age and health.
Insurers don’t require medical exams for most burial plans, but this usually results in higher premiums.
There are guaranteed acceptance burial plans available, but these usually have a waiting period of a few years.
Shopping for insurance in your 60s and beyond can be significantly more costly than your 50s
When You’re Concerned About Your Health
If you discover that you’re at risk for severe health complications, you may start to think of how you can support your family in case you pass away. In this case, many folks tend to prioritize finding investments or insurance plans to secure their families. However, they may find that applying for a whole life or term life insurance plan can be difficult for individuals with pressing health issues.
Luckily, there are many funeral insurance plans with relatively lenient application processes designed to accommodate older people with health issues. This being said, many of these funeral plans may have a waiting period before your beneficiaries can receive any payout, so we recommend applying as soon as possible.
When You’re Looking For Something Affordable
Cost is a big part of shopping for insurance policies, and final expense plans are the more affordable alternative for many older insurance shoppers. This is because many providers adjust life insurance rates based on a person’s age and their general physical health, which deteriorates over time.
Because of this, burial plans are a comfortable alternative to life insurance as you venture into your golden years. There are no health exams and exhaustive medical questionnaires involved, meaning that you don’t have to worry about health-related price adjustments.
When Not To Get Burial Insurance
Not everybody needs a burial policy. Here are some common scenarios where we recommend holding off on buying a burial plan:
When You’re Young
If you’re in your 20s, 30s, or even 40s, buying final expense insurance may not be the best way to secure you and your family’s finances. This is because a burial plan is designed only to cover the amount needed for your funeral expenses, and not much else. Instead, we recommend looking into term life or whole life policies because younger applicants generally receive better rates on their plans.
When You’re Already Insured With Other Policies
If you’re locked into an existing life insurance policy covering everything you require, then buying a funeral plan becomes unnecessary. Many life insurance policies have the option to make provisions for your funeral expenses, if you so choose. We recommend contacting your insurance provider about these options instead of shopping for a separate policy.
When You Want Comprehensive Coverage
Funeral plans can be quite self-explanatory – it only covers your funeral costs. With this in mind, buyers looking to set up an inheritance for their loved ones or pay off outstanding loans and debts won’t find what they’re looking for with this plan.
Instead, we recommend contacting your financial advisor to find out about other viable options to provide the coverage you want.
Types Of Burial Insurance
Each person has different needs and requirements when planning for late-life spending, and that’s why insurance companies have devised several policies to help families set aside their final expenses. It can be daunting going through policy after policy, so we’ve rounded up four of the most common types of life plans designed to benefit end-of-life planners.
Standard Funeral Insurance
As the name suggests, standard funeral insurance is the most basic form of burial insurance available. Insurance companies generally package this similarly to a whole life insurance policy, meaning that a death benefit will be paid out upon the insured’s passing to cover their final expenses.
Make sure to note that beneficiaries may also use payouts from standard funeral insurance to settle the deceased’s outstanding loans.
Pre-Need Funeral Insurance
Pre-need funeral insurance is also known as a prepaid funeral plan, bought from an insurance company or a funeral home. This plan differs from the typical life insurance policy because the death benefit goes directly to the chosen funeral home instead of the beneficiaries. As a result, you won’t have to deal with the stress of planning and payment.
Many families and individuals buy pre-need insurance to lock in low prices. Purchasing this particular policy can be advantageous when folks know the funeral’s specifics, such as the type and place.
Guaranteed Acceptance Burial Insurance
A guaranteed acceptance burial insurance plan is exactly what it sounds like – anyone can apply and get approval for a life insurance policy. However, there are a few things that a person needs to consider before deciding on this particular kind of life insurance.
Many people who find themselves buying a guaranteed acceptance burial insurance are usually already in poor health or infirm. Because of this, insurance companies implement a one-to-three-year waiting period before a death benefit can be paid out in full. In practice, this means a few things:
If the insured person passes away before the waiting period is over, beneficiaries receive only a portion of the death benefit or a refund of the premiums with added interest.
If the waiting period concludes before the insured person’s passing, the beneficiaries receive the death benefit's entire value.
Simplified Issue Senior Life Insurance
A simplified issue senior life insurance policy has a relatively lenient application process because of its intended purpose: to accommodate older individuals. Acquiring this type of life insurance involves a set of yes or no questions, some of which decide a senior’s eligibility. Many insurance companies require one or all of the following criteria when insuring a senior:
Must not be in a nursing home
Must not be diagnosed with a disease that may become terminal in the next few years
Must not have any brain diseases like Alzheimer’s or dementia
In turn, these life insurance policies are cheaper than many alternatives. They also have immediate death benefits upon approval. This means that, unlike guaranteed acceptance burial insurance, there is no waiting period.
Finding The Best Funeral Insurance
Like any investment, there are several things to consider before settling on a plan. Make sure to review all your options to find the best deal for you and your family.
Calculate An Approximate Number For Your Burial Expenses
Before canvassing life insurance plans, we recommend contacting a local funeral home to obtain an idea of your potential final expenses. Direct cremations, traditional cremations, and standard burials all have different associated costs, but planning can sometimes cut down on costs. You may also want to consider setting money aside for medical or legal bills, if applicable.
Decide On The Type Of Burial Policy
This next step can be done with a financial advisor's help, although this may not always be the most accessible choice.
Deciding on the type of funeral plan involves a careful evaluation of your current health and financial circumstances. For example, if you or the insured person are diagnosed with a severe illness, guaranteed acceptance burial plans may be the best option.
Request A Quote
After figuring out your funeral expenses and the type of funeral plan you require, we recommend contacting insurance companies. It’s always in your best interest to shop around a bit to get an idea of what insurance companies are charging before signing on to any plan. This way, you know you’re getting the best rates for your particular circumstances.
Pick An Insurer
Careful planning and consideration are key when planning for your final expenses. Once you’ve familiarized yourself with each company’s requirements, application processes, and policy details, you’re ready to decide on the plan that suits you best. Different insurers may have features or benefits exclusive to their plans, and there are many other policies to suit almost every kind of situation.
Frequently Asked Questions
Is Burial Insurance Worth It?
In short: burial policies are worth it in certain circumstances. Generally speaking, many individuals already have life policies that make any additional plans unnecessary. However, some folks may not want a more extensive insurance plan or might not have enough money saved up to pay for one. In this case, burial plans are a great way to cover funeral costs for their families.
How Much Does It Cost?
A burial plan’s cost depends on your age, health, the amount of coverage you want, and the type of policy you end up getting. Generally speaking, a non-smoker in their late 50s will have lower rates than a smoker in their 70s, but this isn’t always the case.
For example, guaranteed issue policies do not conduct medical exams; therefore, costs may be generally higher than the alternatives because no adjustments are made based on your health.
According to the National Funeral Directors Association, the average funeral's cost starts at around $7,000, but this figure varies with your preferences. Alternatively, cremation services may cost approximately $6,600. However, these averages may not be an accurate representation of what your end-of-life costs will be. The best way to get an idea of how much everything will cost is to request a quote from your insurance provider. Simple requests for quotes come at no cost or obligation to you.
In summary, folks in their 50s up to their 80s are the best fit for a burial plan. However, the sooner you lock down a policy, the easier it will be on your wallet. This isn’t to say that getting a plan in your 60s and beyond is impossible since many insurers have flexible application processes to accommodate most clients.