11/22/2021
What is Burial Insurance?
Burial insurance is a policy designed to help your beneficiaries cover the costs of your funeral and burial. Sometimes, this insurance is also called final expenses insurance or funeral insurance. In most cases, these terms can be used interchangeably and cover the same types of expenses. However, review the policy carefully to make sure it will handle what you need.
There are two main types of burial insurance:
Standard insurance: Standard funeral or burial insurance is usually a type of whole life insurance policy provided in a smaller amount and designed to cover the costs of funeral home services, the cost of the casket, transportation of your remains, headstone and the costs of the burial. Alternatively, you can get coverage that will handle cremation and an urn.
Pre-need insurance: You can get this insurance through a life insurance company or even through the funeral home. Instead of using the money to cover various final expenses, the payout from the policy goes straight to the funeral home.
One major difference between standard and pre-need insurance is what happens if there’s any money left over. With standard insurance policies, beneficiaries typically receive any excess money after all funeral expenses have been paid. But with pre-need insurance, the family of the deceased doesn’t receive any extra payout – instead it stays with the funeral home.
Pros and Cons of Burial Insurance
Before deciding whether to purchase a burial insurance policy, carefully consider your options, and review the pros and cons.
Pros
Easy to qualify
Usually no medical exam required
Possible to pre-arrange services and pay for them
In some cases, there is a cash value that can be tapped into
Cons
Can be more expensive than a traditional life insurance policy
Benefit is lower
You could pay more in premiums over time than the cost of final expenses
Probably won’t be extra funds for your loved ones after all the expenses are covered
How Much Does Burial Insurance Cost?
Just like any other type of insurance, the cost of burial insurance is based on a variety of factors, including your age and health, as well as the size of the policy.
Many policies come with either a $5,000 or $10,000 benefit. You can expect to pay between $14 and $162 per month for your policy, depending on the factors used by the insurance company to determine your premiums.
While you can get final expenses insurance without dealing with health questions or a medical exam, you can usually get a discount if you answer health questions and submit to an exam. On the other hand, if you’re having trouble getting life insurance because of your health or age and you want a policy that allows you to cover the costs of a funeral and burial, you can forgo that process (but might end up paying more in premiums).
There are different premium structures:
Level: You pay one monthly premium until you pass on. You don’t have to worry about higher premiums as long as your policy is current.
Stepped: You start out with a low premium, but each year the policy is renewed and the premium may increase.
Capped: The policy comes with an age limit or payment limit. Once you fulfill the requirements, you no longer have to pay premiums, but your coverage continues.
Guaranteed payout: There are some policies that promise your beneficiaries will receive a payout of some sort, depending on whether the original insured amount or the premiums you paid are higher.
The premium structure you choose also impacts the cost of your insurance, so carefully consider the options before you pick a policy.
Who Is Burial Insurance Best For?
For the most part, burial insurance works best for those who don’t want their loved ones bearing the cost of their burial.
Burial insurance can work well for those who have term life insurance that has run out, and who want to be able to cover the basics. Additionally, it can also work well for those who are concerned that they won’t have a lump sum saved up for paying these costs. It can be expensive to come up with money for a casket, funeral, burial and other related costs all at once. By paying a monthly premium, it’s possible to spread out the cost over time.
Alternatives to Burial Insurance
Of course, like any insurance policy, burial insurance isn’t always necessary. With burial insurance, because the payout is so low, you run the risk of paying more in premiums than the funeral services are worth — especially if you get the insurance while you’re relatively young and use a level premium that you pay over the course of decades.
If you want to avoid using final expenses insurance, there are some actions you can take:
Use your life insurance policy: Your regular life insurance policy can cover final expenses as well as providing a payout. Just get enough life insurance to cover the burial costs on top of the other costs. However, term life renewal gets more expensive as you age, and whole life is usually more expensive. But, if you already have a life insurance policy and it’s reasonably priced, you might not need burial insurance.
Save up for final expenses: This is one of the types of insurance that can be replaced by self-insurance of a sort. It’s possible for you to save up for final expenses on your own, and then your loved ones can use that money to cover the costs. However, depending on the situation, your loved ones might be stuck with taxes. The advantage to insurance is that the payout isn’t taxed.
Pre-pay your final expenses: Rather than getting burial insurance, it’s also possible to pre-pay many of your expenses. You can order your own headstone ahead of time and buy your own burial plot. Some funeral homes offer packages where you can pay now, and lock in a price. You can even pick out your own casket or urn and pay for them ahead of time. This reduces the need for payments later on.
Reduce your need for these services: Finally, you can reduce your need for burial insurance by avoiding some of the services that come with choosing your final resting place. Cremation is often a less expensive option, and there are some states that allow for a natural burial. Less-expensive caskets are available, and you can also choose to donate your body, and request that no funeral services be held.
Author: Miranda Marquit
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