Is Burial Insurance Your Best Option?

Burial insurance – also called funeral insurance – is just what it sounds like. It's an insurance plan that pays out on your death and helps offset funeral and interment expenses. These policies are much less common than similar products, like life insurance. That may seem strange, since death is inevitable and funerals are expensive -- and few want their families stuck with the cost of a service. Still, burial insurance may not be the best investment of your insurance premium. Are you a good candidate? Or is there another insurance product that would better serve you?

What is burial insurance?
Burial insurance is a type of whole life policy with a relatively small payout -- generally just enough to cover a service and burial or cremation. Like other life insurance policies, burial policies typically have contestability periods and exclusion clauses, including for suicide. Some policies may also withhold full benefits until members have held the policy for at least two years. And as with a life insurance policy, you can choose the beneficiary. Two common choices are a family member or a specific funeral home.

Burial policies are typically marketed to older adults for a few reasons. First, it may be easier to qualify. Unlike more traditional life insurance policies, burial insurance often has a simplified application with only a few questions, and without a medical exam. It is still possible to get denied for poor health or other factors, but acceptance is often easier. Second, coverage may be more affordable for older adults than is a standard life policy, whose premiums can become unmanageable for those who apply later in life.

You may have a few options when paying for burial insurance:

  • Lump sum. Some pay a large, one-time premium for burial insurance. This has the advantage of providing immediate, full coverage, and may be the only option for older applicants.
  • Graded benefit. Certain policies offer payment plans over a fixed number of years. Users are eligible for partial benefits only until they've paid in a certain amount, depending on the policy.
  • Traditional. These plans have a fixed monthly premium. Coverage amounts remain the same as long as you continue to pay.

If you're given a choice, opt for traditional premiums. They're much easier to budget on a fixed income, and in many cases, they will still provide full benefits right away, like a lump sum plan.

Who needs burial insurance?
While getting coverage for funeral expenses is a great way to help out family members financially, burial insurance is often not the best route. To cover the costs incurred by drawing from a higher-risk pool, burial insurance policies typically pay out much less for the premiums -- although the premiums themselves may be lower -- than traditional life insurance.

Even if you're an older adult, burial insurance isn't the only way to get your funeral expenses covered. You can also:

  • Buy a guaranteed pre-need plan. Some funeral homes sell policies that allow customers to pre-plan their ceremonies -- an advantage for those who want to ensure that their final wishes are respected -- and lock in prices for services like embalming ahead of time. Benefits are typically paid out right away, unlike those from a life insurance policy, and you can guarantee that your budget will be correct, even with inflation.
  • Save. Setting aside your premium costs over time -- or all at once, if you're able -- provides a guaranteed and liquid source of cash for final expenses, no exclusions.
  • Sign up for life insurance. Though it's less common and can be pricey, older adults can get approved for life insurance. Though premiums will be more expensive, they can also cover other, unanticipated costs, like medical expenses, and can help provide an inheritance.

However, signing up for whole life insurance as a younger adult -- and designating a portion of your death benefit to pay funeral expenses -- is still the best way to cover these costs, while keeping premiums low.

Who offers burial insurance?
If you're shopping for burial insurance, you'll have to look beyond the big names. Companies like Allstate and New York Life provide standard term and whole life policies that pay out, at minimum, $50,000. Burial policies pay out much smaller amounts and are offered by much smaller companies. If you're still interested in getting a burial policy, consider one of these insurers:

  • Global Life. Global Life provides burial policies with benefits beginning at $5,000 and offers locked-in rates as low as $3.49 per month for adults, with no exams or waiting periods. The company is also rated "A+" by both the Better Business Bureau and A.M. Best. However, users note that it is extremely expensive compared with other providers and life insurance policies.
  • Lincoln Heritage Life Insurance Company. Like Global Life, Lincoln Heritage's burial insurance policies don't require a medical exam and provide immediate benefits, as well as consistent rates. Members can elect policies that pay up to $20,000. The company also holds an "A+" rating from the BBB, but it has a slightly lower financial strength rating -- an "A-" from A.M. Best.
  • Colonial Penn. Colonial Penn offers low-limit, whole life plans that can be used toward burial expenses. In most states, those between 50 and 85 are eligible to apply, and acceptance is guaranteed. But while premiums are locked in, clients will receive only partial payouts within the first two years. Colonial Penn also has a lower rating of "B+" from A.M. Best and isn't accredited by the BBB.

Most burial insurance providers offer similar benefits and conditions. If you're choosing between a few, it may come down to premiums. Always seek quotes from a few different insurers before committing to a plan.

The bottom line
Most can get all the benefits of burial insurance through other -- sometimes more affordable -- policies. If you want to help your family in the event of a long illness or other unexpected event, a traditional life policy is probably your best bet. However, if you do choose burial insurance, be sure to do your homework, and not only in terms of premiums. Hopefully, you won't use your benefits for many years, and you want your insurer to be around when you do. A long history of satisfied customers and strong financial rankings are both evidence of a solid insurer, no matter what plan you're buying.

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