What You Should Know About Burial Insurance
Burial insurance: is it necessary? Many seniors find themselves subject to insurance companies telling them they absolutely need burial insurance. If you want to make sure your final expenses are covered in advance and your family doesn’t need to worry about paying for funeral expenses, burial insurance can be a good option. It’s important to remember that burial insurance isn’t the only option, however. Here’s what you should know about burial insurance and what some of your options are.
What is burial insurance?
Burial insurance (also known as senior life insurance, funeral insurance, final expense insurance, or funeral service insurance) is a form of life insurance that covers your final expenses. Burial insurance is a policy you take out on yourself (or on someone else) and pay into while you’re alive; at the time of your passing, the death benefit will be paid out to the beneficiary (or designated funeral home) and will be used to cover all end of life expenses.
Types of burial insurance
Burial insurance can come in a few different forms, so it’s important to know what your options are when shopping around.
Standard burial insurance
Standard burial insurance comes in the form of term or whole life insurance policies and is issued by life insurance companies. You can apply for standard burial insurance relatively quickly and are often only asked a few medical questions before qualifying for a policy. No health exam is needed to qualify for a standard burial insurance policy. Standard burial insurance is a policy you pay into and when you die, the death benefits are paid out to your listed beneficiary on the policy. These policies are usually around the $50,000 or under mark as they’re meant to cover only burial or funeral expenses. Any leftover money can be used by the beneficiary to cover additional expenses (such as medical debt or other outstanding bills you might’ve left behind).
Pre-need burial insurance
A pre-need funeral insurance policy functions in much the same way as a standard funeral insurance policy, with the caveat being that the funds are paid out directly to the funeral provider you chose at the time you set up the funeral insurance policy. Some policies will cover instances of inflation by allowing you to lock in prices at the time you start the policy. The downside to pre-need policies is that if the funeral home goes out of business, you’re out of luck. The policy will not allow you to switch to a different funeral home. These are a good idea if you are certain and confident in the funeral home you’re going with and are unsure if you can rely on a beneficiary to use the money in a way you see fit.
Guaranteed issue life insurance
Guaranteed issue life insurance policies are specifically designed for and marketed towards individuals who are too sick to qualify for any other form of life insurance. These policies are guaranteed acceptance and do not require any form of medical examination, anyone can apply and will be accepted. The catch with a guaranteed issue life insurance policy is that there is usually a two to three year waiting period that the insured needs to go through before the policy can be paid out. If the insured dies during this period, the beneficiaries will not receive the death benefit payout. Beneficiaries will receive the premiums that the insured paid, plus interest, if the insured dies during this waiting period.
How much does burial insurance usually cost?
The cost of burial insurance will depend on the policy you go with and the face amount you’re purchasing, but you can expect to spend around $50 a month on a burial insurance policy. It’s important to keep in mind that this price can be significantly lower or significantly higher, depending on a number of factors. Some of the factors that will change the price of your premium include:
- Health status
- Health questions asked (yes or no)
For example, according to Lincoln Heritage, a 65 year old woman in good health can expect to pay around $41 monthly for a $10,000 burial insurance policy. An 80 year old man who did not answer any health questions could expect to pay $162 per month for a $10,000 burial insurance policy.
Why would I get burial insurance instead of a regular life insurance policy?
It’s important to note that burial insurance is a form of life insurance, regardless of its distinction and name. Funeral insurance differs from standard life insurance in that it is specifically meant to cover your final expenses. The policies are usually much smaller (usually under $50,000) than standard life insurance policies (which can be in the millions) and are paid out almost immediately after death. Most burial insurance is relatively easy to get and does not require a health examination, unlike life insurance, which means that many individuals who would not qualify for certain life insurance policies are likely to qualify for burial insurance.
The reality of these policies is that they’re marketed towards a senior audience and are sold in a way that makes it seem as though they’re necessary to cover end of life expenses. In reality, burial insurance is not necessary to ensure that your family has enough money to cover expenses when the time comes. In addition, it may be worth your while to look into other life insurance policies that aren't specifically marketed with senior audiences in mind. They may be more flexible and you may find success with more reputable companies. If you’re interested in purchasing final expense insurance, it’s important to shop around with different companies and do price comparisons, keeping premiums in mind.
Consider a savings account
An alternative to burial insurance is a simple savings account or trust that you pay into. Having a savings account dedicated to burial expenses is an easy way to cover your final expenses without pulling out a policy. You can open up a savings account and name an individual as the beneficiary who will use the funds to cover funeral expenses at the time of your passing. This offers the option for flexibility, avoids an application process for a life insurance policy, and is a great option for those who don’t qualify for good policies. The funds can be used immediately and are not subject to probate or a waiting period.
When the burial insurance policy isn’t enough
It’s always a possibility that your loved one paid into a burial insurance policy with the intention of covering all funeral expenses at the time of their death. The unfortunate reality of the funeral industry is that it has seen sky high rates of inflation. A $5,000 policy might have been enough to cover a funeral in 1970, but it’d likely barely cover a casket in many states. Today, families can expect to spend at least $12,000 on a standard funeral in most states. This is often an unexpected number and one that has the potential to financially burden many families. If your loved one had an insurance policy that doesn’t quite cover the expenses, here are some options to consider:
Purchase funeral products online. Caskets are the single most expensive part of a funeral in almost all cases. Many funeral homes will mark their caskets up anywhere from 300-500%, a staggering number. You can avoid this markup by purchasing products online or directly from the manufacturer. Your chosen funeral home is required to use any product you purchase, even if it’s not from them.
Consider cremation. While caskets are one of the the most expensive part of a funeral, it’s not necessary to use one if you opt for cremation. Cremation is the most common method of disposition in the US and is much cheaper than burial. You can choose to use a cremation container, which costs $50 in most states; compare this to a casket that usually costs at least $2,000 and you’ve already saved a ton of money.
- Shop around and compare funeral homes. Many funeral homes will ask that you call for pricing or come into the store to learn more about their cost. You can avoid feeling pressured by knowing your rights and recognizing that they’re using common sales tactics. Some funeral homes will have their pricing listed online, so you can start comparing prices local to you. Don’t immediately go for the first funeral home you visit, you can often save hundreds (and sometimes thousands) of dollars just by shopping around.
- Look into government programs that can assist with funeral expenses. If you haven't already, it's worthwhile to research into whether or not your county / city / state has any type of financial assistance program that assists with burial expenses.
If your loved one took out a policy that doesn’t cover the total cost of expenses and you find yourself in need of emergency funds, it’s also worth considering a memorial fundraiser. Memorial fundraisers are a great way to raise money quickly and have already helped thousands of families cover unexpected costs related to funerals. Memorial fundraisers are easy to set up, easy to share, and easy to use. Visitors to your memorial website can donate to help with expenses, share memories, and learn about upcoming events.