Reasons Why You Should Buy Burial Insurance
The number one reason people buy burial insurance is to cover their funeral costs when they have no other means to do so. They don’t want to leave their family with a financial burden.
At the same time, some people use final expense policies to gift money to loved ones or a charity.
Another reason for burial insurance is if you want life insurance but can’t qualify for a traditional policy. Conventional life policies have strict underwriting. Depending on your health issues, you may not qualify at all.
On the other hand, burial policies will accept applicants with a variety of high-risk medical conditions. If you need life insurance and cannot qualify for a traditional policy, burial insurance is a good solution.
When Burial Insurance Is Unnecessary
For some people, burial insurance may not be worth buying.
For example, if you need a lot of coverage, burial insurance is likely not the right type of life insurance. Most final expense insurance companies have a maximum coverage of $25,000-$50,000.
Also, if you currently have a permanent life insurance policy, it can be used to pay for your final expenses. You wouldn’t necessarily need a burial policy.
A big reason why final expense insurance is not worth buying is if you have the funds to buy a pre-paid funeral, pre-need insurance, or cash you can set aside specifically for funeral expenses.
Lastly, if you plan to donate your body to science, it’s completely free, and thus, you wouldn’t need insurance to cover the cost of a funeral.
The Pros Of Final Expense Insurance
- Affordable premiums: Final expense life insurance is generally very affordable. The typical cost is $50-$100 monthly for $10,000 in coverage. Remember, however, that burial insurance quotes will depend on your age, gender, state of residence, health, and how much coverage you buy.
- Rates that never increase: Burial insurance is a type of whole life insurance that has a fixed monthly premium.
- Lifetime coverage: Since a final expense policy is a type of permanent life insurance, it has no age limit and thus will never terminate due to age.
- No exam: Final expense policies are “simplified issue,” which means no medical exam is required. Some policies don’t even require you to answer health questions.
- No waiting period options: Some final expense companies offer no waiting period plans that fully insure you 100% for natural or accidental death. It’s important to remember that you must qualify for an immediate coverage life insurance plan. You won’t have to take a medical exam, but you will have to answer medical questions (and be approved). All plans without health questions have a two-year waiting period.
- Living benefits with most policies at no extra cost: Most burial insurance plans offer a living benefit called the “Accelerated Death Benefit Rider.” You never pay for this rider. It’s always free. These riders allow you to access up to 50%-100% (varies by company) of the death benefit while alive if you’re diagnosed with a terminal illness.
- Fixed death benefit: The coverage is guaranteed never to decrease.
- No health questions plans are available: One of the biggest pros of final expense insurance is that some plans don’t require you to complete a health questionnaire. These policies are commonly called “guaranteed issue life insurance.” In short, you’re guaranteed approval regardless of your previous health issues. Bear in mind that these policies all come with a two-year waiting period. The insurance provider will only refund your premiums if you die during the waiting period. There are no guaranteed issue policies and no waiting period.
- Small coverage options: The best burial insurance companies offer small benefit amounts. Some will go as low as $1,000 in coverage.
- Lenient underwriting: Life insurance companies built these plans to accept applicants with various pre-existing medical conditions. That means seniors with diabetes, high blood pressure, and many other health conditions won’t be denied coverage. You don’t have to be in good health to qualify.
- Fast claim payments: Insurance companies typically pay out the death benefits within 24-48 hours once they approve a claim. They know policyholders primarily purchase these policies to cover cremation or burial expenses, which they know is a time-sensitive issue.
- Virtually all ages are insurable: Funeral insurance plans are available to children as young as 14 days old. Conversely, seniors over 85 can still qualify for a new policy. In many cases, burial insurance is the only way seniors over 80 can get life insurance.
- Many provider options: Dozens of life insurance companies offer final expense insurance plans. Having more options means you have a better chance of securing the lowest rate possible.
- Quick approvals: Most final expense insurance applications render approvals within minutes.
