Some families find it difficult to meet their daily expenses without also having to think about how they will pay for their funeral. Thinking about the final expenses of death can make it a difficult topic.
Many people would like their life Insurance to pay for any funeral or burial expenses as well as provide income for their loved ones in the event of death. Some people want specific plans to cover the burial they choose or other arrangements. Insurance can help you plan your final resting place. It can also be a waste for others.
Is funeral insurance worth the cost? What about burial insurance? Here are some important factors to keep in mind.
What is Funeral Insurance?
Funeral insurance is also known as burial or final expense insurance. It is a policy with a very small premium ($5,000 to $25,000) that is paid directly upon the insured’s passing to a designated recipient such as an executor or family member who made funeral arrangements. You can also pay it directly to a funeral house where you have made arrangements for your funeral or burial.
What it covers
Funeral insurance covers funeral expenses, including cremation, burial, and any other costs. It also covers the cost of a cemetery plot or a headstone, as well as an urn or other container to hold your cremated remains. However, it does not cover any end-of-life costs such as medications or hospice care. The policy is not convertible to life insurance until you die.
It is important to designate someone to manage these funds after your death. There is no oversight over how the money is used. Theoretically, the money can be used for any purpose by your family members — but they are not legally required to pay for your funeral expenses.
How much does it cost
A burial policy will cost you about $50 per month. The most popular plan is $10,000 coverage. Depending on your age, gender and health, the monthly premium may be higher or lower.
However, a monthly premium for a term-life insurance policy can provide you with much more coverage than a burial or funeral policy. This insurance is considered a last resort by many financial and insurance professionals. It is meant for people who are unable to qualify for a term-life policy and don’t have the funds for their funeral.
What is Burial Insurance?
Although burial insurance is sometimes mistaken for a separate product, it is essentially the exact same.
Pre-arranged arrangements can be made with a funeral home and paid for before your death. Although technically pre-need policies are called them, the public often confuses them for funeral/burial insurance. This policy pays at your death and not before. It can be confusing because funeral insurance is sometimes called final expense insurance, burial, or other names. However, funeral insurance and burial insurance are often the same thing.
Best Funeral and Burial Insurance Companies
There are many companies that offer funeral/burial insurance. Each company has its own requirements, costs and terms.
AIG is a long-term insurance company that offers a variety of funeral insurance options, including a permanent and a term policy. A term policy will cover you if you are covered for death during the coverage period. The coverage ends after that point and you will need to buy another policy, probably at a higher price, to continue coverage.
You can’t be refused if you are between 50 and 85 years old. The policy provides coverage of between $5,000 and $25,000 for health reasons. The premium will not rise for any reason over the term.
The company was founded in 1905. It sells term life insurance plans that can be used to pay for burial expenses. These plans are based on your location, health history and other factors. Premiums may be paid monthly or annually. They do not publish their rates. They offer free quotes when you contact them at their website. Terms start at 10 year terms and include optional riders like living benefits.
Mutual of Omaha
Mutual of Omaha offers whole-life policies that provide funeral benefits for as low as $2,000 to $25,000 and are available to anyone between the ages of 45 and 85. There are no health questions or medical exams to answer. For a quote, call 800-377-9000
Baltimore Life offers Silver Guard I, II and III whole-life plans for final expenses. If premiums are paid on time, the policies cannot be cancelled. There are no blood or medical tests required. However, there are a few questions that you will need to answer regarding your health on the application. Additional funds can be added to your policy by adding cash draft or accidental death riders. Call them at 800-628-533 to learn more.
Foresters PlanRight is a whole-life plan that can be used for funeral expenses. The policy covers all ages, from birth to 121. All premiums will remain fixed as long as the coverage is active. There are also riders that can be added to cover accidental death. Foresters insurance can only be purchased through agents. Call 800-524-2803 to find an agent close to you.
Advantages of Funeral and Burial Insurance
This type of coverage is beneficial in certain circumstances. Some people are not able to get standard life insurance policies. Life insurance is not always easy for those with chronic conditions such as diabetes or emphysema, high-risk jobs like firefighters and law enforcement officers, as well as those who are older. Funeral/burial coverage is a good option to offset the final costs for loved ones.
If you are approaching retirement age and have not saved for your last expenses, burial insurance may be a good option. You might choose to have a small burial policy, rather than putting those costs on your loved ones.
A separate funeral policy is a good idea, even if you have life insurance. This will ensure that your beneficiaries get all the money from your life insurance, and not just your final expenses.
Disadvantages of Funeral and Burial Insurance
Most likely, you’ve already figured out some of the disadvantages. Many people find funeral insurance more expensive than regular life insurance. Financial experts suggest that you should save your money in a high-yield savings or mattress account, rather than paying monthly premiums for a policy that can be hard to claim.
Most funeral policies offer a contestable period. This usually occurs approximately two years after your coverage begins. The insurance company may investigate your death if you die during this period. Your family may be denied the death benefit if it is found that you have been diagnosed with a condition other than what you disclosed on your application.
Cash value policies can have their downfalls. Experts in investment say the cash value policy will only yield a 1-3% to 3-percent return even if you have paid into it for more than 30 years. You can make more if you are looking for other investment options.
Other Options to Consider?
Instead of buying a costly burial policy, consider a term policy. Term life policies are often three times more affordable than traditional burial policies. There is no limit on the number of term life policies you can purchase. There are many term policies you can purchase, each with its own purpose. You can also designate a beneficiary for each policy based on the coverage you need.
You can also use a money-market or other savings account to take the money that you would have paid for a policy and put it in the savings account with your designated funeral coordinator as joint owner or authorized signer. Although it may take longer to get the amount you want, your family will not have to go through an investigation or risk not receiving the benefit.
Although there are experts on both sides of the funeral insurance debates, the bottom line remains that you alone can decide if you need one. You may consider buying burial insurance if you are unable to obtain life insurance or if you feel that your death could cause financial hardships for your family. It might be a better investment if you have emergency savings or a regular term policy.