Burial insurance is simply a small life insurance policy that covers the cost of a funeral and burial or cremation.
It exists as an affordable alternative to traditional life insurance policies. Through burial insurance, everybody may have a dignified memorial service without putting their families through financial hardship.
Why is Burial Insurance Important?
Social security only gives a little over $200 toward someone’s burial or cremation. That doesn’t even begin to cover what it costs.
This is nowhere near enough to cover the average cost of a funeral in America, which is anywhere from $7,000 to $12,000.
Burial insurance offers a low-cost way to cover your own end of life expenses. You pay small monthly premiums for a policy that lasts for life. Then, when you pass away, your designated beneficiary receives the money to pay for everything.
In short, it offers a way to remove a burden from people already grieving for you. When everyone else is asking your spouse or one of your children for money, your policy is there to hand them a check.
It’s a gift that says, “I love you.” One last thing which you can do to help the people you love after you pass on.
Who is Burial Insurance Right For?
Burial insurance creates a buffer between final expenses and whoever is in charge of settling your estate. Even if you have the cash on hand to pay for your final expenses, your heirs can still run into trouble until your estate gets divided up.
When a single person passes away, their assets are locked until their will can be read and put through a process called probate.
Probate is where the courts take a look at the will, make sure everything is in order, settle any debts, and distribute whatever is left. This process can easily take a year. Which means that in the meantime, someone still has to cover your final expenses.
When a married person passes away, the surviving spouse still retains control over the joint assets. If you have the cash available, your spouse can use that to pay for your final expenses.
Burial insurance is particularly important for single people with no other life insurance. For married couples, it can be a generous thing to do for your spouse, so they have one less thing to worry about.
In short, if any of the following circumstances apply to you, then burial insurance is something to consider.
What is Covered by Burial Insurance?
Burial insurance works just like life insurance. Although most of the time there are even fewer restrictions than traditional life insurance.
Burial insurance pays out a benefit when the insured person passes away. There are not any certain conditions that must be met.
Some policies come with exclusions for certain things. Although these restrictions tend to be leftovers from decades ago. While it is getting increasingly rare to see these, take a look at any policy you buy to check for the following exclusions:
Your beneficiary (the person who receives the insurance money) can use it for anything they like. Most of the policy will go toward your funeral. If you planned ahead and there is leftover money, your beneficiary can use it toward anything else they with.
The most common uses, after funeral expenses, are paying off the following:
Burial Insurance vs. Term Life Insurance vs. Permanent Life Insurance
Burial insurance is almost always a type of permanent life insurance. You pay a small monthly premium, and it lasts until you pass away.
The main difference between burial and permanent life insurance is the simplicity. Permanent life insurance tends to come with several extra features that make the policy drastically more expensive.
Situations that Best Benefit from Burial Insurance
Burial insurance is one of the most cost-effective ways to pay for your end of life expenses. With small monthly payments, you don’t have to try and save up that money in an account that will be tempting to use for other purposes.
Burial insurance offers much smaller benefit amounts than other types of life insurance.
The other major difference between burial insurance and other types of life insurance is that the underwriting is significantly less restrictive. For example, companies that might otherwise penalize you for being diabetic or multiple sclerosis will not charge you as much for burial insurance.
Situations that Best Benefit From Term Insurance
Term insurance covers a set number of years. If you pass away within that time frame, the insurance company pays your beneficiary. If you do not, then the life insurance company keeps your premiums. Death benefits start at $50,000 for most companies.
Term life insurance is not a great choice to cover end of life expenses. It is better suited to cover the following situations:
Situations that Best Benefit from Permanent Life Insurance
Permanent life insurance is significantly more expensive than the other two options. The benefits typically start around $100,000 and last for life. (Some companies will limit that to age 121.) Many policies have additional components life a cash value accumulation feature which makes for even higher premiums.
