YOUR COMPLETE GUIDE TO BURIAL INSURANCE
Have you spent time speaking about funeral plans with an elderly parent or grandparent? Do you know if your loved one would prefer a funeral and burial over a memorial service and cremation? Most people would rather not dwell on losing their loved ones. Certainly, most older folks would rather enjoy their lives than spend a lot of time contemplating their death. At the same time, most seniors would prefer to have some input into the disposition of their assets and the final celebration of their life.
Most elderly parents also hope to relieve their family members of as much stress as possible. They understand that it’s important to think about different costs that will arise after they die. These older people have taken care of their families for their entire lives, and they don’t want to stop. Starting a discussion about funerals and other end-of-life responsibilities might seem uncomfortable, but seniors and other family members usually feel relieved to find solutions to various issues. For many families, one of the largest issues is coming up with the money to make sure everything can get handled in a dignified and stress-free way.
The Importance of Final Expense Planning
Naturally, end-of-life plans should include some thoughts about funerals and other necessary tasks that somebody will have to attend to after a loved one passes on. The name for various costs that arise after a family member dies are called final expenses. While most people would rather not think about death, it can relieve a lot of stress if the elderly person or somebody in the family has made some financial plans to make certain everything can get paid for.
After parents and grandparents die, survivors will want time to mourn in peace. Nobody wants to have to worry about money. One tool that you might consider to help you plan financially for final expenses is called burial insurance. If you have concerns about the cost of a funeral and burial, you may want to learn more about burial insurance and other ways to cope with final expenses.
What is Burial Insurance?
Before diving into a comprehensive guide to burial policies, it’s important to understand what this term means. You may see burial insurance referred to as funeral insurance, final expense insurance, or even senior life insurance. It’s likely that you have seen ads for these kinds of products on TV or on the internet. All of these names for burial insurance refer to a whole life insurance policy that has been designed for older people and families to use to pay for final expenses.
One advantage of burial insurance is that it’s very easy to buy. Applications for this kind of life insurance usually only ask a few health questions, and some guaranteed-acceptance policies won’t even ask any health questions at all. If you compare final expense insurance to other typical life insurance policies, the death benefits are fairly modest, and that helps keep the premiums affordable for many seniors or their families.
These are some typical characteristics of final expense insurance:
- Insurance companies generally offer this kind of policy to people from about 50 or 55 to 80 or even 85 years of age.
- You can usually select a death benefit from $5,000 to $25,000, though you may find some insurers that will offer somewhat higher or lower face values.
- The policy will pay a cash benefit to the beneficiary. In turn, the beneficiary can use the cash to handle funeral expenses or in any way that he or she sees fit. You can also split the death benefit between two or more beneficiaries.
- Typically, life insurance agents and companies market these funeral policies. Some funeral homes may have a license to sell burial policies in order to serve their clients, but funeral homes usually approach funeral planning with a prepaid funeral plan.
What About Prepaid Funeral Plans?
It’s also important to understand that burial insurance policies are not generally the kind of pre-need funeral plans that funeral homes might sell. This quick summary highlights the typical differences:
- While some funeral homes may also sell prepaid plans, the benefits of these are simply to have the funeral paid off in advance at that funeral home. In some cases, the prepaid plan might also include a chain of affiliated funeral homes that you might transfer your plan to. It’s possible that funeral homes may use life insurance to help fund these products, but they intend to collect upon the death benefit.
- Final expense insurance actually offers beneficiaries a cash benefit that they can decide how to use after their loved one dies. For instance, the beneficiary might use some of the cash to pay for final expenses and have the right to save any money left over. In this way, the policy can fund final expenses and also leave a small inheritance to children, grandchildren, or a surviving spouse.
This article isn’t intended to argue for the advantages of burial policies vs. prepaid funeral plans, but you should know the difference to make a good choice. In the best case, you will have a chance to explore a few different options to find the best solution for your family.
Who Needs Burial Insurance?
If you haven’t helped plan a funeral lately, some statistics about the costs of funeral from the National Funeral Director’s Association might surprise you:
- The latest reports showed an average cost of over $8,500 for a U.S. funeral and burial in 2015. This figure represents an increase of about 30 percent from the prior decade, and is almost certainly higher today. Of course, your own price may vary because of options you select or where you live in the country.
- Substituting a cremation for a burial may reduce the average bill by about $2,000. Some families might also substitute an informal memorial service for a formal funeral to save more money. The idea, of course, is to offer a loved one a dignified sendoff and fulfill their wishes. Some families decide upon a memorial service because they prefer a less formal or more personal celebration and not because it might be cheaper.
