What is a burial insurance policy? How is it different than a normal life insurance policy?
These two questions come up all the time when we talk to a new client about their life insurance options. Understanding why you might need this type of final expense policy is the first step to knowing whether it is right for you.
The average funeral cost has skyrocketed in the past few decades. For a typical funeral, you can expect to shovel out (pun intended) around $10,000 depending on where you live and your burial preferences.
There are countless stories of families that have inherited thousands of dollars of debt after their loved one passed away, but you don’t have to be one of those families.
Providing for your family after you’re in the ground could be easier than you think.
What is Burial Insurance?
There are a lot of misconceptions about burial insurance plans and how they work, but we are here to help clear all of those up.
Simply put, burial insurance is a tool to help your loved ones pay for all of your final expenses after your death. While it’s often referred to as a separate produce, burial insurance policies are basically very small life insurance policies that are used to cover any expenses left after someone dies.
These expenses could be the funeral, hospital bills, or credit card bills.
Burial life insurance (sometimes called “funeral insurance”) is an excellent and affordable option for helping provide for your family after you passing, even though many Americans see these policies as a waste of money. Burial insurance policies are sold by dozens of large life insurance companies across the U.S.
They often have lower coverage limits, normally around $10,000, but they can range anywhere from a small $5,000 policy to a $20,000 policy. Burial plans are easy to apply to and often don’t require any medical exam.
Just about every insurance company has a minimum age limit you must be older than to purchase a burial insurance policy, normally this is around 50 (some companies have limits as low as 40).
Similarly, every insurance company will have a maximum age that they will sell you a policy; normally you can’t be older than 80 or 85. If you have a policy, you can keep the policy until you are 100 years old (hopefully, we all reach that point).
Burial insurance is often confused with a prepaid funeral, but there are a few key differences between the two plans.
Prepaid funerals are funded directly through the funeral home of your choice while funeral insurance is bought through an insurance agency.
With prepaying for a funeral, you can only use that particular funeral home, with burial policies you can use whichever location works best.
The beneficiary of the burial insurance plan can use the payout to cover any expenses necessary, but a prepaid funeral can overpay for the cost of the burial and related expenses.
Many people choose to go with a burial policy instead of a prepaid funeral just in case there are any expenses they may have forgotten about.
Why buy a Funeral Insurance Plan?
One of the most frequent questions regarding these policies is, “what’s the point of a burial insurance policy”?
Well, the answer is simple.
Nobody wants to leave their loved ones saddled with thousands of dollars of debt after their passing. Between flowers, a casket, a burial plot, transportation, taxes, headstone, and more the cost of a funeral can quickly add up to a massive price tag, which can be difficult to pay for, especially for a grieving family dealing with the loss of someone close to them.
Having a burial insurance policy will provide your family with the funds they need to cover the cost of your final expenses without adding any extra stress to the already stressful time.
Advantages of a Burial Life Insurance Plan
There are plenty of benefits to purchasing a burial insurance policy. One of those you can’t put a price on “peace of mind”.
Having a policy will give you and your loved one a sense of peace knowing that if anything were to happen to you, they would not be strained to find money to give you the final respect you deserve.
Burial insurance plans are an excellent option for any applicant that cannot be accepted for traditional life insurance plans. Many people with poor health are not eligible to be covered under a life insurance policy, and even those that can be accepted must pay outrageous monthly premiums that can quickly drain a bank account.
So instead of having to pay these ridiculous monthly payments, you can opt to pay the lower costs of a burial insurance policy.
Burial insurance is also a good alternative for elderly. Burial insurance for elderly is becoming a more common choice as life insurance premiums continue to rise.
The older the applicant is, the higher the life insurance fees are going to be, meaning that older applicants are starting to shift towards burial polices instead of traditionally underwritten life insurance to accomplish their coverage needs while not sacrificing their current lifestyle.
Finding a Burial Insurance Plan
Okay, so you’ve decided you want to purchase a burial insurance plan, now what do you do?
The first step is to decide how much you’re going to need for your funeral (I know, that is not the most wonderful dinner conversation to have with your family). Discuss your wishes with your family and loved ones.
Do you want to be buried? Cremated? Shot off into space? Have your ashes compressed into a diamond?
Buried and have a tree grow where you are? Or any of the other unique burial techniques. Your burial wishes will impact the size of the burial insurance policy you’re going to need. After you decided your final wishes, you can begin to estimate what the final cost will be at the end of your life.
After you know much coverage you’ll need, you can start looking for the perfect insurance company for the burial insurance plan. Just about every major insurance company offers burial insurance policies.
Each company will have different rates, coverage amounts, and policy restrictions, meaning that you may have to call several before you find the perfect fit. Be sure to contact several insurance companies before deciding on one, because some companies could have significantly lower rates than others.
You will also need to ask each company if they have a graded death benefits period. A graded death benefit is the amount of time you have to wait before the policy becomes effective. Most policies will have a year or two-year graded death period.
Here are the three different types to compare:
- Level – Level life insurance is the traditional type of insurance coverage. It’s effective immediately and the premiums will never increase. Provides the most amount of coverage of any type of insurance.
- Graded – Two-year waiting period after being accepted. Given to applicants with severe health complications. Less coverage available than with a traditional plan. Limited underwriting.
- Guaranteed – Effective immediately. Can be bought in hours. Drastically lower limit on protection. No underwriting.
For example, if the policy has a two-year graded death benefits period, if something were to happen to you within the first two years after you accept the policy, the insurance company will not pay the face value of the plan. Some companies repay the premiums that have been paid on the plan and others will pay the premiums plus interest.
You should always consider the graded death benefits period before purchasing a burial insurance policy because it could have an impact on your family’s financial future if something were to happen to you.
To apply for a burial insurance plan, you’ll need a few things. You’ll need a photo I.D., payment options like cash or banking information, and the beneficiary’s information. Because you probably won’t need to complete a medical exam, most applications can be done in office, over the phone, or through email.
The application process will only take between an hour or two depending on the company. For most policies, you can be accepted within a few days.
How much does it Cost?
One of the most common questions regarding a burial insurance policy is, “how much is it going to cost?”
Well, the answer depends on several factors.
The first is how large of a policy are you going to get. The larger the policy, the more you are going to pay.
Your monthly payments will also change drastically depending on your age, gender, overall health, and if you use tobacco or not.
There are also different types of life insurance plans that will have varying premiums. Two of the main categories are guaranteed issue while others are simplified issued. The difference between the two types revolves around the application process.
In a guaranteed issue policies, you will not be required to answer ANY medical questions, but with a simplified issue, you will have to complete a minor medical questionnaire.
For anyone with a pre-existing health condition, guaranteed issue policies are an excellent option, but you can expect to pay more for these policies than with ones that have a health exam.
While each company is going to have different rates depending on your situation, we can give you a rough idea of what you can expect to pay for a policy. For a 70-year-old man that doesn’t smoke or use tobacco, you could expect to pay around $100 – $140 every month for a $10,000 policy. While the same $10,000 policy for a female smoker at 75 years old could cost $150 or more every month..