So, what is burial insurance and how is it different than a standard life insurance policy? These are typical questions that surface for individuals when contemplating their life insurance options. Decisions relating to the purchase of any kind of insurance can be overwhelming. Luckily, independent insurance professionals are available to clarify the importance of purchasing such a policy.
It’s no surprise that the average funeral cost has risen substantially in the past few decades. You can now expect to pay approximately $10,000 depending on your location and your burial preferences.
In fact, according to the National Funeral Directors Association (NFDA)
The national median cost of a funeral with viewing and burial for calendar year 2016 was $7,360. If a vault is included, something that is typically required by a cemetery, the median cost is $8,508. The cost does not take into account cemetery, monument or marker costs or miscellaneous cash-advance charges, such as for flowers or an obituary.
Here is a comparison of funeral costs between 2014 and 2017:
What is Burial Insurance?
Simply stated, burial insurance is a plan that allows for your loved ones to pay for all of your final expenses following your passing. These expenses include the funeral and burial, uninsured medical bills, and any outstanding personal debt you do not want to pass on. Oftentimes referred to as final expense insurance or funeral insurance, burial insurance is a wise and affordable choice to help provide for your family financially after your death.
Burial insurance is typically considered a whole life insurance policy with limited underwriting and low death benefits. It has lower coverage limits, around $10,000 on average, but they can range in coverage from anywhere as little as a $5,000 policy up to a $35,000 policy (depending on your age). Fortunately, these plans are easy to apply for and often do not require a medical exam.
The minimum age limit for application of burial insurance is generally around 50 but differs among insurance companies with some offering minimum age limits as low as 40. Likewise, all insurance companies have a maximum age limit in which they can sell burial insurance policies, normally being no older than 80 or 85. However, if you are approved for a burial life insurance policy, you are able to retain that policy until you are 100 years old or older, in other words, for your lifetime.
Time and again, a burial life insurance policy is mistaken for a prepaid funeral; however, there are fundamental differences between these two plans. Funeral insurance, or burial insurance, is purchased through your insurance agency, whereas funeral prepaid plans are purchased directly from the funeral home of your choosing. There is flexibility in the location of the funeral with the burial life insurance policy.
Furthermore, the beneficiary of the burial insurance plan can use the proceeds to cover any unavoidable expenses. Most people choose a burial life insurance policy rather than a prepaid funeral plan in case there are any expenses that they may have forgotten.
Advantages of a Burial Life Insurance Plan
There is a multitude of benefits to purchasing a burial life insurance policy. First, having this policy would give you and your loved ones “peace of mind” and let’s face it, you can’t put a price tag on that. Your loved ones will know that if the unexpected were to happen to you, they would not be searching for the finances to provide you with the final respect that you deserve.
Next, burial insurance plans are a great alternative for applicants that can’t be accepted for traditional life insurance plans. Those in poor health are typically not eligible for coverage under a traditional life insurance policy, and those deemed eligible usually have exorbitant premium payments.
Finally, burial insurance is a good alternative for the elderly as well. In fact, burial insurance is becoming the more popular choice among the elderly due to rising life insurance premiums. Basically, the older an applicant is, the higher the insurance premium is going to be. This is starting a shift towards the purchase of burial insurance policies rather than the traditionally underwritten life insurance policies, allowing the elderly to have adequate coverage in an affordable manner.
Some Disadvantages to Consider
A few things to consider when deciding on purchasing a burial insurance policy are low maximum death benefit payouts ($15,000-$35,000 typically) which may not be readily available should your death occur within the first 2-3 years, depending on the carrier. Age restrictions according to most insurance carriers for applying for burial insurance is a minimum application age of 40 with the maximum age being usually around 85.
Finding a Burial Insurance Plan
If you’ve made the decision that you need to purchase a burial insurance policy, what’s the next step? First, you’re going to need to calculate the approximate coverage amount you will need to purchase based on your final wishes. Although no one looks forward to the topic of end of life care, it is a conversation that has to happen in order to address such preparations as burial, cremation, and other funeral arrangements. The size of your burial insurance policy will depend on your final wishes. You will better comprehend what the final cost – at the end of your life – is if you make the necessary preparations for your final wishes now.
Once you determine how much coverage you will need for a burial insurance policy, you can search out the perfect insurance company that is able to offer the most affordable rates. Of course, rates, policy restrictions, and coverage amounts vary by company, so you will need to conduct the appropriate research to find that perfect fit. It’s always best to contact several insurance agencies before deciding because rates can significantly differ from one company to another.
Tips When Applying
You will want to inquire from each company if they have a level benefit policy and a graded death benefits period, which is the amount of time you will have to wait before the policy is effective. If you are unable to qualify for a level benefit plan, then, by all means, ask for the graded benefit (guaranteed issue) plan because the insurer will not consider your health during the brief underwriting process.
Take, for example, a policy that has a 2-year graded death benefits period. Should something happen to you within the first 2 years once accepted for the policy, the insurance carrier will not pay the face value of the policy. Most insurance companies will repay the premiums that have been paid into the policy, while others will pay the premiums back plus interest.
Carefully consider the graded death benefits period prior to buying a burial insurance policy. This could have a significant impact on your family’s financial stability if the unexpected happened to you within the first year or two after purchasing your policy.