Burial Insurance Policies: Guide To Policies And Costs
Burial insurance policies are usually less expensive than life insurance policies with a more modest final sum, making burial insurance available to many senior citizens.
When someone dies, their loved ones need time to mourn in peace. No one wants to also have to worry about planning and associated expenses of a funeral.
As such, any good end-of-life plan will include some mention of funeral preferences and other costs associated with the death of a loved one.
Of course, no one wants to think about death and final expenses but taking time to lay out funeral plans and a scheme to pay for the service will alleviate a lot of stress for loved ones.
Burial insurance is a tool that many people find useful to guarantee that the funeral they want can be paid for, without putting excessive strain on their family. Other people find that a prepaid funeral plan is a better fit for their families.
Both of these options are discussed below.
Burial Insurance Policies
It is important to fully understand the term ‘burial insurance’ when looking for a plan that will suit your needs. This type of insurance can also be called senior life insurance, final expense insurance, or funeral insurance.
Remember that these names all mean the same thing – it is an insurance policy that has been tailored to older people and their families to pay for any final expenses. As these sorts of policies are so popular, they are fortunately very easy to purchase.
You can get some policies that are guaranteed acceptance that will not ask any questions about you, but most require some information about your health to calculate the price of the premiums and eventual payout.
But do not worry –
Key Features Of burial Insurance Policy To Look Out For
- On average, the death benefit payout will be between $5,000 and $25,000, though obviously there will be some policies out there that pay out more or less so be sure to look around to find the right policy for you.
- Burial insurance will pay the cash benefit to the nominated beneficiary – or beneficiaries – on the death of the policyholder. This money can be used exclusively for the funeral or can be used in any way that the beneficiary thinks is appropriate.
- As a general rule, these types of insurance are available to anyone who is over the age of 50. Be sure to check the plan thoroughly as some plans are only available to those aged over 55 or 60 and some have an age limit of 80 to 85.
Prepaid Funeral Plans
It is important to know that a prepaid funeral plan, often available from a funeral home, is an entirely separate way to organize your affairs. A prepaid funeral plan is just that – you plan your funeral with the home and pay for it before you pass on.
A fair number of funeral homes will have a prepaid funeral plan or something similar so you are able to plan and pay for your funeral in advance.
Some larger companies will let you transfer your plan to a different funeral home that is part of a chain or affiliated with the company but be aware that this is not always the case.
Paying off a funeral in advance, so that burden does not fall on their families, is often enough peace of mind for some people – you may not need burial insurance at all if this is you.
You also need to keep in mind that some funeral homes will offer life insurance attached to any prepaid funeral service or product.
This type of arrangement just means that the funeral home will collect all or some of the death benefit, depending on the terms of the prepaid funeral plan, to pay for some or all of your funeral.
Keep in mind that a burial insurance benefit will be paid to any beneficiaries to be used however they see fit and this might include the cost of a funeral. Any leftover money can then be saved or spent elsewhere, possibly leaving a small inheritance for family members.
Burial Insurance Policies: What Is And Is Not Covered?
For burial insurance, there are no fixed rules as to how to spend the benefit. Generally, however, the benefits are spent on funeral homes, burial or cremation, and a memorial service but this is by no means set in stone.
The beneficiaries can spend the money on sorting out the estate of the departed loved one, including on probate lawyers.
As the actual monetary value of such a policy isn’t usually exorbitant, the lump sum tends to be paid out to the named beneficiaries quickly upon receipt of death.
Death certificates can take several days to arrive so some funeral homes are happy to accept a copy of the relevant policy as a form of guaranteed prepayment as the benefit will soon be paid.
Policy Premium Payment
It is most common for the policyholder to pay their own premiums or for an appropriate adult – usually an adult child – to pay.
The latter is particularly common if the adult child is the one who shall be named beneficiary, especially if the policyholder themselves lives on a tight budget.
The cost of the premiums will be dictated by the final benefit amount, the type of insurance chosen, and the policyholder’s health and lifestyle as well as their location.
For a better idea of premium costs, take a hypothetical non-smoker from Texas who is 65. For a benefit of $10,000 from a guaranteed acceptance insurance policy, they would pay around $55 a month.
For the same benefit but with a simplified issue insurance policy, this will be a little bit cheaper at $37. If the benefit is raised to $20,000, guaranteed acceptance premiums increase to around $110 and simplified issue policyholders can expect to pay $71.
With so many policies available for burial insurance you are bound to find the right one for your budget so be sure to look around.
Keep in mind that premiums are probably going to increase as the policyholder gets older and there will be a dramatic increase if they take up smoking.
Calculating The Benefit Amount
As the main purpose of burial insurance is to pay for a funeral, memorial service, or other end-of-life ceremonies, the benefit payout needs to be enough to cover these expenses.
It is therefore a good idea to go to several funeral homes to get an idea of the cost of your preferred type of service. Generally, you can expect to pay around $8,500 for a full service, with a vault burial. This is the most expensive type of service.
You could opt for a full service with a cremation which is a little less pricey at roughly $6,000, or a basic cremation with an urn for around $2,000. Be aware that memorial service prices range substantially so a rough cost cannot be calculated.
