If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
There are many different kinds of life insurance that can protect loved ones from financial loss after the policyholder passes. Final expense insurance is one type of coverage. This review of final expense insurance, or burial insurance as it is also called, will provide insight into whether this life insurance is right for you.
Burial insurance is a marketing term used to describe a subset of whole life insurance policies. A burial policy is simply a small whole life policy. It's promoted to people with the promise it will help cover final expenses. It is also called final expense insurance. Many of the best life insurance companies offer these policies.
Most burial insurance policies fall into one of two categories. Some are guaranteed issue. This means everyone is approved. Others are simplified issue, meaning there's no medical exam required. However, would-be policyholders fill out a health questionnaire. They can be disqualified for certain conditions, but most people -- even seniors -- are approved.
A burial insurance policy pays out a death benefit to a chosen beneficiary. While the policy is called burial insurance, beneficiaries can do other things with the money besides just pay funeral costs.
Burial insurance is different from a funeral insurance policy. Also called pre-need or prepaid funeral policies, a funeral insurance policy typically involves paying a funeral home in advance for funeral services, such as a burial service or cremation.
There are different types of burial life insurance.
Final expense insurance is purchased from final expense insurance companies. The policyholder can choose their beneficiaries. The beneficiaries will receive a lump-sum payment, and the money is generally meant to be used for funeral costs. However, beneficiaries can also use it for other things. For example, it may be used to cover medical bills incurred by the deceased at the end of their life.
Final expense insurance policies generally have a relatively low death benefit. For example, the payout may range from around $10,000 to $25,000.
A pre-need or prepaid burial insurance policy works differently than standard final expense insurance.
Typically, pre-need burial insurance policies are purchased from funeral homes. Policyholders make arrangements with the funeral home and prepay for the services they want. For example, a policyholder could opt for cremation insurance if they wish to prepay for cremation.
With funeral insurance, it's possible to lock in the price of funeral costs. It can also spare family members from having to plan and pay for a funeral. But it provides less flexibility than standard final expense or end of life insurance from the best burial insurance companies.
The cost of funeral insurance varies depending on the type of plan the policyholder selects. The policyholder's age and the amount of the death benefit also affect the cost.
The table below shows the typical monthly premiums by age for a $10,000 final expense policy with no waiting period for a non-tobacco user. Prices vary by age as burial insurance for seniors is more expensive since it's anticipated they'll need it sooner. This table can give consumers an idea of the funeral insurance cost in different situations.
|40 to 49||$20-$24||$24-$29|
|50 to 59||$24-$31||$40-31|
|60 to 69||$32-$50||$43-66|
|70 to 79||$52-$93||$69-$129|
|80 to 89||$98-$275||$139-$357|
The amount of burial insurance a person needs depends on their situation. In 2021, the National Funeral Directors Association found the median cost of a funeral was $7,848. Most people who buy final expense insurance or burial insurance will want at least enough to cover the costs of a basic funeral proceeding.
Since the death benefit obtained through final expense insurance policies can be paid directly to beneficiaries, policyholders may want a little more money than just the actual cost of a funeral. A few thousand dollars extra could help loved ones cope with other costs immediately following a death.
Many policyholders are better served by purchasing term life insurance rather than a final expense insurance policy.
Term life insurance can provide larger coverage limits. Beneficiaries can use the money to pay for a funeral. But they can also get substantial additional funds to help replace income or services the deceased is no longer providing to the household. The cost of the premiums of term life insurance are usually much more affordable, relative to the coverage obtained, than burial insurance premiums.
Some people cannot get term life insurance, though. They may be too old or too sick. Or they may not have anyone depending on them so they may not need a large policy. In these cases, final expense insurance may make sense. A small policy that's easy to qualify for could spare loved ones from having to pay for funeral costs out of pocket.
Those considering final expense insurance should be aware that burial insurance may be more expensive and have much lower coverage limits than other policy types.
Virtually all final expense insurance plans do not require a medical exam. Some simplified issue policies do ask questions about the would-be policyholders health. Certain answers can be disqualifying. For example, someone with serious heart disease may not get approved. But guaranteed issue plans are also generally available and are open to everyone.
Most final expense insurance has a waiting period before benefits kick in. This could last for two years or longer. It's important to understand the waiting period. Those who want full coverage right away would need to shop around to see if they can find an insurer offering it.
Level premium burial insurance means premiums do not change for the entire time the policy is in effect. Those who are covered by burial insurance which guarantees level premiums will not need to worry about the costs of coverage rising.
The best burial insurance depends on each policyholder's needs. Here are some examples of the best burial insurance companies.
AARP provides up to $50,000 in coverage with no medical exam. Rates never increase, and AARP received fewer complaints than average with the National Association of Insurance Commissioners.
Already an AARP member? Check out The Ascent's AARP credit card review to see if this is the right card for you.
Globe Life Insurance allows those shopping for insurance to apply online within minutes using a simple application. The approval process is timely and there is no waiting period. Full coverage begins the first day. This sets Globe Life apart from many competitors.
Forester Financial's PlanRight Whole Life Insurance Coverage is an ideal choice for seniors as it provides lifetime coverage and guaranteed level premiums up to age 121. It also offers riders that most other burial insurance plans don't, including an accelerated death benefit rider. This can allow the policyholder to receive part of the death benefit in advance if diagnosed with a terminal illness.
There are several alternatives to burial insurance. These include:
In most cases, beneficiaries do not owe taxes on the death benefit that a burial life insurance policy pays out.
Whether burial insurance can be denied depends on the policy. Some policies are guaranteed issue, meaning anyone can get one. Others are simplified issue. There's no medical exam required for simplified issue plans, just like with guaranteed issue policies. But those applying for coverage must complete a questionnaire. They must provide health details, and certain conditions can be disqualifying.
Funeral insurance is also available to virtually everyone. Anyone can make arrangements to prepay their funeral with a funeral home.
Burial insurance is generally more expensive for less coverage compared with standard term or whole life insurance. But it may be the only option available in some cases when policyholders can't qualify for standard coverage because of their age or medical conditions.
If a family cannot afford a funeral, surviving family members can sign a release form. They can release the body to the county coroner's office. The form will indicate they cannot afford to bury the family member. The county then buries or cremates the body. In some cases, it's possible for family members to pay a small fee to obtain their loved one's ashes. In other cases, the body or ashes are married in common graves.
The average cost of burial insurance varies depending on age, insurer, policy terms, and the amount of the benefit. Those interested in buying burial insurance should shop around for coverage with several insurers.
Our Insurance Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.