- When a loved one dies, families usually have to deal with many other final expenses besides a funeral. Some examples might include feeding guests, paying off bills, transporting the body, taking time away from work, traveling, cleaning out a home, and so on. It’s tough to have to worry about money during a period of mourning.
In any case, it’s difficult for many seniors to put aside money to pay for these expenses, and the bills can also cause a hardship for many middle-class families. Typically, the insured person will name an adult child, or children, as the beneficiary. The person who receives the cash can use to handle all manner of final expenses, according to their loved one’s wishes. Beneficiaries are also free to save or spend any leftover money in any way that they choose.
What Does a Burial Policy Cover?
Like any other life insurance policy, burial policies cover the insured person’s life. The cash benefit is payable upon their death, according to the terms of the policy when it was purchased. Most people buy final expense insurance to make sure they can cover the cost of a funeral home, burial, cremation facility, and/or memorial service. The important takeaway is that there is no rule or law about how the money gets spent. Typically, the person who will be responsible for carrying out final plans will be named as the beneficiary.
Consider some final expenses you may incur in addition to funeral costs:
- After a loved one dies, you might need to travel for a funeral.
- Alternatively, you may need to feed and house funeral guests.
- Your obligations may cause you to miss time from work.
- You may also need to clean out your loved one’s belongings from their home and even have to pay a probate lawyer to help settle the estate.
- Few mourners ever regretted having an extra infusion of cash after a loved one passed away.
Since the face values of these final expense insurance policies are usually fairly modest, insurers agree to pay promptly and in a lump sum. Typically, the beneficiary just has to present a death certificate to get the check. In some cases, it can take several days to get an official death certificate. Some funeral homes will even accept a copy of the policy or a phone call to the insurance company as a guarantee of prepayment because they will know you have the funds coming from an insurer.
Who Pays the Final Expense Insurance Premiums?
In some cases, the elderly person who wants the insurance will pay the premiums. Of course, many senior citizens have to live on tight budgets and aren’t actually the people who will benefit from a burial policy in the end. Very often, an adult child will step up and offer to pay the premium, particularly if that adult child is the one who will be named as the beneficiary. After all, that adult child is the one who will gain the benefits.
Most of these companies ask for automated debits against a bank account to pay premiums. This keeps the policy from getting terminated for nonpayment, which is really the only reason that the insurance company could terminate the policy once they accept it. It’s best to make sure the policy won’t get terminated because any kind of life insurance may be unavailable or more expensive as time passes.
Kinds of Funeral Insurance You Might Consider
It’s important to understand that you might find different kinds of burial policies. Mostly, this has to do with the application process and how benefits get paid. This fact underscores the importance of comparing different policies and different insurance companies before making a decision.
Here’s what you need to know about common kinds of funeral expense insurance policies:
Guaranteed Acceptance Burial Insurance
You might see advertisements for senior life policies that don’t require any answers to health questions upon the application. Everybody who qualifies and applies gets accepted. These may appear attractive and even seem to good to be true. Obviously, insurance company executives know that these will kinds of insurance will attract people who are already seriously ill or infirm.
You might even wonder how insurance companies can make money if they accept everybody. Insurance companies know how to make a profit. Your main concern is getting the best value for yourself.
It’s important for you to understand how a guaranteed acceptance policy will work:
- Insurers that offer guaranteed accepted policies will virtually always impose a two- to three-year waiting period before the policy will pay the entire death benefit.
- If the insured person passes away before the waiting period ends, the insurer will usually either refund premiums with interest or pay some percentage of the full death benefit. In some cases, they may have a graded benefit that will vary by the length of time that the insured person survives after they started their policy.
- If the insured individual survives the waiting period, the policies will pay the full face value just like any other insurance.
The takeaway is that you might consider guaranteed acceptance policies for an elderly person with serious health issues, but you should carefully understand how the waiting period works. When compared to other options for life insurance, these policies may charge more for modest amounts of insurance and offer poorer benefits. The advantage of guaranteed acceptance policies is that they are easy to get.
Simplified Issue Senior Life Insurance
You can also find senior life insurance companies that will require the answer to just a few health questions on an application. These are YES or NO questions that are simple to answer. For instance, they might require a NO answer to questions like:
- Are you currently in a nursing home?
- Have you been diagnosed with disease that’s expected to be terminal within the next three years?
- Do you suffer from any brain diseases, like Alzheimer’s or dementia?
The majority of relatively active seniors can answer NO to these questions and still get accepted for one of these simplified issue policies. Furthermore, they won’t be required to take a medical exam.
