At some point in their lives, seniors need to think about and discuss funeral plans and burial insurance in the US. Of course, it is better done sooner than later. Certainly, most seniors cringe at the thought of discussing death even though it is very necessary. On the other hand, no parent wants to leave behind the struggle and financial burden of laying them to rest when they pass on. Together with the pain of loss, children often find themselves quite overwhelmed when a parent passes on without proper funeral plans. This is because funeral expenses can easily run into thousands of dollars. In the end, it’s an unanticipated burden for grieving loved ones.
While planning for their burial plans, seniors should also bear in mind their funeral and other final expenses. The good news is that there are several options that seniors can explore to plan for end-of-life obligations. One option that many seniors are exploring is burial insurance.
What is burial insurance?
Burial insurance is a type of life insurance that covers funeral, medical, and other end-of-life expenses. Burial insurance is also commonly referred to as final expense insurance, funeral insurance, or senior life insurance. The insurance burial policy designed for seniors is budget-friendly and for those who wish to plan for their funerals in advance. In fact, many seniors consider a life insurance policy. This is because it caters to final expenses including:
- Medical bills
- Purchase of a casket
- Memorial service costs
- Catering
- Flowers
- Headstone
- And others.
Burial insurance is easy to acquire as does not require any medical examination. It is also quite affordable with low fixed premiums. These plans are calculated based on the age and health of the person being insured. However, it offers smaller benefits compared to other insurance policies. Burial insurance can be purchased for much lower values of $5,000 up to $50,000.
Does burial insurance have a cash value?
Yes. Burial insurance is a form of cash policy. This means that it has a cash value that accumulates over time. A portion of the premiums paid allows the insurance holder to withdraw some cash after a certain period whenever they are in need.
Are burial expenses tax-deductible?
Funeral expenses are not tax-deductible for individuals, but can be tax-deductible for estates worth $11.7 million at the federal level as of 2021.
In summary, these are the following benefits:
- It is a type of whole life insurance that does not expire when one reaches a certain age. It remains valid as long as premiums are paid.
- You will accumulate cash value after a certain period to allow the insured access to a policy loan when in need.
- It’s easy to acquire as the application process does not need a medical exam. Some health questions will be asked which will determine the terms of the policy.
- A burial insurance attracts fixed premiums.
- They offer affordable rates compared to the traditional whole life insurance policy.
- Fast approval during application and payout.
Is burial insurance worth it?
Not everyone may have access to traditional whole life insurance. Therefore, burial insurance will be necessary for the following people:
- For those who are approaching retirement, are on a tight budget, and may not have the lump sum to cater for their burial expenses when they pass on. To them, a this insurance policy presents a better alternative to personal savings which could take a much longer time.
- For people who suffer from chronic illnesses like emphysema who may otherwise not qualify for traditional life insurance.
- Anyone engaged in high-risk occupations such as extraction, firefighting, logging, law enforcement, and construction.
- For those who may not qualify for life insurance because of their advanced age.
How does burial insurance work?
We have seen what is burial insurance and how simple it is to acquire one. This policy does not require a medical examination. You will be asked a few questions regarding your health, pre-existing conditions, age, smoking history, and other general questions about you. Some insurers may offer you the burial policy without asking any questions. The premiums you pay will be determined by your age and gender.
It is important, to note that burial insurance may fall under any of these two categories of whole life insurance.
The simplified issue of life insurance
The simplified issue life insurance may not require a medical exam but the person seeking the cover will be asked a few medical questions that will determine their premiums. However, it is not guaranteed as some conditions such as some terminal illnesses could disqualify you from acquiring the insurance. This type of burial insurance is best for people with moderate health who may not qualify for traditional policies. But, for those who require limited coverage for final expense purposes.
The guaranteed issue life insurance
The guaranteed issue life insurance leaves out the medical exam or medical questions. As the name suggests, it is guaranteed one cannot be disqualified from acquiring this policy on any grounds. This makes it a good option for people who may have serious health conditions. Also, it’s for those who may not qualify for the traditional or simplified issue insurance policies but would not mind a small payout to cater for their final life expenses.
Some guaranteed issue life insurance policies may have graded death benefits. This means that in the event that the insured passes on before the end of two or three years, the insurance will not pay out the full death benefit. Rather it will surrender an amount equal to 110% of the premiums paid to the beneficiaries. Accidental death will however receive full insurance benefit.
Choosing your beneficiaries
Whilst the insurance company will surrender the insurance benefit to one’s beneficiary, it is not responsible for how the money will be spent. For this reason, choose a primary beneficiary who will use the funds for the right purpose. Also, be sure that the beneficiary information provided is accurate and up to date. Also, always inform the company of any changes in address, contact details, or other information.
Some people prefer to have the insurance death benefit split among multiple beneficiaries. In this case, have accurate, up-to-date information. Also specify the percentage benefit that each of them should receive after your death to avoid conflict.
How does burial insurance work?
