Burial insurance is a small face value whole life insurance policy that covers your end-of-life expenses.
It pays for the cost of the funeral, outstanding medical bills, credit cards, or other debts.
Eligibility doesn’t require good health because existing health issues won’t cause a denial of your application (no medical exams are needed).
The premiums tend to be very affordable since you only buy a small amount of coverage.
Whereas traditional life insurance plans offer very large death benefits to replace your income, pay off a mortgage, or supplement retirement.
In this article, you’ll learn the difference between life insurance and burial insurance, the typical cost, and tips for finding the best policy.
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What Is Burial Insurance?
The main thing to understand is that a burial insurance policy is life insurance.
A burial only happens when life ends, which is why insurance to cover funeral costs is still a type of life insurance.
The term “burial insurance” was coined many decades ago as a marketing expression.
Consumers were much more receptive to buying insurance for final expenses rather than being sold life insurance.
More specifically, final burial insurance is a type of whole life insurance policy.
The premiums will never increase, the policy won’t expire, and it will build cash value.
These insurance products are “simplified issue” because they don’t require you to undergo a medical exam to qualify.
In fact, some plans don’t require you to answer health questions.
Please note that plans with no health questionnaire have a two-year waiting period.
Death during the waiting period will not result in the death benefit payout. All that would happen is a refund of your premiums.
The goal of a final expenses life insurance for seniors is peace of mind.
People who buy this type of policy do so because they want to ensure they don’t saddle their loved ones with the financial burden of unpaid funeral expenses.
Ultimately, the policy proceeds are a lump sum cash tax-free payment to your family members or funeral home.
The policyholder chooses the beneficiaries.
Like all forms of life insurance, the money can be spent with no restrictions.
So if your loved ones don’t use all the money to cover your burial or cremation, the remaining amount is theirs to keep.
Traditional Life Insurance Options Vs Final Expense Insurance
The term “life insurance” is very broad because there are many different kinds.
Just like the word “vehicle” is very vague because there are many kinds of automobiles.
It’s helpful to remember that all types of life insurance work differently. For example, a term life policy will expire after a certain number of years.
Whole life insurance, on the other hand, will last forever.
When deciding if you want life insurance or funeral insurance, it’s helpful to know the differences.
Below is a table that outlines some of the unique features of a final expense policy compared to traditional life plans.
| Traditional Life Insurance | Final Expense Life Insurance |
|---|---|
| High coverage amounts ($50K-$1 million+) | Small coverage options ($2K-$50K) |
| Meant to pay replace income, pay off mortgage, estate planning, or supplement retirement | Meant to pay for the cost of a funeral and other final bills |
| Can take weeks or months to get approved | Approvals are typically instant or within a couple of days |
| Can be term life insurance or universal life which expire after a number of years | Never expires at any age |
| Often require medical exams | No exam required |
| Usually require good health to qualify | Very lenient underwriting accepting of high-risk health conditions |
| Guaranteed approval is not an option | Some policies are guaranteed approval (no health questions) |
| Payout can take months | Approved claims are typically paid within 48 hours |
| Can have a premium increase in the future | Locked in prices for life |
Who Needs Funeral Life Insurance?
The truth is that not everyone needs a burial policy.
Sure, companies out there will tell you it’s a must-have for everyone, but that simply is not true.
Realistically, there are only a handful of reasons to purchase a final expense life insurance policy.
- You have no financial means to cover your burial expenses.
- There is existing coverage, but it’s not enough to pay for a funeral.
- You’d like to leave a little money behind to someone special as a financial legacy.
- Pay off a small debt such as a car note or credit card bills.
The National Funeral Directors Association reported in 2021 that the median cost of a funeral was nearly $10,000.
You could put money into a savings account, buy a final expense policy, or preneed funeral insurance directly from a funeral home.
Regardless of which plan you choose, stick with it, so you don’t saddle your loved ones with a huge bill.
How Much Does Final Expense Insurance Cost?
The typical cost of insurance to cover burial costs is $50-$150 per month, depending on a few factors.
Insurance quotes are determined by gender, age, health, tobacco usage, and how much coverage you purchase.
The best life insurance is one that you can afford.
That said, final expense insurance rates vary quite a bit based on the company.
It’s advisable not to settle on just one life insurance company without investigating at least five other carriers.
Also, guaranteed issue life insurance plans are very convenient since you don’t have to answer health questions.
But remember that guaranteed acceptance policies are the most expensive since the insurer knows nothing about your health.
Frequently Asked Questions
Burial insurance is a type of permanent life insurance meant to pay for your funeral expenses. The payout is a tax-free cash payment to the beneficiaries of your choice, and they can spend the money on anything.
A burial policy, also known as final expense or funeral insurance, is a type of whole life insurance plan meant to pay for your funeral. Because it’s life insurance, the insurance company will quickly pay cash to a funeral home or your loved ones.
Funeral insurance is an excellent buy if you have no financial means to pay for your end-of-life expenses. It can provide immediate peace of mind to ensure your surviving loved ones don’t have to come out of their own pockets to pay for your funeral.
All forms of life insurance result in a payout of cash (tax-free) to the beneficiaries of your choice. There are no restrictions on how the money is spent. So your beneficiaries can use the life insurance money to pay for your burial or anything else.