There are a multitude of reasons for the purchase of a life insurance policy. These can include the replacement of income upon the death of a breadwinner, the repayment of debt such as a large mortgage balance, or even the payment of expenses such as a future college education for a child or a grandchild.
Although not all people have the very same insurance needs, there is one expense that nearly everyone will one day be faced with – and that is the cost of a funeral. Today, the cost of the average funeral across the United States is approximately $10,000 – an amount that many families and loved ones just simply do not have readily available to pay off these expenses. This is why having a burial or funeral insurance policy in place can offer the funds to pay these costs – along with peace of mind.
How Burial Insurance Works
Burial insurance, also known as funeral insurance or final expense insurance, is a type of life insurance coverage that pays the costs that are associated with one’s funeral. This can include the memorial service, flowers, and transportation, as well as other related items such as a casket, a headstone, and burial plot.
There are many additional costs that can also be associated with one’s passing that people are not often aware of – but that can add up. These may include legal expenses, outstanding medical bills, and any other debts that may be owed by the dececdent such as credit card balances and personal loans.
If arrangements are not in place for paying off these obligations, the loved ones or survivors of an individual may end up being responsible for the payment of these debts. Unfortunately, this could put them into a difficult financial situation – especially if their income has been cut due to the death of the insured.
Having a burial insurance policy in place can help to pay off what could be a substantial amount of final expenses as in many areas of the country today, the average cost of a funeral and its related expenses can easily exceed $10,000.
The death benefit proceeds from funeral insurance are typically paid out quickly – allowing the beneficiary to take care of these expenses as they become due. This can provide peace of mind for survivors at what is usually an already difficult time.
In many ways, burial insurance can work like other types of life insurance whereby the insured pays in a premium and, upon the insured’s passing, the policy will pay out proceeds to the named beneficiary (or beneficiaries).
There can be different types of funeral insurance to choose from. For example, a pre-need funeral insurance plan can be either directly or indirectly linked to a funeral service provider. Here, the purchaser of the policy may pay into the plan for a certain number of years. Upon death, the proceeds are typically paid out directly to the funeral provider so that the service and items that were chosen may be carried out as the insured wished.
With a regular funeral policy, the plan is not linked to a service provider, but rather is owned by the policy holder. In this case, the proceeds are paid out to a named beneficiary, who is generally in charge of overseeing that the wishes of the insured take place upon his or her death.
While these plans can be either term of permanent coverage, in many cases they are permanent. A permanent life insurance policy will consist of both death benefit protection, as well as a cash value component.
The cash in the cash value portion provides the policyholder with some real tax advantages. For example, the growth of this cash is allowed to increase on a tax-deferred basis, meaning that there will be no income tax due on the gain until the time it is withdrawn. Because of this, the cash can essentially continue growing within the policy exponentially over time.
Should the policyholder opt to do so, he or she may take a loan or make a withdrawal of this cash for any reason that they see fit. For instance, they could use the money to pay off debts, to supplement their retirement income, or even to take a nice trip around the world – there are no stipulations on how it is used, and there is no requirement that the cash be repaid. However, it is important to note that if there is an unpaid balance in the cash component at the time of the insured’s passing, then the amount of this balance will be charged against the amount of the death benefit that is paid out to the named beneficiary.
This could have an effect on how much of the final expenses can be paid with the death benefit proceeds – so if any cash is used from the cash value component, it may be wise to inform the beneficiary of this.
Most burial insurance policies that are sold in the marketplace today offer death benefits that range between $5,000 and $50,000. There are, however, some insurance carriers that will offer policies with higher death benefit amounts.
When purchasing a burial insurance policy, it will be important to determine how much your loved ones may need in paying your final expenses. Coming up with an approximate figure could entail some research.
For example, you may need to contact some funeral homes in your local area (or in the area where you intend your final resting place to be). In doing so, inquire as to the cost of the type of funeral and burial in which you are planning to have, along with the memorial service, and other related items. Although many people do not like to discuss these topics, doing so can help to save your loved ones a great deal of money – and grief – when the time does come.
Many burial insurance policyholders will also add in additional coverage for any potential uninsured medical expenses that they may incur. Unfortunately, end-of-life issues can, and often do, include hospital and medical related issues. With this in mind, be sure to include some additional funds in your burial insurance policy for medical bills that your survivors could be left with. Otherwise, those whom you love could be burdened with this debt for many years to come.
How to Qualify for Final Expense Insurance
Qualifying for burial insurance can often be somewhat easier than qualifying for a regular life insurance policy. This is because often, there is no medical examination that is required to qualify for this type of coverage.
In applying for traditional life insurance coverage, applicants are usually required to answer lengthy questions concerning their health and medical history. In addition, it is required that an applicant meet with a paramedical professional who will take a heart and blood pressure reading, as well as take a blood and urine sample. These samples are tested for various types of health issues that could pose a risk to the life insurance company, at which point a determination regarding coverage – as well as a premium quote – are then determined.
