Burial insurance, also known as final expense insurance, is a type of whole life insurance policy designed to cover end-of-life costs. While insurance companies market these policies as a way to ease financial burdens associated with funerals, consumer advocate Clark Howard advises caution. He suggests there are better alternatives to burial insurance for paying funeral expenses.
Howard recommends planning ahead and clearly stating your funeral wishes to lift the burden from grieving loved ones. Instead of purchasing burial insurance, he proposes joining a local nonprofit memorial society as a more cost-effective option. These organizations can help secure lower-priced funeral services and cremations.
The average cost of a $20,000 burial insurance policy is approximately $140 per month or $1,680 annually. Given these expenses, Howard encourages consumers to explore other financial planning strategies for end-of-life costs that may provide better value and flexibility.
Understanding Burial Insurance
Burial insurance provides financial protection for end-of-life expenses. It aims to ease the financial burden on families during a difficult time.
What is Burial Insurance?
Burial insurance is a specialized insurance policy designed to cover funeral and burial costs. It typically offers coverage between $2,000 and $50,000. These policies help pay for expenses like caskets, cremation, funeral services, and burial plots.
Burial insurance is often easier to qualify for than traditional life insurance. It usually doesn’t require a medical exam. This makes it accessible to older adults or those with health issues.
The premiums for burial insurance remain fixed throughout the policy’s lifetime. This predictability can be helpful for budgeting purposes.
Types of Burial Insurance Policies
There are two main types of burial insurance policies: simplified issue and guaranteed issue.
Simplified issue policies require answering a few health questions. They generally offer lower premiums and higher coverage amounts.
Guaranteed issue policies accept all applicants regardless of health status. They typically have higher premiums and lower coverage amounts.
Some burial insurance policies are structured as whole life insurance. These build cash value over time, which policyholders can borrow against if needed.
The Difference Between Burial Insurance and Life Insurance
Burial insurance and life insurance serve different purposes. Burial insurance focuses specifically on covering final expenses. Life insurance provides broader financial protection for beneficiaries.
Life insurance policies often have higher coverage amounts, ranging from $100,000 to millions of dollars. They’re designed to replace income or pay off large debts.
Burial insurance is usually easier to obtain and has lower premiums than traditional life insurance. However, it offers less coverage.
Unlike term life insurance, burial insurance doesn’t expire as long as premiums are paid. This ensures coverage will be available when needed, regardless of age.
The Cost Factors of Burial Insurance
Burial insurance costs vary based on several key factors. Understanding these elements can help individuals find appropriate coverage at reasonable rates.
Determining the Burial Insurance Premiums
Age is a primary factor in premium calculations. Generally, younger applicants pay lower premiums. Health status also plays a crucial role. Many burial insurance policies don’t require medical exams, but some may ask health questions.
The coverage amount selected impacts premiums directly. Higher coverage leads to higher costs. Gender can affect rates too, with women often paying less due to longer life expectancies.
Some insurers offer discounts for non-smokers or those in good health. Policy type matters as well. Guaranteed issue policies typically have higher premiums than simplified issue ones.
Average Burial Insurance Cost
For a $10,000 policy, monthly premiums can range from $30 to $100, depending on the factors mentioned earlier. A $20,000 policy might cost between $60 and $200 per month.
Costs increase significantly with age. A 50-year-old might pay half what a 70-year-old pays for the same coverage.
Here’s a simple breakdown of average costs:
| Age | $10,000 Policy | $20,000 Policy |
|---|---|---|
| 50 | $30 – $60 | $60 – $120 |
| 60 | $45 – $90 | $90 – $180 |
| 70 | $70 – $140 | $140 – $280 |
These figures are estimates and can vary by insurer and individual circumstances.
How to Get the Best Burial Insurance Quotes
Shop around and compare quotes from multiple insurers. Each company uses different criteria to set rates. Online comparison tools can simplify this process.
Consider working with an independent insurance agent. They can access quotes from various companies and help find the best fit for your needs.
Be honest about your health status. While it might be tempting to withhold information, doing so could void the policy later.