Following death, one’s primary beneficiary should contact the insurance company as soon as possible for claims to be processed. Some documentation includes the identification of the insured, filled claims form, along with a certified copy of death certificate.
How much is burial insurance?
Burial insurance ranges between $10,000 and $20,000 although it can go as low as $5,000 or as high as $50,000. This makes the total much smaller than traditional whole-life policies. Generally, burial insurance offers lower benefits compared to the traditional whole life insurance as it is only used to cover funeral costs.
Owing to this, the premiums for an insurance policy for burial may range anywhere from $30 – $70 per month which is considered affordable, particularly for seniors. This will be determined by factors like:
- Age
- Sex
- Health status
- Coverage amount
For instance, while younger healthy applicants under the age of 70 may pay between $20 and $70 in monthly premiums, older people with an existing health condition may find themselves paying up to $120 premium per month.
Here is a typical itemized funeral budget. This does not include medical bills or credit card debts.
Item Cost
Funeral home $2,000
Body pick up and transportation $350
Embalming $800
Other body preparation (cosmetology, dressing, hair styling) $400
Funeral home facilities and staff vizitation and viewing $500
Funeral home facilities and staff memorial service $500
Hearse/ funeral coach $300
Service car/flower van $150
Funeral home facilities and staff graveside service $450
Casket $2,500
Burial vault $500 - $1,500
Permanent monument $2,000
Estimated total cost $9900 - $10,900
Burial insurance vs life insurance: What’s the difference?
The main difference between burial insurance and life insurance is that the first is a type of life insurance designed specifically for burial expenses. It is easier to acquire, earns a lower coverage value, and also attracts lower premium payments.
On the other hand, the purpose of life insurance is to take care of dependents who are left behind after one has passed on. Life insurance benefits can also be used to settle outstanding debts after the death of a loved one.
The table below shows the differences between both types of insurance.
Burial Insurance Life Insurance
Category A type of life insurance A category of insurance that includes term, whole, simplified issue, guaranteed issue, and other life insurance.
Covers Funeral expenses upon death Natural and accidental causes of death
Coverage value Typically, doesn’t exceed $50,000 Can run into millions of dollars
Premiums Fixed premiums paid throughout the policy period Fixed premiums paid throughout the policy period
Maturity Matures upon death Matures after the expiry of a defined period or upon death whichever comes first.
Cash value Has a cash value with 2 to 3 years waiting period May or may not have cash value depending on the type of policy.
Benefits Lump sum is paid upon death One can receive a lump-sum amount or monthly payments upon maturity. This depends on the type of life insurance.
Requirement Answers to health questions or no questions at all. A medical exam, family history, occupation, and credit information are considered.
Best for Best for those who do not have life insurance or enough savings to cater for their burial expenses. Best for people who desire to provide financial security for their spouse, children, or dependents upon their death.
Burial insurance and life insurance have many things in common. For both insurance policies, the insured person earns lump-sum benefit upon death. However, they are different in several ways. Knowing the facts for burial insurance vs life insurance will help you know which one is best for you.
Where to buy burial insurance
Many regular life insurance companies also offer burial insurance. Some licensed funeral homes in the United States also provide burial insurance. You can find information online and compare quotes to see which ones best suit your needs.
You can also enlist the services of a life insurance agent if you feel overwhelmed by all the quotes you have to go through to decide the best insurance policy for you.
Popular major life insurance companies are:
- Mutual of Omaha
- Nationwide insurance
- AIG
- Fidelity Life
Things to look out for when choosing burial insurance
The best burial insurance policy is one that will cover all the burial expenses and offer a higher benefit than the amount invested in it. There are several factors you need to bear in mind before deciding whether burial insurance policy is the best for you. These are:
- Ease of application: Most burial insurance policies have a simple application process. They do not require medical exam. An applicant simply answers a few questions about their health or none at all. Also, you can buy burial insurance over the phone while others will require the person seeking insurance to visit the insurance company office.
- Eligibility requirements: Some policies are designed for people who are at least 50 years old. Other may have a higher or lower qualification age.
- Coverage maximum value: The coverage value of burial policies varies from one insurance to another. While some insurance companies offer a high coverage value of up to 50%, others will offer lower maximums.
- Cash value: Some burial insurance policies have a cash value that accumulates over time from the premiums paid. This allows the insured person to access to loans that they will repay with interest. Some policies simply do not allow people to borrow loans against the premiums paid.
- Graded benefit period: Some insurance companies offer graded death benefits for their burial insurance policies. This means that the beneficiaries are entitled to benefit equal to 110% of the total premiums contributed. In the event that the insured person passes on from natural causes before two or three years pass. Other companies will pay out the full benefit regardless of how long people pay the premiums.
Conclusion
An insurance burial policy might not offer a high amount in benefits. However, it’s a good option for people who may not have enough savings or alternative insurance policies. Helping their families to cater for their funeral expenses and other end of life costs like medical bills, is important. It is easy to apply and requires no medical examination. Its premiums are pretty affordable too.
