What is burial insurance?
Burial insurance, also known as funeral insurance or final expense insurance, is a type of life insurance that provides a cash benefit to be used to cover the costs associated with funeral and burial expenses upon the death of the primary policyholder. The main purpose of burial insurance is to ease the financial burden on family members by paying for final costs upfront.
Types of burial insurance policies
There are a few main types of burial insurance policies available:
Final expense whole life insurance
A whole life Burial Insurance policy provides lifetime coverage for the insured individual. Premiums are paid periodically, often monthly, for the insured's lifetime. The death benefit is guaranteed regardless of when death occurs. Whole life policies may accumulate cash value over time that can be borrowed from or surrendered by the policyholder while living.
Burial/final expense term insurance
Term life insurance provides coverage for a set period of time, often 10-30 years. The premium is fixed for the length of the term. If death occurs during the term period, beneficiaries receive the death benefit. Term policies do not build cash value.
Graded death benefit insurance
Graded death benefit policies have a lower death benefit for a set number of years (often the first 2 years) that gradually increases each year until reaching the full death benefit amount. This type of policy protects the insurance company somewhat from adverse selection by new policyholders.
What costs can burial insurance cover?
Some typical costs that burial insurance death benefits can help cover include:
- Funeral home expenses such as basic services fees, visitation/viewing costs, transportation/delivery costs
- Cremation or burial plot/grave costs
- Casket or urn expenses
- Headstone or marker
- Cemetery fees such as opening/closing the grave
- Clergy/officiating fees
- Obituary costs
- Flowers
- Thank you cards
- Transportation of deceased
Burial insurance advantages
There are several advantages to having burial insurance:
- Guarantees funds will be available to loved ones when most needed during a difficult time. Helps take the financial burden off of grieving family members.
- Premiums are relatively low and affordable for most individuals compared to the potential costs of burial/funeral expenses that average $7,000-$10,000 nationwide currently.
- Pays the death benefit directly to the beneficiary to use however needed for burial/funeral costs. No out-of-pocket expenses come out of the estate.
- Can often purchase coverage for oneself as well as a spouse/partner under the same policy for additional protection and convenience.
- Premiums and coverage amounts are guaranteed not to increase during the lifetime of the policyholder provided premiums continue to be paid.
Who should consider burial insurance?
Burial insurance is recommended for:
- Individuals with limited life insurance or no other financial assets to cover end-of-life costs. Final expense policies help fill that coverage gap.
- Senior citizens or retirees living on fixed incomes who want to pre-pay or pre-plan their funeral arrangements.
- Younger families or those with young children to establish coverage before health issues could potentially lead to higher premiums later in life if risks develop.
- Self-employed individuals or those whose employers don't provide group life insurance benefits.
Applying for and purchasing a burial insurance policy
The application process for burial insurance tends to be very straightforward:
- Meet with an insurance agent either in person or over the phone to discuss coverage needs and policy options.
- Complete a brief medical questionnaire regarding current health status. No medical exam is usually required.
- Provide basic identifying and contact information such as name, address, date of birth, beneficiary, etc.
- Select the desired policy type (term vs whole life), coverage amount, premium payment frequency.
- Once approved, sign the application paperwork either electronically or physically depending on the carrier.
- Set up premium payments either through automatic bank withdrawals, credit/debit cards, or mailed payments.
- Receive the policy paperwork in the mail within a few weeks. Coverage takes effect once the first premium is paid.
Policyholders then make timely premium payments, usually monthly, to keep the burial insurance coverage and death benefit active for themselves or their beneficiaries. When death occurs, the named beneficiary files a claim to receive the benefits.
Complaints and criticisms about burial insurance
While burial insurance offers many benefits, it also has some disadvantages and criticisms:
- Products may be oversold to seniors focusing more on pre-paying funeral costs rather than true life insurance needs.
- commissions can incentivize salespeople to aggressively market policies whether truly needed by consumers or not.
- Returns or cash values if any are rarely significant since premiums are tied to insuring against mortality risks primarily.
- Policies may overlap or duplicate existing resources like final expense riders within whole life policies already owned.
- Premiums are not refundable if paid for years and the policy is eventually lapsed since risks were already insured.
- Disclosures about commissions and costs are not always clear or prominently featured by some carriers and agents.
In the burial insurance can be a good solution for many to financially protect loved ones from funeral costs after passing away. But consumers must carefully evaluate their needs, shopping multiple quotes while being wary of potential overselling by some agents focused more on commissions than the consumer's best interests long-term. With the right policy from a reputable carrier, it delivers cost-effective coverage for its intended purpose.
Explore additional details from the source
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About Author:
Money Singh is a seasoned content writer with over four years of experience in the market research sector. Her expertise spans various industries, including food and beverages, biotechnology, chemical and materials, defense and aerospace, consumer goods, etc. (https://www.linkedin.com/in/money-singh-590844163)
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