Remember that relying on ‘average cost’ data for funerals alone is not a good way to calculate the required benefit amount because these prices are just that – averages.
Some funerals will cost less than this estimate and there is certainly room to spend a lot more, depending on a range of factors including the state you live in.
You also need to consider the cost of other aspects that are not often considered in the total cost of a funeral. Remember that the recently deceased will need to be taken to the funeral home and flowers, while a beautiful tribute, can quickly rack up the cost.
With this in mind, it is better to slightly overestimate the amount of money that is needed rather than underestimate – any leftover funds can be distributed as the beneficiary sees fit.
Increased costs also need to be considered when calculating the benefit amount as the cost of a funeral has increased by over 30% in the last ten years.
Types Of Funeral Insurance
There are several different types of burial insurance available on the market so it is important that the differences are understood so you can make an informed decision on which policy is best for you.
Most of the differences involved in the different policy types are to do with how the final benefit is paid and the application process.
Simplified Issue Insurance
This type of policy has very few health questions and is primarily for those who need insurance but do not want a medical exam.
The lack of a medical exam means that policy coverage can begin in a few days rather than a few weeks, perfect for those who need insurance immediately.
The premiums for a simplified issue insurance policy can be higher than life insurance premiums as there is no required medical, but you will often have the option to answer a few medical questions to have the premiums lowered.
The final payout on death can be anywhere from under $5,000 to over $100,000. This will be paid out immediately after confirmation and there is no waiting period.
Guaranteed Accepted Burial Insurance
If you are particularly averse to answering any medical questions, a guaranteed acceptance burial insurance policy is a good option.
There are no medical examinations or questions of any kind associated with such a policy – anyone who applies gets accepted.
Be sure to read the fine print on these policies as many require several years of premium payment before the full death benefit will be paid and some do not pay out anything until two full years have passed.
Some insurers will refund some of the paid premiums if the policyholder dies before they qualify for full payout so be sure to check thoroughly before opening such a policy and be sure to ask any questions if you are unsure.
Guaranteed acceptance policies have higher premiums but comparatively low benefit payouts.
As such, many people looking for burial insurance view these policies as ‘last resort options’ and only accept a guaranteed acceptance policy if they are unable to get accepted elsewhere.
Insurance companies know this and so often gear policies towards those who have serious health issues whilst also ensuring they make a profit – these policies are not necessarily ‘bad’ but you do need to keep your wits about you and ensure that you research well.
Fully Underwritten Insurance
Those who qualify for fully underwritten insurance policies, particularly those who are younger seniors or quite fit, should keep in mind that a term insurance burial or funeral policy is not ideal.
A term insurance policy is likely to expire before you do as most insurance companies only offer ten-year terms. You should instead find a permanent policy.
Fully underwritten insurance policies are a good alternative to a burial policy but can be set up to ultimately serve the same purpose.
A healthy policyholder may find that the premiums are lower than other burial insurance policies available but with more appealing benefits.
Prepaid Funeral Plans
This kind of policy has been discussed previously and can be considered a type of burial insurance as they can be tied to life insurance policies.
You are essentially prepaying a funeral home for their work with these policies so the benefit paid on death goes straight to the funeral home rather than to the beneficiary.
These policies are great for those who know the when, where, and what of their preferred arrangements.
These policies also offer the benefit of guaranteeing the price of your funeral the moment you open the plan so there is no need to factor in inflation or rising funeral costs.
Just remember that you may be tied to the funeral home you make the plan with. Some companies will give the option of choosing the funeral home after the policyholder has passed if they are tied to a network, but this is by no means standard.
Be sure to check with your policyholder.
Alternatives To Burial Insurance
If burial insurance in any form is not ideal for your needs, there are some other options available that should be explored.
The perfect choice may be something as simple as a more traditional life insurance policy, perfect for younger and healthy seniors.
The cost of premiums for a life insurance policy is generally lower than for burial, with a larger death benefit payout.
If the thought of paying premiums to an insurance company does not appeal, why not set up a savings or investment account that will be passed to a beneficiary upon death?
This account can be paid into on your own terms and, through some basic research and budgeting, can be enough to pay for a funeral in full.
This setup also means that the money is always accessible by the account holder, a benefit that is not available to those who opt for insurance.
Veterans should check with Veterans Affairs to see if they are eligible for any of their benefits and some may not have to pay for burial in a VA cemetery.
The VA will pay just under $800 for a plot in a non-VA cemetery and an additional $800 towards general funeral expenses so do check to see if you qualify.
If you are concerned about funeral costs or simply do not want to have that sort of ceremony you have the option of donating your body to science.
You can register your interest with a company, like Science Care, which will sort out all administration and transportation.
The organization or institution that studied the body will then sort out a cremation and send the remains back to the family in an urn.
The estate of the family of the deceased will at no point contribute to the cost of this arrangement.
If your primary concern is cost, why not check with local charities and religious organizations.
Some of these groups, particularly religious ones, are likely to have some funds set aside for those who cannot afford to pay for all aspects of the funeral.
There are also some state and governmental agencies that can contribute to the cost – be sure to check for eligibility.