Losing a loved one can be devastating and stressful, but having funeral expenses that you can’t pay for makes the experience even worse. Discussing funerals is not necessarily anyone’s favorite topic, but it is one that you must have. The average cost of a funeral has continued to rise, reaching around $8,500 in 2015. There are several expenses that families forget to account for when planning a funeral. Services like embalming, memorial services, transportation, and flowers, all of these costs can add up quickly.
One of the easiest ways to offset the rising costs of a funeral, whether it be the cost of a burial or a cremation service, is to purchase a burial insurance policy (also called final expense or funeral insurance). These policies provide the added resources to cover the full cost of a funeral without leaving your loved ones in debt because of your passing.
Burial life insurance policies can have coverage amounts that range from $2,500 to $20,000. They can be purchased from most large insurance companies. For many companies, the applicant must be at least 50 years old to apply for a funeral insurance plan.
Everyone is different, and each family has different insurance needs based on their specific situation. It can be a difficult process deciding which type of coverage is going to work best for you. We are going to explore burial insurance and the different benefits of the plans and if one of these burial insurance policies are going to work best for you and your family.
Burial Insurance Explained
Burial insurance works similarly to other insurance plans, but with the idea that the payout from the plan can be used to cover the expenses of a funeral and all other final expenses like medical bills or unpaid debts. These plans are offered by many insurance companies and can be purchased up to age 100 depending on the company. Over the course of the policy, the premiums will never increase and are effective for as long as payments are continued. These policies are cash policies, meaning they will build cash value the longer you hold the policy.
These plans are different from Pre-Need Insurance or Pre-Paid Funeral Insurance. Pre-Need Insurance plans are bought directly from funeral homes. These plans work similarly, but you are restricted to using that particular funeral home. Also, the family will be required to pay any differences in the cost if the funeral prices have risen since the policy was bought. Some policies will have a price guarantee, which means that if the price goes up in the future, you won’t be forced to cover the costs.
Benefits Of A Final Expense Policy
Aside from covering final expenses, they are additional benefits to purchasing a final expense insurance plan versus other insurance policies. Typically funeral insurance plans will have much lower monthly premiums compared to a life insurance policy, especially a no exam life insurance policy. Depending on your situation, you may be able to find a $25,000 policy for less than $15 a month. If you’re looking to get affordable insurance coverage, then a burial insurance policy is going to be one of the best options for you. Because these policies are much smaller, the premiums are going to be more affordable than a traditional life insurance plan that has a lot larger payout.
Another benefit of burial policies is the simplicity and ease of applying and being accepted for the plan. The plan requires you to complete a simple health questionnaire that can usually be completed in less than an hour. Unlike other insurance policies, there is no medical exam for receiving a final expense insurance policy. Because there is no medical exam required for these plans, they are a great policy for anyone that is in less than perfect health or has several pre-existing conditions. If you’ve ever been declined for life insurance, you can still get life insurance. Regardless of your health, you will be able to buy a burial insurance policy.
One reason that burial insurance has become popular is the fact that applicants will not be turned down due to health complications. This makes burial plans perfect for anyone with serious health complications that would be turned down for life insurance. While you cannot be turned down for these policies, some companies may require a graded benefits policy. These policies have the same benefits, but there is a 2-year period before the policy is effective. If the person insured were to die before the waiting period, most companies will repay premiums and add interest.
Who Should Choose A Funeral Insurance Plan?
With so many insurance plans and options, it can become confusing when deciding which one will work best for you. While funeral policies are not right for everyone, numerous people could benefit from purchasing a policy.
These plans are excellent for senior consumers. Seniors typically have no dependents that require their salary to live off of, which eliminates the need for traditional life insurance policies. For older adults like this, burial insurance is a perfect fit. They require minimum monthly payments it will alleviate the pressure from loved ones to cover final expenses. If you still have family members that rely on your income every month, then these plans will not be large enough for you and your family, you will need to buy a traditional insurance policy with a bigger payout.
Funeral policies are ideal for consumers that no longer need or have a life insurance policy. If you cannot afford a life insurance policy due to the monthly premiums, then burial insurance’s lower premiums will work perfectly. Similarly, if you’ve been turned down for life insurance coverage, a burial policy will be one of your best options.
Before you decide to apply for a burial plan, there are a few aspects to consider. The first is how expensive your funeral plans are. Spend time researching average funeral costs and begin to budget out the expenses for the funeral. Be sure to include all expenses like:
- Casket (or cremation costs)
- Cemetery plot
- And funeral service costs
To get an accurate estimate of a funeral in your area, call a local funeral home to inquire about average costs and fees associated with the final expenses.
Funeral vs. Life Insurance
Many consumers are faced with the question of should I buy a life insurance policy or a burial insurance policy. There is no “one right answer”; it all boils down to each person’s particular health, family, and financial situation.
