Burial Insurance: What Does It Cover?

Burial insurance is a small policy designed to cover end-of-life expenses. It’s to avoid leaving family members in the lurch, scrambling money together to cover funeral or cremation costs.

There are a couple different types of burial insurance (called final expense insurance in the industry) that you can get. The best type for you depends on your health and how much estate planning you’ve already done.

What Does The Average Funeral Or Cremation Cost?

The cost of funeral services varies widely by location. According to the National Funeral Directors Association, the median cost of an adult funeral is $7,360. Common burial expenses include:

  • Basic services
  • Transfer of remains to the funeral home
  • Embalming services
  • Other preparations of the remains
  • Viewing
  • Funeral ceremony
  • Hearse or service car/van
  • Memorial printed package
  • Metal casket

Naturally, you can spend more if you have a reception (catered or otherwise). Flowers are another costly consideration.

Cremation services vary depending on how your family makes the arrangements. The average cost of a direct cremation is $1,100. However, that only includes the cost of cremation. The median cost of a funeral with viewing and cremation is $6,260 which does not include the crematorium fees. Combining the two averages, you are still at $7,360.

Who Needs Burial Insurance?

Burial insurance was designed to help families who don’t have the liquid assets to pay for the burial expenses.

Finance experts will tell you that most Americans would have trouble covering a $1,000 emergency. Finding $8,000 can feel like asking the impossible of a family in grief.

If you don’t have the liquid assets to cover your own end-of-life arrangements, it would be a generous gesture to pre-plan these expenses. It leaves one less thing for your family to take care of when you pass away.

Keep in mind, even if you do have the liquid assets stashed away, the proceeds from your estate are not distributed until after probate. (Probate is the expensive and tedious process of the courts going through your will to make sure everything gets reviewed and distributed correctly.) Unless you’ve pre-arranged your burial or cremation, your assets cannot be unfrozen even for that.

In short, if you have $8,000 in a pay-on-death account or in a joint account with your spouse, you will help prevent your family stressing over finding the money to hold a funeral or cremation. If you don’t, then burial insurance may be for you.

The 2 Types Of Burial Insurance (Plus One More Option)

You can go about getting burial insurance in two ways. The first way is through traditional final expense insurance. This is a normal life insurance policy, but with a low death benefit. (Death benefit is the amount a life insurance policy pays out.)

The other way is through Preneed Funeral Insurance. This policy will be through the funeral home you choose.

Preneed Funeral Insurance

This policy is not as much of an insurance policy as it is a pre-payment plan. You are paying for your funeral ahead of time. That way, when the time comes, everything is set up according to your wishes. Your family gets a break. Everything is paid for. Most of the time, the organization is 90% complete too.

Preneed funeral insurance works off an installment plan. These plans can be as short as one year or as long as ten years. Most plans fall in the 1, 3, 5, 7, or 10-year range. Once you pay off the balance, you are covered for the rest of your life.

Pricing on this varies widely across the country. If you have a place where all your family is buried, give them a call for pricing. Most funeral homes offer preneed funeral insurance. Then compare the pricing on that to what a final expense policy would cost you.

Final Expense Insurance

Final expense insurance is regulated by the SEC and insurance commissioners. Some plans require underwriting. Others don’t.

You have more options here than with preneed funeral insurance. It’s often cheaper too. For underwritten final expense insurance, you can select from graded or level benefits.

Graded Benefits

This type of policy changes premium rates over time.  This can be leveraged to make initial payments more affordable if you are in poor health and do not think you will outlive the term of the policy. It can also be leveraged by making rates higher in the beginning and lower over time. Graded benefits can also be adjusted in the case of financial problems.

Level Benefits

Level benefit life insurance policies have premiums that stay level throughout the life of the policy.  This can be helpful because you know what to expect each month for your life insurance cost.  Both options are viable depending on your financial situation.

The following monthly rates are for both non-smoking men and women in preferred plus health looking at a $10,000 death benefit. That should more than enough to cover funeral costs and leave a little left over for any unforeseen final expenses.

Age Men Women
50 $26.33/mo. $17.24/mo.
55 $32.96/mo. $20.00/mo.
60 $39.76/mo. $22.75/mo.
65 $50.64/mo. $28.96/mo.
70 $65.84/mo. $39.30/mo.
75 $100.15/mo. $72.14/mo.
80 $132.65/mo. $98.43/mo.
85 $183.15/mo. $135.90/mo.

Guaranteed Issue

This is typically regarded as one type of burial insurance because the benefits are low. However, you will see it as a standalone policy elsewhere.

Guaranteed issue life insurance policies neither ask medical questions nor require a medical exam. As long as you are within the age range on the policy, you will get the insurance. Most companies stop offering guaranteed issue policies around 75. Some companies will go up to 80 or 85.

There is one major thing to keep in mind with guaranteed issue life insurance. Most companies will use graded premiums. That means if you pass away within the first couple years of owning the contract, your benefit is reduced. For example, if you pass away within the first year, your beneficiaries may receive 110% of premiums paid. Year 2 or 3 might result in 75% of the total death benefit.