With a burial insurance policy, however, there is often no medical exam necessary. In many instances, just a few short health related questions are asked on the application for coverage. Once that has been completed, the policy can be approved fairly quickly. This is why people often think burial policies are for seniors.
Because many funeral insurance policies are permanent policies, once an individual has been approved, the policy cannot be cancelled due to the insured’s increasing age, or due to an adverse health condition that occurs – provided that the insured continues to pay the premium.
Also, most permanent life insurance policies will lock in the premium price. This means that once the policyholder has been approved, the amount of the premium will not go up – for any reason – throughout the life of the policy. This can be great news – especially for policyholders who may be living on a fixed income or a budget.
It is important to note, however, that because there is not medical exam that is required, these policies may be taking on applicants who are more risky to the insurance company – and because of that, the premium that is charged for this type of coverage may be higher than that of a comparable policy that is traditionally underwritten.
With that in mind, if an individual is in relatively good health, then he or she may wish to consider the purchase of a regular life insurance policy as versus a burial insurance plan. In any case, it is always a good idea to compare before making a final purchase decision.
Overall, however, a burial policy can be a great solution to managing your funeral and burial related costs. This is especially the case for those who do not already have any other type of life insurance coverage in place. Setting up an insurance plan that will cover these expenses can allow you to make small and affordable premium payments over time, rather than having your loved ones faced with a substantial expense at an already difficult time in the future.
Who is a Good Candidate for this Type of Coverage?
There are many people who may be a good candidate for a funeral policy. But it is important to keep in mind that the need for this type of coverage will be dependent on your specific and individual situation. Some of the key factors will include your budget and your financial status.
Those who may want to consider the purchase of burial insurance include the following:
- Those who do not currently have any other type of life insurance coverage in place
- Individuals who have no other means of paying for their funeral expenses
- Those who have a limited amount of savings/investments with which to pay off outstanding debts, as well as potential medical bills that may be incurred at the end of life
- Anyone who wishes to have a separate life insurance policy for covering their final expenses
- A person who is looking for a policy for their parents
Those who purchase funeral insurance are typically between the ages of 50 and 80 years old – although others may be able to qualify. These policies will usually cover a policyholder until he or she reaches the age of 100, provided that the premium continues to be paid.
What to Look for in a Burial Insurance Policy
When shopping for a funeral insurance policy, there are several criteria that will be important to research prior to making your final purchase decision. First, you will want to be sure that you have enough face amount of insurance protection. For example, in this case, be sure that the amount of coverage on the life insurance policy will be ample to pay off your final expenses, as well as other potential debts such as uninsured medical bills that you could incur.
One way to get a good estimate of this figure could be to contact several local funeral homes in your area (or in the area of your intended final resting place) and ask them roughly how much the average funeral costs. You should then factor in an additional amount of coverage for medical expenses that may be incurred.
You will also want to consider the underlying insurance company that you will purchase the policy through. There are numerous life insurance companies that are out in the marketplace today – and many of these carriers offer burial insurance policies. Before you buy a policy, you will want to be sure that the company you purchase the policy through is financially strong and stable, and that is has a good reputation for paying out its claims to its policyholders.
One of the best ways of researching this is to check the ratings that have been given to the insurer via the rating agencies such as A.M. Best, Standard & Poor’s, Moody’s, Fitch Ratings, and TheStreet.com. These companies will typically assign letter ratings anywhere from an A++ to an F, based on the insurer’s financial strength, stability, and claims paying ability. In most cases, it is wise to stick with purchasing policies from insurers that have a rating of an A or better.
You should also consider the Better Business Bureau (BBB) rating and information on an insurance company prior to purchasing, too. The BBB also assigns letter grades of between A+ and F, as well as provides information about complaints that have been filed with a company and what those complaints have been in regards to. This can be a wealth of information about an insurance company, and can help you in moving forward with a purchase, or moving on to another insurance company.
How and Where to Obtain the Best Premium Quotes on Funeral Insurance
When you are seeking the best premium quotes, one of the most beneficial ways of going about it is to work with either a company or an agency that has access to more than just one life insurance carrier. This is because in doing so, you will be better able to directly compare the policies, benefits, and premium quotes of multiple insurers – and to then determine which will work the best for your specific situation and for your budget.
If you are ready to begin your policy comparison process, then we can help. We work with many of the best burial insurance companies in the market today, and we can assist you in obtaining all of the important details that you need to make a more informed purchase decision. We can do so quickly and easily, all from your computer, and without having to meet in person with a life insurance agent. When you’re ready to begin, all you have to do is use the form on this page.
Should you determine that you have any additional questions along the way concerning burial insurance – or even if you have questions about life insurance in general – then our experts are ready to assist you. We can be reached directly via phone, toll-free, by calling (877) 235-9299.
We understand that the purchase of life insurance can be somewhat overwhelming. There are many variables to keep in mind, and you want to make sure that you are making all of the right decisions. That’s why you have an advocate on your side to help in ensuring that you make the right choice. So, contact us today – we’re here to help.