- Various application process options: There are multiple ways to complete a final expense insurance application. Generally, you can apply 100% over the phone, via email, directly online, or through the mail (paper application).
- Multiple payment modes: Most companies will allow you to make your premium payments monthly, quarterly, semi-annually, or annually. In most cases, you cannot mail in monthly payments. To pay monthly, you must do it via an automatic deduction from a checking or savings account (no pre-paid cards) on a day you choose. Some insurers will allow you to pay with a Direct Express card, but not many.
- The money can be used for anything: Since final expense coverage is a type of life insurance, the final result will merely be a tax-free cash payout. Your beneficiaries can spend the money on anything. There are absolutely no restrictions. That means they can pay for your funeral expenses, medical bills, credit cards, or other debts. Also, any unused money stays with your family.
- You can name any beneficiary(s) you want, even a funeral home: You decide how many beneficiaries you want. It’s best to name people, such as a loved one, as a beneficiary. However, you can designate a funeral home as the recipient of the funds if you’d like. Also, you can name multiple primary and secondary (contingent) beneficiaries. Lastly, you can change and update your beneficiaries anytime you want in the future.
- Someone else can pay for it: Someone else, such as a family member, can pay for your coverage. Children buying burial insurance for their parents is quite common. Essentially, anyone else (even if they aren’t related to you) can be the payer of your policy so long as you agree to it.
- Cash value that grows over time: A burial policy is a type of whole life insurance that builds cash value. A small portion of each payment is directed to this account, and it usually earns interest. You are free to borrow from the money that accrues in the cash value account. Also, if you ever cancel your coverage, the insurer will refund you the policy’s cash value.
- Most policies have automatic lapse protection: Most companies include an Automatic Premium Loan Provision (APL) at no extra cost. If your policy has this feature, it will prevent your coverage from lapsing due to non-payment. The APL will automatically draw from the accrued cash value to make the premium payment(s) to keep your policy active.
- Tax-free benefit payout: A funeral insurance policy will always pay out a cash benefit tax-free. Your beneficiaries will not be subject to a tax burden from the IRS.
- It can be used as a charitable gift: The proceeds from a final expense policy can be a generous gift to a loved one or charity. Remember, the policy will pay out cash that can go to anyone and be used for anything.
The Cons Of Final Expense Insurance
- Multiple names that often lead to confusion: Final expense plans have many alternate labels that can confuse some shoppers. The terms “burial insurance,” “funeral insurance,” and “end-of-life insurance” are all synonymously used by companies that market these plans. Know that all these names mean the same thing.
- Beneficiaries can use the money any way they want: As mentioned before, your beneficiaries can spend the death benefit money on anything. They don’t have to spend it exclusively on your funeral services. That can present challenges if you don’t have a person you can trust as your beneficiary.
- Large amounts of coverage aren’t available: Final expense insurers often limit their exposure to a maximum death benefit of $25,000 or $50,000. A burial insurance plan is likely not for you if you need a high amount of coverage, such as $100,000 or more. You’d either need to A) buy multiple burial policies or B) buy a traditional life insurance policy for a large amount.
- Premiums are more expensive than other types of life insurance: All types of burial insurance policies generally have higher premiums (per thousand of coverage) than other types of life insurance.
- It may not be enough to cover the entire cost of your funeral: A burial insurance policy does not contractually stipulate what your final wishes are or the net cost. Instead, the policy only provides a quick cash payout to your family so they can pay for your funeral. If you don’t have enough coverage to pay your funeral bills, your heirs will have to pay for the remaining amount. That’s why using a funeral cost calculator or a similar tool is useful to select the right amount of coverage.