Permanent life insurance works best for people in the following situations:
Average Price of a Funeral in America
Funerals, whether they include burial or cremation, cost $8,000 on average. This cost can easily go up as well. Flowers can run a small fortune. Hosting a small reception can quickly add to that average.
National financial surveys show that 61% of Americans cannot cover a $1,000 emergency. So covering an $8,000 or even $10,000 expense is asking the impossible. That makes it more important than ever to make sure your final expenses are covered. And the most affordable way to do that is burial insurance.
Even if you started saving now, most financial experts expect it will take at least a year or two to save up $10,000 on an average wage. For someone who makes less than average or is retired, it can take even longer.
Who Burial Insurance is Not Right For
If you are one of the 39% of American who can cover a $1,000 emergency without sweat, chances are you have your finances in order. If you are closer to retirement age, you also probably have some estate planning finished as well.
While burial insurance can still benefit people with large estates, chances are you’ve already allocated money for your final expenses in your estate planning. People with permanent life insurance policies may also find burial insurance redundant.
In short, if you fall into any of the following, burial insurance may not make sense for you. But it can still be wise to speak with a financial planner to make sure you are prepared.
For everyone else, burial insurance is a wise consideration.
Is Burial Insurance Worth It?
If you want to continue caring for their family after they pass on, yes. Even if you aren’t interested in having a funeral, there is a good chance someone in your family will find it appropriate.
It’s all up to you whether you choose to look into burial insurance or not. But out of all your options for life insurance, it is arguably the most affordable at any age.
How Much Does Burial Insurance Cost?
The premiums for your burial insurance will cost less than permanent insurance. Of course, the main factor in how much the premiums will be is your health.
Burial insurance policies are significantly more lenient with health issues than other types of insurance. The policies are so small in comparison to other types that the insurance companies can afford to take bigger risks.
Even if it would be difficult for your to get a normal policy, there is a good chance you can qualify for burial insurance. Even better, you can qualify at better rates.
Burial Insurance Rate Comparison
Below is a chart comparing insurance prices for men and women ages 50, 65, and 80. It shows how much they would pay each month with burial insurance, term insurance, and permanent life insurance.
The following monthly rates are for someone in good health who doesn’t smoke.
|Age / Sex||Burial Insurance $10,000 benefit||Term Life Insurance $50,000 benefit 20-year term||Permanent Life Insurance $50,000 benefit Universal Life|
|Age 50 – Male||$26.33||$20.25||$80.33|
|Age 50 – Female||$17.24||$15.42||$69.54|
|Age 65 – Male||$50.54||$74.84||$168.92|
|Age 65 – Female||$28.96||$52.96||$149.57|
|Age 80 – Male||$132.65||$380.80**||$545.26|
|Age 80 – Female||$98.43||$277.93**||$499.58|
**20-year terms are no longer available at age 80. The rates represented are for 10-year terms.
Can I Buy Burial Insurance for My Parents?
Yes. Government regulations on the insurance industry allow for people with an “insurance interest” to take out policies on others. Insurable interest means you have a financial incentive for that person to continue living.
All parent-child relationships count as insurable interest. It doesn’t matter whether you will financially gain or not while they are alive.
The downside is you cannot take out a policy without your parents knowing about it. They will need to sign some information releases so that the insurance company can underwrite the policy.
Just be careful not to fall into a common tax pitfall when taking out insurance on your parents. You need to make sure that there are not three different people named as the insured, the policy owner, and the beneficiary.
You can easily avoid this situation by listing yourself as both the policy owner and beneficiary. If you do list three different people for all of these positions, the death benefits on the policy may trigger taxes.
Finding the Best Burial Insurance Rates
When looking for the best burial insurance rates, you want to be sure that you are working with an independent life insurance agent who can compare multiple policies from the best life insurance providers.
We do just this. We compare over 20 of the best burial insurance companies to find the best rate for your specific situation and needs for your family.
Call today to speak with an agent for free, or get a quote instantly with our online quoting engine!