If you were to unexpectedly pass tomorrow, would your family and loved ones have enough money to pay for your funeral costs? Or will they be left in a panic, scrambling to locate the cash among them? The reality is that no one knows when the unexpected may happen, so why not make sure your loved ones will have adequate coverage to handle your final expenses.
Life insurance is an important element of a successful financial plan. Even if you already have a life insurance policy, you may or may not have designated a fragment of that coverage to cover your funeral or other final expenses.
According to Parting.Com, a national company that tracks funeral homes, the average cost of a moderately priced funeral is between $7,000 and $10,000:
Today, the average North American traditional funeral costs between $7,000 and $10,000. This price range includes the services at the funeral home, burial in a cemetery, and the installation of a headstone. While cremation is gaining in popularity, the traditional funeral is still the most popular manner for disposing of the deceased. Read the Article…
In most cases, this is an amount that most families just do not have laying around readily available. This is what makes having burial insurance an important addition to your financial planning.
What is Burial Insurance?
Burial insurance is a life insurance product specifically designed to pay the policyholder’s funeral and other final expenses. Referred to as final expense insurance or simply, funeral insurance, this type of coverage is typically approved for those between the ages of 50 and 85. However, there are a few insurance providers that offer burial insurance to applicants older than the age of 85.
Burial insurance policies are actually small whole life insurance policies that build cash value over time. Furthermore, burial insurance provides a death benefit. This death benefit amount cannot decrease, nor can the premium amount increase.
The death benefit coverage offered with a burial insurance policy typically ranges between $5,000 and $25,000. However, in some instances, the applicant may want to add additional coverage in order to adequately cover other unexpected costs, such as uninsured medical expenses or hospice care.
Still, there are some insurers that will provide burial insurance death benefits that are in the excess of $100,000, and in some instances, even up to $500,000. It is wise to have an idea of how much a funeral or other related burial expenses cost in your area so that you will be better prepared when deciding on the amount of protection you feel will give you and loved ones’ peace of mind.
How Does Burial Insurance Work?
This policy should not be confused with funeral insurance products, which is prepaid to the funeral home by the insured. With burial insurance, beneficiaries are able to use the insurance benefit for the deceased’s debts and/or other related final expenses.
The following are a few factors to consider when contemplating purchasing burial insurance.
1. Approval
Burial insurance policies are typically exclusively available to applicants over a specific age, most often 45 years of age. Even though complete medical exams aren’t necessary, applicants may be required to answer some general questions regarding their overall health. And unfortunately, disclosing certain medical conditions, such as cancer and addiction, oftentimes leads to the denial of coverage.
2. Waiting Period
If the company’s underwriting policies reflect that the potential policyholder has increased risk, the burial life insurance provider may withhold issuing a full death benefit at first. However, the death benefit will increase over time, according to the insurer’s schedule. For example, Tom was recently diagnosed with cancer, so his burial insurance death benefit is really only 25% of the normal value until the waiting period set by the insurer passes, such as 2 years. It is possible that his death benefit will increase during years one through three, but that depends on his insurer’s rules.
3. Cost
Typically, burial insurance is more expensive than traditional whole life insurance due to the fact that the applicant is not subjected to a full medical history evaluation. This lack of scrutiny increases the insurer’s perceived risk, thus reflecting higher premiums. Even though policy rates differ by insurer, location and coverage amount, burial insurance premium rates are most often substantially higher than rates for traditional whole life insurance coverage.
Here the rates offered by Foresters Life Insurance for $10,000 in Burial Insurance with a level benefit:
4. Death Benefit Payout
Burial insurance policies come with a death benefit, which is a specific amount that the insurer will pay if the policyholder passes, regardless if the policy is paid in full at the time or not. However, if the policyholder borrowed against or received a loan from the policy, the amount deducted would be subtracted from the death benefit payout. Also, depending on the policy’s rules, the insurer may charge interest on the amount advanced or withdrawn.
5. Policy Restrictions
Oftentimes policies have restrictions, such as suicide exceptions and contestability period. These exceptions state that the insurer does not have to pay in the event that the policyholder commits suicide or that there is a clause within the policy addressing such. This insurance contestability period, specified within the policy, allows for the insurer to investigate the applicant’s cause of death and previous health in case the applicant did not disclose something upon application. For example, Mary purchases a burial insurance policy with a two-year contest clause and doesn’t disclose her preexisting condition of cancer on her application. Should Mary die from her cancer while the clause is in effect, the insurer will investigate and examine the nature of her death, and will most likely, not have to pay out.
Where to Get the Best Rates
Multiple life insurance carriers offer burial insurance coverage. But in order to obtain the best possible rates on this type of coverage, you will need to compare premium rates and policies of several different life insurance carriers before making your final decision.
Comparing each individual insurer singularly would be extremely time-consuming. A more efficient alternative would be to work alongside an independent life insurance broker or agency that works with a network of multiple insurance carriers. This route will afford you the ability to compare coverages and prices directly, from an unbiased perspective and then from there you are able to best determine which plan will be right for you.
If you believe you are ready to move forward with purchasing a burial life insurance policy, we can assist you. We work with many of the top life insurance providers in the industry, and we can help you gather the relevant details that are required for making an informed decision. We can guide you through the burial insurance quoting process and help you determine which plan and premium are the best for you, your loved ones, and your budget.
We appreciate that purchasing burial life insurance can be somewhat overwhelming. With so many factors to consider, you want to ensure that you purchase the appropriate type of coverage at a premium amount you can afford. Let us help you make this important decision today.