Burial Insurance: How to Find the Best Policy
What is Burial Insurance?
Burial insurance is a life insurance policy that is designed to cover the cost of your funeral and other “final expenses.” A funeral and burial are often the costliest of the end-of-life expenses but there may also be medical bills, legal fees, housing costs and other remaining bills. A wise planner takes all of these final expenses into consideration when deciding how much insurance they will need. We’re calling it burial insurance here but these policies are also commonly referred to as funeral insurance and final expense insurance. They are basically the same type of policy.
Preneed insurance is another commonly used term but that is a different type of policy. Preneed insurance is tied to a prearranged contract for funeral goods and services. These are contracts with a funeral home or other funeral provider that are created in advance. Burial insurance is not linked to a prearranged funeral contract.
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How does Burial Insurance Work?
To understand how burial insurance works, we need to compare it to other types of life insurance. Certainly, any type of life insurance can be used to pay for your funeral expenses. For most of us the main purpose of life insurance is to provide financial security for our survivors. It can partially replace the income lost due to your death as well as provide an inheritance for your heirs. Burial insurance is specifically designed to cover our final expenses.
True burial insurance is a permanent whole life policy. It differs from “regular” whole life policies because it is issued in lower face amounts – between $1,000 to $25,000 and in some cases as much as $50,000. Due to the lower face amounts, it is easier to qualify for a burial insurance policy. Most importantly, as a whole life policy it will be available until the insured dies provided that the premiums are paid in full. Obviously, the policy needs to be enforce at the time of death so the benefit can be claimed and your final expenses paid.
In our opinion, term life insurance policies cannot be considered burial insurance because they terminate at a certain point in time – either at a specific age (Example: 70, 75 or 80 years old) or terminate after a specific number of years (Example: 10, 15 or 20 years). As a result, a term life policy may terminate before the end of your life.
You might want burial insurance as a supplemental coverage so that the proceeds from your main life insurance policy are not depleted by your final expenses. But if you are concerned about cost, burial insurance provides a more affordable option than regular life insurance.
How Do I Apply For Burial Insurance?
Applications for burial insurance policies fall into 2 basic categories.
Simplified issue policies. Burial insurance policies are usually issued on a “simplified” basis. “Simplified” means that medical exams are generally not required to obtain coverage, although the applicant will have to answer certain medical questions. The insurance company may rely on other information such as Medical Information Bureau (MIB) reports when reviewing applications. Applications may be declined due to pre-existing conditions and a history of smoking.
Guaranteed issue policies. A Guaranteed Issue policy will generally be issued without the need to answer any medical questions. They are typically limited to $25,000 of coverage and limited to ages such as 40 to 80 years old. Many Guaranteed Issue policies do not distinguish between smokers and non-smokers whereas Simplified Issue policies usually do. Look for a guaranteed issue policy if you have health issues or do not want to answer any health questions.
What You Need To Know About Death Benefits in a Policy
The payment of death benefits depends on whether it is a Level Policy or a Modified Policy.
A Level Policy will pay the full face amount of the policy whenever the death occurs, regardless if the death is due to natural causes or an accident. A Modified Policy pays a reduced death benefit during the “restriction period” (typically 1 or 2 years) for deaths due to natural causes. Generally, an accidental death during the restriction period will qualify for the full death benefit regardless of when the death occurs.
Why the difference? Because insurance companies issue Level Policies when there are no medical concerns about the insured. Whereas, Modified Policies are issued when there are some adverse medical considerations and the insurance company wants to limit it’s exposure during the first year or two of the policy. Modified policies may be Simplified Issue or Guaranteed Issue.
Also, be aware that burial insurance policies contain a contestability clause that gives insurance companies the right to examine and contest claims – usually in the first two policy years. If death occurs during this time, the insurance company has the right to conduct a review to the application for any material misrepresentations that would have caused it to decline the policy. Be sure to fully disclose all requested information accurately on an insurance application.
For more information on Level and Modified policies and how to file a death benefit claim see our article on final expense insurance.
How Do I Find Low Cost Burial Insurance?
Your age, health and amount of coverage needed determine the cost of a burial insurance policy. Rates for women are typically a little less than for men. For example, a $5,000 guaranteed issue policy for a 65 year old female will be around $30 per month whereas the same policy for a male might be $37 per month. An underwritten policy would most likely be less depending upon your medical history. These are estimates to give you an idea of the costs. Multiply these figures by 2 to estimate a $10,000 policy and multiply by 3 for a $15,000 policy, and so on.
How Do I Shop For Burial Insurance?
We recommend the following steps when considering and buying burial insurance:
- Estimate your final expenses.
- Determine how much money you will leave behind.
- Decide if you really need burial insurance.
- Decide on the type of policy to buy.
- Request a quote.
- Determine if you can afford the coverage you want.
- Pick a burial insurance provider/li>
For details on how to go about these steps see our article on funeral insurance.
Get an Instant Quote for Burial Insurance
The best way to find out the cost of a burial insurance policy is to request a quote. Our funeral insurance finder will get you started. Your quote is free and you are under no obligation.
Whether you use our Funeral Insurance Finder or go elsewhere, we strongly recommend that you talk with an insurance agent. That’s the best way to find the right policy for you at the lowest price.
If you work in the insurance field you may be interested in the Funeralwise Agency/IMO.