- Misleading marketing is abundant: Final expense life insurance ads are on television, in the mail, and online. Sadly, dozens of companies regularly use deceptive marketing to confuse, mislead, and sometimes scam shoppers. The Colonial Penn $9.95 plan is one such example. Their ads give the impression that seniors can buy ten or twenty thousand dollars of coverage for just $9.95 monthly. However, the truth is that most seniors get less than $1,000 of coverage for $9.95 when they buy from Colonial Penn. Other common examples include ads that say things like “free funeral insurance,” “Coverage starting at just $10 per month,” “Policies cost just pennies per day,” “new state-regulated life insurance program,” or “government burial insurance.” While those statements aren’t technically a lie, they are very close to it. People who see these ads think they really can get very cheap burial insurance or coverage provided by the government (the VALife program for disabled veterans is the only type of government coverage). Please don’t take these ads seriously because 99% of the time, they are not a realistic representation of the true cost.
- Some scandalous agents hide the truth about critical policy details: Every business has its fair share of bad apples, and insurance is no exception. There are a variety of final expense insurance scams that bad agents will employ to make money, so it’s important to protect yourself.
- Most options are only sold through agents: Most burial insurance companies do not sell their plans directly to consumers. Instead, they rely on licensed insurance agents to market their products. Generally, the only time you can purchase directly from a life insurance provider is via a guaranteed acceptance policy that includes a two-year waiting period. There are some anecdotal exceptions to that rule, of course. Globe Life and TruStage are two such examples. But by and large, most insurers mandate that you work with an agent, which some consumers would rather avoid.
- Final expense insurance is life insurance: Burial insurance is a type of life insurance policy (read: burial insurance vs. life insurance). If you already have a life insurance policy, you can rely on it to pay for burial costs. Some people think there is insurance to cover burials that isn’t life insurance. That simply is not true. A burial only happens when a life ends. That’s why an insurance policy to cover final expenses will always be life insurance coverage.
- Your premiums could one day exceed the death benefit: While uncommon, your total premiums could exceed the death benefit if you live a very long time. Generally, you’d have to live to be 90 years old or older for this to happen.
- Options in New York are very limited: There are specific regulations in New York that target final expense insurance policies. These regulations don’t apply to other types of life insurance. For that reason, many final expense companies choose to avoid New York, which means consumers have far fewer options than other states.
Frequently Asked Questions
On average, a final expense policy costs $50-$100 per month for $10,000 in coverage. Keep in mind that your exact price will vary depending on age, health, gender, tobacco usage (if any), and how much coverage you choose.
Most final expense policies become available at age 50, but some providers offer them to young adults as low as 18. Ideally, buying coverage as soon as you know you want or need it is best. Waiting to purchase a policy will only make it harder to qualify for and cost more.
Burial insurance is a type of life insurance that only covers your life and nothing else. Your life will be insured for however much coverage you choose. The money that pays out when you die can be used for anything. The money does not have to be used only to cover end-of-life expenses.
Burial insurance is a type of no-exam whole life insurance meant to cover all your burial and cremation expenses. Your loved ones can use the policy to pay for your funeral costs, medical bills, outstanding debts, burial plot, headstone, memorial services, embalming or anything else associated with a funeral.
Term life insurance is a type of policy that will expire after a specified period of time. Therefore, it’s not a suggested way to cover your final expenses. Term policies generally expire around age 80. If you outlive the policy, you won’t have the coverage necessary to pay for your funeral costs. Always opt for a whole life insurance policy for the end-of-life expenses. You can have peace of mind knowing the coverage will last forever. Universal life policies are also not recommended since many of them don’t last forever or have significant premium increases in the future.
Choice Mutual often cites third-party websites to provide context and verification for specific claims made in our work. We only link to authoritative websites that provide accurate information. You can learn more about our editorial standards, which guide our mission of delivering factual and impartial content.
- Direct Express. https://www.usdirectexpress.com/
- tax-free. https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds
- Automatic Premium Loan Provision. https://www.investopedia.com/terms/a/automatic-premium-loan.asp
- regulations in New York. https://www.dfs.ny.gov/consumers/life_insurance/types_of_policies
