Burial and Funeral Insurance: Your Guide to Final Expense Insurance

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.

Types of burial insurance

There are different types of burial life insurance.

Standard final expense 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.

Pre-need or prepaid burial insurance

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.

How much does funeral insurance cost?

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.

How much burial insurance do you need?

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.

Should you buy final expense insurance?

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.

Features of end of life insurance

No medical exam

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.

No waiting period

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

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.

Best burial insurance companies

The best burial insurance depends on each policyholder's needs. Here are some examples of the best burial insurance companies.

Best overall: AARP Permanent Life Insurance

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.

Best for quick coverage: Globe Life

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.

Best for seniors: Forester Financial

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.

Alternatives to burial insurance

There are several alternatives to burial insurance. These include:

• Term life insurance: This coverage is in effect for a limited period of time. For example, it may pay out the death benefit if the policyholder dies within 30 years of getting covered. Term life insurance can provide a much larger death benefit than burial insurance. The money can be used by beneficiaries for anything, including funeral expenses. But most term life policies require medical exams.
• Standard whole life insurance: Standard whole life insurance policies also require a medical exam. But they offer larger death benefits that can pay for funeral costs and more. A standard whole life policy is much costlier than a term life policy. But unlike burial insurance, it can accrue a cash value and provide more protection for beneficiaries.