The biggest factors that will go into making your final decision are your health and finances. If you are healthy and expect to live for many years to come, then a traditional life insurance policy could be your best bet, but if you are in bad health, then a burial insurance plan that you cannot be denied will be a better option. Having poor health can cause life insurance raise to increase drastically while final expense insurance rates will not change much because of health.
The other factor to consider is the finances of you and your family. If there is someone that relies on your income, then life insurance is a better option to recover the lost income of the deceased. Unlike life insurance, burial insurance will assist in paying any bills that are left at the end of someone’s life, but not replacing a lost salary.
What Does Immediate, Modified/Graded Death Benefit Mean?
Immediate (again term usage varies by carriers) benefit means exactly what the term implies: Once approved the full amount of the policy is immediately in force and will be paid in its entirety should the insured die during the policy’s active period.
Modified/Graded Whole life insurance plans are plans that do not offer full policy face amount payout until 24-36 ( varies by carrier) months after the policy is in place. Should death occur during the modified/graded period, most policies will return the premiums paid, plus some modest interest.
What Is A Guaranteed Issue Graded Whole Life Policy?
Those in the worst of heath can still get a life insurance policy. But, as you can imagine there are a lot of limitations. Carriers generally refer to them as Graded Whole Life or Guaranteed issued Life Insurance policies. That being said, most people would still consider these to be burial insurance plans.
Guaranteed issue Policies generally have these features:
- The maximum face amount you can get is around $10K
- Same general age restrictions as Burial Insurance plans, generally start at 45+
- They are all Graded Life plans, most with a 36 month waiting period before the full face amount is in force. If the insured dies before the full face amount is in force, most carriers will pay back premiums paid, plus some interest.
- If death is by accident, some carriers will pay the full face amount, regardless of the in force policy graded period.
- No Medical questions and no health checks.
These plans can be expensive and out of reach for those with limited income.
What Other Types Of Burial Insurance Plans Do Carriers Offer?
As an agent, who offers Burial Insurance plans, I see many different carrier offerings this niche market. The growing, life insurance for Seniors market and those with High Risk health impairments has allowed each carrier to create its own “unique” attribute that makes their product stand out. It gives me options to place people with various health impairments.
If you’re looking to buy a burial insurance plan because you’ve been declined for coverage in the past, or you assume that you won’t be approved for coverage, you could be completely wrong. The best way to get burial insurance is to find an agent who has years of experience shopping for burial plans.
Here is an example of a very unique burial insurance plan that is offered by one of my key carriers:
They offer plans for Terminally ill patients, at any age and up to $25K in face value.
If the proposed insured or family can make/afford a single premium payment (single lifetime payment for the policy) they can have an immediate death benefit payable in month 7 of the policy! If death occurs before the 7th month they get their premium back plus 5% interest. As you can imagine, the premiums can be steep, but, it is an opportunity to add additional funds to the final expense account.
Here is an example of this plan:
- Age 65 wants $8,000 in coverage
- Single Premium payment would be $7,492.32
- Immediate Pay of full benefit at month 7
- Return of Premium plus 5% interest should death occur in months 1-6.
As you can see, after the single premium payment, the death benefit, after the 7 months, would return the original amount plus additional dollars or about 9% in this example. Is it worth doing this, hard to say, but it is an example of what carriers are doing within the Burial Insurance/Final Expense market.
There are many different plans, with different options. The best plan is the one that addresses your immediate needs.
Finding An Affordable Burial Insurance Quote
Before you request burial insurance quotes, you will have to find an insurance company that delivers the benefits you desire. There are plenty of companies that offer these policies; so finding the right policy should not be too difficult. When looking for a policy, receive quotes from several different companies before deciding. Because every business is different and has unique standards, their monthly premiums and coverage amounts can vary drastically. You can receive a quote on the monthly premiums without having to purchase their policy.
Applying for a policy is simple. There is no medical exam required, which means that the application process will be quick. An insurance company, such as Banner Life, will ask you a few simple questions about age, sex, height, weight, tobacco usage, occupation, lifestyle, and income. They will also need banking information depending on how you plan to pay for the policy.
When searching for the right insurance company, there are several questions you need to answer. Be sure to understand fully the coverage amount, the monthly payments, and if there is a waiting period before the company will pay out the policy. If there is no waiting period, your policy will become effective as soon as you begin to make payments on the plan.
Importance Of A Burial Policy
Many consumers overlook the importance of having a burial insurance policy. Many families underestimate the rising costs of funerals and the financial strain it can put on a grieving family. If you are a senior or have a senior begin to start the conversation about purchasing a plan to cover those costs. Don’t look those drastic expenses up to your family to pay for your final expenses.
Burial insurance will provide peace of mind that you would not have otherwise. Knowing that your family will have the funds they need during that difficult to provide for your family even after you’ve passed will give you freedom from the fears of leaving your family stranded.
Do not become one of the people that continue to put off their end-of-life plans until it is too late. Don’t wait until “tomorrow” or “next year’ to get the coverage your family needs. No family should have to worry about excess debt after they lose a loved one in their lives.