Purchasing Burial Insurance For Your Parents

If you are the child of an aging parent, one of the most difficult things you may have to do is plan for the time when they are no longer around. Though it will hopefully be many years before that date actually arrives, it is important to begin thinking about the big “what ifs” sooner rather than later.

There are many different financial assets that are used for late in life planning including various types of trusts, estates, retirement savings accounts (401(k), IRA, Roth IRA, etc.), and particularly life insurance. However, though life insurance has rightfully received a significant amount of attention from long-term financial planners, one component of the life insurance industry that seems to be particularly overlooked is burial life insurance.

What Is The Difference Between Life Insurance And Burial Insurance?

Generally speaking, life insurance is primarily designed as a form of income security for the dependents of an individual who has passed away. For example, if you currently provide your family with $50,000 per year in income, a $500,000 life insurance policy (all else equal) can serve to replace your income for the first ten years after you pass away.

A typical burial life insurance policy will usually cover roughly $5,000 to $25,000 in expenses. However, though these policies are designed with a very specific purpose in mind, they will still typically afford the beneficiary a significant amount of freedom to spend the payout as they see fit. If you do have specific instructions for how a burial insurance policy ought to be used, this is something that needs to be clarified well in advance (possibly communicated through the use of a will).

Can I Purchase Burial Insurance For My Parents?

One of the most common questions that burial insurance agents are asked is “can I purchase a burial life insurance policy on someone else?” Considering that the costs of a funeral, burial, and end of life expenses are frequently endured by someone other than the estate of the deceased, this question is one that certainly seems quite reasonable.

In many ways, burial insurance is quite different than life insurance. Not only is burial insurance designed with a very specific intended use, but because most children will statistically outlive their parents, it is much more common for the younger generation to purchase the policy rather than the other way around. If you believe that you will likely be financially responsible for paying the costs of a parent’s burial or funeral, then purchasing burial insurance can often be an incredibly wise decision.

What Does The Phrase “Insurable Interest” Mean?

Typically, an insurable interest can be reasonably claimed to exist in the instance of relationship by blood, common ownership of a specific asset, or other sorts of relationships that explicitly exist by law.

Being friends with or simply connected to a certain person is almost never considered to be an insurable interest. For example, if you believed that your neighbor was going to pass away in the near future, you would not be allowed to purchase a burial insurance policy and effectively “profit” off of their death.

However, because your parents are considered to be an insurable interest, it is reasonable for you to purchase a burial insurance policy for them and then use the money to pay for their end of life expenses.

Can I Get A Life Insurance Policy For My Parents?

If your parents are considered by the insurance provider to be an insurable interest in your life, then you will not only qualify to purchase a burial insurance policy on them, but you will also likely qualify to purchase a life insurance policy as well. Typically, your parents will be considered an insurable interest unless some legal action (restraining order, emancipated minor, etc.) has taken place in the past.

The status of your parents as an insurable interest does not necessarily require that you are financially dependent upon them in the status quo. For example, if you are the designated recipient of their estate and you are aware that your parents have a significant amount of debt, then purchasing a life insurance policy on your parents may be able to help you receive a larger amount of the estate than you otherwise would.

The Two Primary Types Of Life Insurance Available

How Much Does A Burial Insurance Policy Typically Cost?

The most common amount of coverage that a burial insurance policy will provide is $10,000. Usually, a burial insurance policy will cost more per month than a typical term life insurance policy but less per month than a typical permanent life insurance policy. The reason that burial insurance is more expensive than term life insurance is that the payout is essentially guaranteed (with a few exceptions) and the amount of time that policy is being paid into is significantly less.

The average price per month for a burial insurance policy is roughly $50 ($600 per year). However, in an industry that is dynamic and adaptable to the insurance industry, there can be a significant amount of variation between any two companies or even different policies offered by the same company. In order to be as confident in your final decision as you realistically can, it is important to use an independent agent that is able to objectively compare multiple different options at once.

What Does Burial Insurance Cover?

As stated, burial insurance is generally designed to cover a specific set of costs. These are the costs most burial life insurance policies cover:

Because you—assuming you are purchasing a burial insurance policy for parents—are the individual who is responsible for paying the monthly premiums associated with the policy, you will also have the freedom to spend the payout of the policy as you see fit. If there are other end of life expenses that are more urgent than the cost of burial, you will beallowed to make the decision to spend the benefits of the policy elsewhere.

However, because you did purchase the initial policy for a very specific reason, using the benefits of a burial insurance policy in accordance with your parent’s wishes is usually considered the right thing to do.

Why Is It Important To Have A Burial Insurance Policy?

There are many different reasons that most insurers and financial consultants would consider purchasing a burial insurance policy to be a good decision. The costs of a funeral, burial, and other end of life expenses can often be incredibly expensive. If you are like most people, spending an additional $50 per month in order to access a specific type of insurance coverage is likely significantly easier than saving roughly $10,000 on your own.

Burial insurance is a reasonably conservative investment that has helped families of all kinds. If you are responsible for taking care of your parent’s financial needs, you may want to consider investigating your current options.

What Is The Best Burial Life Insurance Policy For My Family?

When trying to find the best burial life insurance coverage for yourself or your parents, the most important factors that come into play are:

Depending on your parents current health, and the amount of coverage they need, burial insurance rates may be very low.  For those in worse health, you can expect higher rates.  There are companies that specialize in burial insurance.  Some of the best burial life insurance companies are:

Finding The Best Burial Insurance Policy

While there are a lot of online tools that can easily be used to find and compare burial insurance rates quickly and easily, it is always recommended that you take the extra step to speak with an insurance agent before making a purchasing decision.

Insurance agents know the ins and outs of the industry, and have a much broader understanding of the type of burial insurance coverage you and your loved ones need, and where to find the best burial life insurance rates from the best burial insurance companies.  Working with an insurance agent is usually free, and can save you a lot of money over the course of a burial insurance policy.