Look for policies with a “level” premium structure. These keep costs consistent over time, unlike “graded” policies where premiums increase periodically.
Consider getting coverage earlier rather than later. Locking in lower rates at a younger age can save money in the long run.
Benefits and Coverage Details of Burial Insurance
Burial insurance provides financial protection for end-of-life expenses. It offers specific benefits and coverage options tailored to funeral and burial costs.
Coverage Limits and Death Benefit
Burial insurance typically offers coverage ranging from $5,000 to $25,000. The death benefit is paid directly to the beneficiary, who can use it to cover funeral expenses, outstanding medical bills, or other final costs.
Some policies allow for increasing coverage over time. This feature helps policyholders keep pace with rising funeral costs.
The death benefit is usually paid out quickly, often within 24-48 hours of claim filing. This rapid payout helps families manage immediate expenses associated with a loved one’s passing.
Graded Death Benefit and Guaranteed Issue Policy
Graded death benefit policies offer limited coverage in the initial years. Full benefits typically become available after a 2-3 year waiting period.
During this period, if the insured passes away due to natural causes, beneficiaries receive a percentage of the full death benefit. Accidental deaths are often covered at 100% from day one.
Guaranteed issue policies accept all applicants regardless of health status. These policies often have higher premiums and lower coverage limits compared to traditional burial insurance.
Funeral Home Services and Pre-Need Insurance
Pre-need insurance allows individuals to pre-plan and pre-pay for specific funeral services. This type of policy is often sold by funeral homes and covers predetermined funeral expenses.
Benefits may include:
- Lock-in pricing for future services
- Customization of funeral arrangements
- Reduction of family stress during bereavement
Some policies offer transferability, allowing policyholders to change funeral homes if needed. It’s important to carefully review terms and conditions, as pre-need policies can have limitations on service substitutions or refunds.
Planning for End-of-Life Expenses
End-of-life expenses can be substantial and often unexpected. Proper planning can help reduce financial stress for loved ones and ensure one’s final wishes are carried out.
Comparing Funeral Costs and Services
Funeral costs vary widely depending on location and services chosen. The median cost of a funeral with viewing and burial is around $8,300, according to the National Funeral Directors Association.
Basic services typically include:
- Funeral home fees
- Casket
- Embalming
- Transportation
- Use of facilities for viewing and ceremony
Cremation is generally less expensive, averaging $6,000 to $7,000 with a viewing. Direct cremation without a service can cost $2,000 to $4,000.
To save money, consider:
- Comparing prices from multiple funeral homes
- Opting for a simple casket or urn
- Limiting viewing hours
- Holding a memorial service at home or a meaningful location
Choosing a Burial Plot and Headstone
Burial plot costs range from $1,000 to $4,000 or more, depending on the cemetery and location. Urban areas tend to be more expensive than rural ones.
Factors to consider when selecting a burial plot:
- Family plot availability
- Cemetery rules and regulations
- Perpetual care fees
- Religious or cultural preferences
Headstone prices vary based on material, size, and design. Simple markers can cost $200 to $1,000, while elaborate monuments may exceed $10,000.
Dealing with Outstanding Debts and Financial Burdens
End-of-life expenses extend beyond funeral costs. Outstanding debts and financial obligations can impact an estate and survivors.
Common financial burdens to address:
- Medical bills
- Mortgage or rent payments
- Credit card balances
- Personal loans
- Taxes
To minimize financial stress:
- Review life insurance policies
- Create a comprehensive list of assets and debts
- Consider setting up a payable-on-death account for funeral expenses
- Consult with an estate planning attorney to protect assets and minimize tax burdens
Addressing these issues in advance can provide peace of mind and reduce the financial strain on loved ones during a difficult time.
Choosing the Right Insurance Provider
Selecting a reputable burial insurance provider requires evaluating company ratings, comparing policy details, and considering customer satisfaction. These factors help ensure you find reliable coverage that meets your needs.
Best Burial Insurance Companies
Top burial insurance providers include Lincoln Heritage, Mutual of Omaha, and AIG. Lincoln Heritage specializes in final expense insurance and offers additional support services. Mutual of Omaha provides flexible coverage options and competitive rates. AIG stands out for its financially stable policies and straightforward application process.