Here’s why it’s better to look for simplified issue senior life insurance policies than guaranteed acceptance policies:
- They are considerable cheaper and usually allow for higher death benefits.
- They pay an immediate death period and don’t have any waiting period. Once the policy is issued, the insured person qualifies for the entire death benefit.
Consider answering a few health questions on the application in order enjoy cheaper premiums, higher death benefits, and an immediate qualification for the full face value.
Fully Underwritten Life Insurance
Younger and relatively active seniors may very well qualify for a fully underwritten life insurance policy. Typically, you would want to consider permanent and not term insurance for a burial policy, but term will be cheaper. The problem is that the term might expire before a younger and healthier senior passes away. Most insurers will only offer 10-year terms to people who have reached retirement age, but a 55-year-old may be able to find a 20-year term.
Why would you want to use a fully underwritten life insurance policy as burial insurance? You will find that these policies offer better benefits at a lower cost. If you are an active and healthy, you should look into a fully underwritten policy as an alternative. These won’t be called burial policies, but they can serve the same purpose.
Prepaid Funeral Plans
As discussed earlier, a prepaid funeral plan may or may not rely upon some form of life insurance. Funeral homes aren’t always that transparent about how these plans work. From your perspective, they work like prepaying a funeral home for some or all of their services. Instead of getting a cash death benefit paid to beneficiaries, the benefit goes directly to the funeral home.
These may work for people who know what kind of funeral they want and where they want to have it. Some companies allow the benefits to transfer to other funeral homes within a network, so they don’t always entirely lock you into one funeral home. You might enjoy the advantage of locking in today’s prices for a funeral that may occur decades in the future.
Determining the Amount of Burial Coverage That You Need
If your main focus for buying these funeral policies is simply to pay for your funeral, memorial service, cremation, or burial, than you may want to visit funeral homes in your area to get an idea how much money you will need. Previously, you saw some statistics about average costs, but you can certainly spend a lot more or a lot less.
These are some average cost figures pulled from the National Funeral Director’s Association for average U.S. rates, but you should definitely do some local shopping around to compare these prices within your own town or city:
- Full service, vault, and burial: About $8,500
- Full service and cremation: About $6,000
- Direct cremation and urn: About $2,000
- Memorial service: Varies
Keep in mind that you may also have to pay to transport a body and for other odds and ends. If you are the beneficiary, you can decide where to allocate funds. You will probably never regret overestimating instead of underestimating because you may have to spend money on other expenses that are associated with the loss of a family member.
Also, prices only seem to increase over time, so if you expect your loved one to survive several years, you might want to remember that the price of average funerals increased by almost 30 percent in the last decade. You might want to take your estimate and add at least another thirty percent to it to make sure you have enough money when you need it. If you end up with more money than you need, you can keep it, so you won’t be taking a big risk.
How Does Burial Insurance Work With Other Life Insurance?
Life insurance offers people a simple way to transfer money to the next generation and to leave an inheritance. It’s possible that your loved one already has a life insurance policy that they got from their past jobs or bought on their own. The beneficiaries of that older policy will still get to collect the proceeds from it.
With a burial policy, beneficiaries of other life insurance won’t have to take any of the money from the death benefit of the first policy to pay for final expenses. In some cases, dependents may need the proceeds from the first policy to help pay for living expenses.
It’s worth mentioning that some seniors do purchase these burial policies to leave money to children and grandchildren and not just to pay for funeral expenses. Typically, beneficiaries can collect the proceeds from a life insurance policies without having to pay taxes on it. That explains why these policies offer such a handy way to transfer money from one generation to the next.
How Much Does a Burial Policy Cost?
If you believe burial insurance will help you and your family plan for final expenses, you still probably wonder about the cost. As with almost any life insurance policy, your burial insurance premiums will depend upon age, location, and the death benefit. You will probably find that some companies offer cheaper premiums than others for very similar products, so it’s always a good idea to shop around. With any policies that require answers to health questions, you may be declined for certain preexisting conditions.
To help you understand how much a burial policy might cost, you can look at some sample prices that were pulled from online quotes. Note that these are only samples and won’t be likely to represent the exact price that you would pay. They could be different because of your location, age, and available insurance companies.
