With costs continuing to rise, you’re understandably concerned about what is the best way to pay for a funeral.
And from the enquiries we get from our readers, you’re not alone.
Our recent study found the average funeral cost to be somewhere over $10,000.
Which is a lot for most American families.
So the question is, is Burial Insurance or Final Expense Insurance a good option for covering funeral costs?
Well the honest answer- yes and no.
Don’t worry, we’ll explain in depth whether it’s a good option for you.
In this guide we’ll go through everything you need to know about Burial Insurance- what it is, what a policy covers, costs, the pro’s & con’s.
We’ll also recommend some very reputable insurance companies on the market.
What Is Burial Insurance?
There are many different kinds of insurance you can purchase to prepare for end-of-life costs. Some examples are life insurance, funeral insurance and final expense insurance.
Burial insurance is a specific kind of whole life insurance which pays out directly to your beneficiaries after your death.
Unlike some kinds of life insurance, burial insurance is very easy to purchase. It requires minimal (if any) answers to health questions, and won’t expire as you age.
Premiums are locked in, making this a very affordable option.
The payout can range from $5000 to $40,000, depending on the company and the plan that you select.
How Does It Work?
Different kinds of life insurance policies function in different ways. When choosing a burial insurance plan, it’s essential to understand how it differs from other types of plans.
Burial insurance typically results in a lower payout than other whole life insurance plans.
Because of the lower payouts, premiums can be much more affordable.
Like other kinds of whole life insurance, these plans remain in force until the end of your life.
This is different from term life insurance, which typically expires after a certain number of years or when you reach a certain age.
Why Buy Funeral Insurance?
You may be asking yourself whether funeral insurance is really necessary.
There are many pressing reasons for this purchase, ranging from the financial to the emotional.
It Just Makes Sense
You insure yourself against almost every other catastrophic event, including illness, accidents, and theft, all of which may or may not happen.
So why not purchase insurance to protect your loved ones against an event which comes to all of us?
Easy Application and Acceptance
You will be asked to fill out a 2-4 page application providing vital statistics and other key details about your health.
It typically takes applicants about 20 minutes to go through the entire process of applying and being accepted for funeral insurance.
You don’t have to be in perfect health, and you can be insured even if you are well into your 80s.
Funerals Cost a Lot
Do your loved ones happen to have an extra $15,000 lying around?
Most of us would say no.
Yet this is the low end of the spectrum for covering a funeral and all the costs associated with it.
Not to mention, most life insurance plans won’t cover the entire cost of your end-of-life expenses. They may expire before your death, or they may have been created when funerals were less expensive.
Relief To Family Left Behind
Even if your family can afford this expense, wouldn’t you like them to be able to use the money for something else?
Freeing them from this burden is a loving gesture from you which can help them deal better with the loss.
Types Of Burial Insurance
Guaranteed Acceptance Burial Insurance
This type of insurance is usually issued without responding to any medical questions.
They are often limited to about $25,000 of coverage, and may only be available to you if you are within a specific age bracket (40-80 years old).
Simplified Issue Policies
These policies may require you to answer a few simple yes/no questions about your health when applying.
These questions will screen out applicants who are living in a nursing home or who have been diagnosed with a terminal illness.
But aside from such major issues, most applicants will find it easy to qualify.
Fully Underwritten Life Insurance
If you’re a young, recently retired senior with an active lifestyle, this may be your best option.
That’s because a fully underwritten life insurance policy offers more coverage at a lower cost than other options.
You may choose either a permanent or a term life insurance policy.
While permanent life insurance is pricier, keep in mind that a term life insurance plan may expire before you can use it.
What Does a Burial Policy Cover?
Simply put, burial insurance covers a person’s life. It provides a prompt cash payout to beneficiaries after presenting a death certificate.
Since it is a payout of a specific amount, there is no breakdown of what services are covered.
There are a myriad of expenses associated with death, beyond the funeral costs.
For example, there may be legal and medical fees resulting from your death. Family members may also incur expenses by travelling or catering for house guests.
Ideally, you should tailor your burial insurance payout to the amount that you think your family will need.
Difference Between Pre Need and Burial Insurance
These two types of insurance are very similar.
Both protect you from inflation, locking in premiums so that you will not be affected by rising funeral costs.
They can also be used to pay for a variety of services, including funeral merchandise and the costs of using a church or funeral home.
However, pre need insurance pays out directly to the funeral home, instead of to your beneficiaries, as with burial insurance.
While this may be convenient, it does not offer the option of leaving an extra cushion to grieving loved ones.
Additionally, the payout for burial insurance is typically lower than it is for pre need insurance.
How Much Does Burial Insurance Cost?
Of course, the cost of burial insurance will vary depending on what kind of plan you choose.
If you choose to break it down into a monthly payment, your average cost will be about $50 a month.
Paying up front will cost you about $10,000.
Keep in mind that there are many factors affecting these costs. Your gender, age and overall health can make a difference to your rate.
Your costs may also vary depending on the face amount of coverage that you choose, and on whether or not there is a waiting period.
For example, a healthy 50-year-old woman opting for a face value of $5000 may pay as little as $14 a month. However, an 89-year-old man who wants $10,000 of coverage could have a monthly cost of over $350.
The Best Burial Insurance Companies
AARP offers guaranteed acceptance burial insurance plans. They do not turn anyone down, regardless of age or health.
To qualify, you must be an AARP member between the ages of 50-80, or the spouse of an AARP member between the ages of 45 and 80.
You can purchase coverage up to $25,000 while locking in premium rates.
Mutual of Omaha
Mutual of Omaha is really the best choice if you’re anticipating a smaller funeral, with relatively low expenses.
Coverage starts as low as $2000 and goes to a maximum of $25,000.
On the down side, there is a two-year waiting period. Within that two years, your beneficiaries would receive the premiums you paid with an additional %10.
It’s not just death which is expensive. Living with a chronic or terminal illness can rack up unpaid bills, too.
AIG is unique in that it offers some protection from expenses while you’re still alive in addition to funeral costs.
If diagnosed with a terminal illness, it lets you access up to 50% of your death benefit to help with medical care. And if you are diagnosed with a chronic illness which makes it impossible for you to keep up with your daily routine, it will return all your premiums up to 25% of your total coverage value.
This is the best option if you are elderly or in poor health, and want to avoid a waiting period.
Their Immediate Solution plan allows you to be covered immediately, with coverage amounts ranging from $1000 to $55,000.
You can also opt for add-ons like an accelerated death benefit or benefits for children and grandchildren.
This option gives you the most freedom in how you will use your death benefits.
It allows you to use some of your death benefit for a variety of services while you’re still alive, such as medical expenses, paying off debts, or even a vacation.
Getting a Quote
Getting the Best Deal
To get the best coverage for the lowest rates, try for a plan that requires you to respond to a health-question survey. These plans generally have the best prices and are less likely to have waiting periods.
Unless you have a serious illness, like cancer or Alzheimer’s, you can still qualify for one of these policies.
Things To Look Out For
Before purchasing any insurance policy, find ratings and reviews of the company on the A.M. Best website. Ratings of financial strength are especially important, since this can make a difference as to whether the company will last long enough to be able to pay out your death benefit.
It’s also a good idea to find an insurance broker who specializes in burial insurance.