Other well-regarded companies are Foresters Financial, Royal Neighbors of America, and Transamerica. Each offers unique benefits like community involvement programs or accelerated death benefits for terminal illnesses.
Insurance Company Ratings and Customer Satisfaction
Financial strength ratings from agencies like A.M. Best, Moody’s, and Standard & Poor’s indicate an insurer’s ability to pay claims. A.M. Best ratings of A or higher suggest strong financial stability.
J.D. Power surveys measure customer satisfaction with claims handling, policy offerings, and pricing. The National Association of Insurance Commissioners (NAIC) Complaint Index compares companies based on consumer complaints.
Check these ratings and reviews to gauge an insurer’s reliability and service quality. Companies with high marks in both areas often provide better experiences for policyholders.
Policy Details and Comparison Shopping
Examine policy details carefully when comparing burial insurance options. Key factors include:
- Coverage amounts
- Premium costs
- Waiting periods
- Age restrictions
- Health qualification requirements
- Riders or additional benefits
Use online comparison tools to view multiple quotes side-by-side. Some websites aggregate information from various insurers, making it easier to compare policies.
Request sample policies from different companies to review exact terms and conditions. Pay attention to exclusions, limitations, and any fine print that could affect coverage.
Consider working with an independent insurance agent who can provide personalized recommendations based on your specific needs and budget.
Additional Considerations
Burial insurance offers options beyond traditional policies. Alternatives, simplified underwriting, and special programs for certain groups can provide flexibility and accessibility for end-of-life planning.
Life Insurance Alternatives
Traditional life insurance policies often serve as viable alternatives to burial insurance. Term life insurance provides coverage for a set period, typically 10-30 years, at lower premiums. Whole life insurance offers lifelong coverage with a cash value component.
Some insurers offer final expense policies, a type of permanent life insurance designed specifically for end-of-life costs. These policies usually have lower face values and can be more affordable than standard whole life insurance.
No Medical Exam and Simplified Issue Policies
Simplified issue life insurance and no medical exam policies make coverage more accessible. These options typically require answering a health questionnaire instead of undergoing a physical examination.
Simplified issue policies often have higher premiums but can be approved quickly. They’re suitable for those with health conditions that might disqualify them from traditional policies.
No medical exam policies may have coverage limits and waiting periods before full benefits apply. Premiums are generally higher than for fully underwritten policies.
Support for Veterans and AARP Members
Veterans may be eligible for burial benefits through the Department of Veterans Affairs. These can include burial plot allowances, funeral expense reimbursement, and interment in national cemeteries.
AARP offers its members access to burial insurance plans through partnerships with insurers. These policies often feature guaranteed acceptance for members aged 50-80 and locked-in premiums.
Veterans and AARP members should compare these specialized offerings with other options to ensure they’re getting the best coverage for their needs and budget.
The Role of Memorial Societies and Funeral Consumer Alliances
Memorial societies and funeral consumer alliances play a crucial role in helping individuals navigate end-of-life planning and reduce funeral costs. These organizations provide valuable resources and support to their members.
Benefits of Joining a Memorial Society
Memorial societies are non-profit organizations dedicated to promoting simple, dignified, and economical funeral arrangements. Membership typically costs between $25 and $35 for a lifetime.
Members gain access to:
- Reduced pricing on final arrangements
- Annual updates on local funeral costs
- Educational resources on funeral planning options
These societies often partner with local funeral homes to negotiate lower prices for their members. This can result in significant savings on funeral expenses.
Assistance from Funeral Consumer Alliance
The Funeral Consumers Alliance (FCA) is a national organization that works to improve the end-of-life industry. It provides support to local memorial societies and offers direct assistance to consumers.
Key services provided by the FCA include:
- Education on funeral rights and options
- Advocacy for fair practices in the funeral industry
- Price surveys of local funeral homes
The FCA website offers free resources to help individuals make informed decisions about funeral planning. They also provide guidance on how to join local memorial societies for additional support.