These sample premiums are for a 65-year-old woman who lives in Texas and does not smoke:
- Death benefit of $10,000 for simplified issue: $37
- Death benefit of $10,000 for guaranteed issue: $54
- Death benefit of $20,000 for simplified issue: $71
- Death benefit of $20,000 for guaranteed acceptance: $107
Premiums tend to increase with age. Smokers may pay more than nonsmokers. These are all level premiums, so you don’t have to worry about your rates increasing if you keep your policy in force. Your policy should remain in force for a lifetime unless you let it lapse because you don’t pay premiums on time. Again, some of you may qualify for a fully underwritten policy with premiums that are lower than those listed for simplified or guaranteed issue.
Alternatives to Burial Insurance Policies
Are there good alternatives to burial insurance? Burial insurance may or may not be the best solution for you and your family. You should find burial policies very easy to apply for and to buy. Since the insurers limit death benefits to several thousand dollars, premiums may be affordable for middle-class families. Even though you may find premiums modest, it’s possible that you can find other ways to plan for final expenses that offer you more benefits, depending upon your situation.
Consider these alternatives to final expense insurance policies:
- Other kinds of life insurance: Some life insurance companies will still offer term or fully underwritten permanent policies to relatively healthy applicants in their sixties and maybe even in their seventies. You may enjoy better benefits for less money if you can qualify for one of these other kinds of life insurance policies.
- Savings and investments: You could set up a savings or investment that is payable upon death to the person who will be responsible for making final arrangements. If you contribute to this account every month instead of paying premiums, you might be able to set aside plenty of money to pay for a funeral and burial. You can also use this cash while you are still alive.
- Churches, charities, and government agencies: Your church, a local charity, or even a local senior services government organization may have some funds set aside to help people pay for funerals and burials. This page on ElderCare.gov has links to state organizations that can provide information and in some cases, funding.
In addition, you may have benefits from other sources that will help defray final expenses. These are some examples:
Veterans may not have to pay for a burial or service in a VA cemetery. In addition, the VA may contribute up to $762 for a funeral and another $762 for a plot for those who do not want a burial in a national cemetery. Check the veterans’ burial benefits page on the VA website for more information about how to qualify. In addition, survivors, such as spouses and children, may be entitled to survivor benefits.
Social Security might offer a lump-sum death benefit to surviving spouses or dependent children. This benefit is only $255, so it’s not likely to cover all final expenses. Still, qualifying spouses or children should know that it exists, so they can collect what they are entitled to. In some cases, spouses or dependent children may also qualify for Social Security survivor benefits.
Donating Bodies for Science
You can search online for local organizations that help medical schools, hospitals, and other institutions gather cadavers to use for study, transplants, or research. Science Care is an example of an organization you can use to register for a service like this. Typically, the organization will pay to transport the body for use. After the facility has finished, the organization will also pay for a cremation and then return the urn with cremated remains to the family.
Some families or even individuals may take this route to avoid having to pay for a funeral. These days, it’s become a more common option even for those families who could afford all of their funeral expenses. They do it because the elderly person wanted to donate their body as a way to help train doctors or advance science. The family is still free to have a funeral or memorial service at their convenience. After a loved one receives the urn back, they are free to spread the ashes or store the urn however they see fit.
How to Find Affordable Burial Insurance
Before you decide which policy to buy and who to buy it from, you can benefit from some comparison shopping of benefits and premiums. These are some things you can learn:
- Find out which policies you qualify for: You can find information about what health conditions might disqualify you for a simplified issue policy, so you know if you should search for guaranteed acceptance policies or not. Insurers might publish their applications on the internet, or you can gain more information about your best options from a life insurance agent.
- Get customized quotes to compare: You should find customized final expense insurance quotes for various death benefits, so you can balance the size of the policy against the price. You should also take the chance to compare a handful of insurers in your area. You might find these burial insurance quotes online or through an independent insurance agent.
- Make sure burial insurance is the right solution: You will also get a chance to decide if your family would benefit the most from final expense insurance, prepaid funeral plans, or by planning in some other way. You may find that some alternatives to final expense insurance, such as selling an asset, provide better options.
It’s very likely that you can learn a lot by simply searching on the internet for final expense insurance companies. Some quote systems even deliver competitive quotes from multiple insurers to your screen. They may even let you begin the application process online. If not, they will probably help you connect with an experienced and licensed life insurance agent who can help you. A good life insurance agent should interview and then come up with the option that offers you the best value.
Should You Buy Burial Insurance?
Burial insurance may offer your family a simple and affordable way to plan for final expenses. After you determine what kinds of expenses you may have, you can estimate costs. If you find that handling those costs will cause financial strain, you might consider burial insurance or other options.
Starting a discussion about funerals and other end-of-life responsibilities might seem uncomfortable, but seniors and other family members usually feel relieved to find solutions to various issues.