Also, because guaranteed issue life insurance policies are guaranteed, the rates are much higher than other types of policies.  For this reason, this option is mostly for people who are in terminal condition or very poor health.

Before signing a guaranteed issue policy, make sure you and your beneficiary understand the death benefit schedule. That way you avoid surprises.

These guaranteed issue monthly rates reflect non-smoking men and women. Your health does not matter because they accept everyone within their allowable age ranges.

Age Men Women
50 $44.09/mo. $34.47/mo.
55 $56.50/mo. $39.86/mo.
60 $63.17/mo. $45.14/mo.
65 $73.09/mo. $54.51/mo.
70 $93.14/mo. $70.41/mo.
75 $124.49/mo. $95.82/mo.
80 $175.15/mo. $135.12/mo.
85 $298.88/mo. $204.20/mo.

Frequently Asked Questions For Burial Insurance

Life insurance gets confusing fast. You can try to sit down and read the contract, but it will more likely be an effective cure for insomnia.

These questions almost always follow a conversation about burial insurance. Contact one of our life insurance agents if you have a question that we did not answer here.  We are more than happy to speak with you and discuss help answer any questions you may have about final expense insurance or burial insurance.

Can You Use Life Insurance To Pay For A Funeral?

Yes. The beneficiary on your life insurance policy can use the proceeds for whatever they want. Whether they use it for your funeral or a trip to the Bahamas, it’s up to them.

Some people choose to name their estate as their beneficiary. This can make paying for your funeral difficult. It takes around a year (sometimes many years) to get your will through probate.

Naming a spouse or your most responsible adult child the beneficiary can ensure the benefits get used in accordance with your wishes.

What Is The Difference Between Life Insurance And Burial Insurance?

Burial insurance is a type of life insurance. Specifically, burial insurance offers a much smaller death benefit. Most policies start at $5,000 benefits and cap out at $25,000. Some policies go as high as $50,000. The idea behind the larger death benefit is to pay off any medical expenses or other debts.

Traditional life insurance death benefits start out at $100,000. Some of the benefits can go toward your funeral, but most people have other reasons for buying larger policies. These can include:

  • Supporting minor children
  • Paying for children’s college
  • Paying off the mortgage
  • Supporting a spouse
  • Covering estate tax obligations
  • Paying the executor of your will or trust

Can You Buy Life Insurance After Being Diagnosed With Cancer?

There are a few routes you can take if you are currently battling cancer. Until your cancer has been in remission for at least a year, most insurance companies will postpone your application.

Talk to your insurance agent first, but some extremely lenient life insurance companies will issue a life insurance policy with a cancer exclusion. A policy exclusion means that you will not qualify for benefits if you die from cancer-related causes.

The most common type of life insurance for people with cancer is guaranteed issue life insurance. These policies offer lower benefit amounts to anyone. The only qualifying factor is your age. Most companies only issue policies between 18 and 75, some will go as high as issuing life insurance to an 85 year old.

A guaranteed issue policy is probably your best bet. But since everyone is different, have a life insurance agent assess your situation first.

Can I Get Burial Insurance For My Parents?

Yes, you can obtain life insurance for your parents. As their child, you have an insurable interest in your parents. Jargon aside, that means you will financially suffer if your parents pass away. You will not actually have to prove any financial impact. The parent-child relationship automatically counts as insurable interest.

Try to avoid having the policy owner, the insured, and the beneficiary all be different people. For example, you can trigger tax obligations if you owned the policy on your parents while making your children the beneficiaries.

Either own the policy and be the beneficiary, or your parents can own the policy on themselves (you can still pay for it) and name you as the beneficiary.

Can You Buy Life Insurance On Your Parent Without Their Consent?

No. As the insured, your parents will need to sign a series of releases. These include allowing the insurance company to:

  • Access DMV records
  • HIPAA release form
  • Check the Medical Information Bureau records
  • Request medical records from hospitals

If you are having trouble convincing your parents to get life insurance, try approaching the conversation from a different angle. You could try talking about how your friend realized that neither she nor her parents have enough money to cover her parent’s funerals. So she took out and paid for a small policy. All they had to do was sign the dotted lines.

Whatever way you come up with of broaching the subject, several successful techniques involves relating the subject to other people. That way they don’t immediately have to start thinking about their own death.

Can You Get Burial Insurance On Someone Else?

Yes. You need their permission because they will have to sign several forms. They may also need to take a medical exam.

The catch is you must have an insurable interest in that person. Insurable interest means you financially benefit from that person living. Parents, children, and spouses all count. Businesses also fund buy/sell agreements through life insurance on the business partners.

How Long Does It Take For A Life Insurance Policy To Pay Out?

Most companies are on the ball and get the payment to you within 14 to 30 days. If the claim is complicated, then it can take up to 60 days.

The vast majority of claims are straightforward without any issues.

Finding The Best Burial Insurance Rates

When searching for burial insurance or final expense insurance, you want to be sure to work directly with an insurance agent.  While comparing hundreds of rates online is as simple as clicking a button, knowing and understanding the various nuances of policies, premiums, providers and pricing can be very difficult.

In order to get the best burial insurance rates, it is essential to speak with an expert who can help you find the exact policy that is right for you and your family’s financial needs.

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