PolicyScout’s Guide to Burial Insurance: What Is It?
Learning about Burial Insurance and if It's the Right Choice for You
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Many people don’t understand the costs that come with a funeral and are sometimes caught off guard by unexpected costs.
According to the 2021 National Funeral Directors Association (NFDA), the median cost of a funeral in the U.S.A has increased by 6.6% since 2016.
This article will help you understand what burial insurance is, why you should consider it, how much it costs, and some of the alternatives that can help you cover your end-of-life final expenses.
What Is Burial Insurance?
Burial insurance is a type of whole life insurance designed specifically for end-of-life final expenses.
It is also sometimes referred to as ‘funeral insurance’ or ‘final expense insurance.’
Burial insurance is meant to financially help your loved ones cover your funeral costs once you pass away.
Some of these end-of-life final expenses include:
Burial plot
Cemetery fees (such as digging a grave before burial and filling it afterward)
Headstone
Casket
Flowers
Transportation
Funeral service
It is important to note that burial insurance is generally untouchable while a policyholder is alive.
Burial insurance cannot be taken out before the policyholder dies in order to cover medical costs, doctor’s appointments, prescriptions, or anything else related to a living person's health.
There are usually two kinds of burial insurance.
1. Standard burial insurance covers all of the costs, and more, listed above and cannot be touched until the policyholder dies.
2. Pre-need insurance is a highly customizable and more specific kind of burial insurance. This form of burial insurance is ideal for those who have already secured a funeral home or burial spot.
Pre-need insurance policies are preemptively established with the funeral home so that the policyholder can ensure that there will be no hidden fees or inflation that will impact the beneficiaries.
This type of burial insurance is more costly than your standard type and has a shorter payment period.
Burial insurance policies aren’t meant for people who are raising families or who need life insurance to cover things such as mortgages or kids’ college tuition.
What Is Whole Life Insurance?
Whole life insurance, also known as traditional life insurance, is a type of permanent life insurance that doesn't expire. As long as a policyholder pays their premiums, their cover will remain in place.
One of the major benefits of whole life insurance is that you can get coverage while you are younger and lock in lower rates not available to older policyholders.
Whole life insurance policies also have a savings component (known as a cash value account), which can grow in value over time.
These cash value accounts are classed as assets and can be used by policyholders to loan money or as emergency funding.
Why Should I Get Burial Insurance?
Burial insurance is a great way to ensure that your loved ones have some sort of financial aid when you pass and that they are able to settle all potential bills and debts.
Your loved ones, who will most likely be your beneficiaries, will be able to use the burial insurance payout to cover your funeral costs or use it for other pressing costs such as mortgage or tuition fees.
Note, however, that although burial insurance is designed to cover your funeral costs and other end-of-life costs, the payout does not have to go to your funeral.
The beneficiaries are free to use the payout however they want. For example, when you pass, the beneficiaries can choose to use the payout for tuition, other outstanding fees, or even a vacation.
Burial insurance is a great policy type for those who only want a small plan or can’t qualify for a larger, more expensive policy because of their age or health.
How Do I Get Burial Insurance?
Burial insurance is a relatively easy policy to sign up for and unlike many other forms of life insurance, burial insurance:
You don’t need a medical exam to qualify
You will need to complete a medical questionnaire and give your insurance provider information regarding:
- Your medical history
- Any prescription medication you are taking
Once your burial insurance has been approved, the policy can quickly cover the costs associated with your funeral.
Follow these steps to find a final expense insurance plan that will offer you the coverage you need at a price you can afford.
Think about the expenses that you want to cover with your burial insurance. If you plan on the funds going towards the cost of your burial or funeral expenses, research what it will cost.
Work with an insurance agent or broker and find the best insurers in your area. This can save you time and make finding the best plans easier.
Compare prices for each insurance policy and see if they offer value for money and whether their options are affordable.
Getting the right coverage can be difficult, especially if you don’t have the experience or expertise needed to understand policies, terms, and different coverage options available.
If you need assistance finding a final expense insurance plan or provider that will offer you the best rates, speak to one of our consultants today.
How Much Does Burial Insurance Cost?
As we’ve already covered, the 2021 median cost of a funeral has increased by 6.6% since 2016 to $7,848, while the median cost of a funeral with cremation has increased to $6,970.
There are many costs that come with a funeral. The amount you will have to pay will also depend on the type of funeral you require.
Here is a 2021 list of the National Median Cost of an Adult Funeral with Viewing and Burial.
| Item | 2021 Cost |
|---|---|
| Non-declinable basic services fee | $2,300 |
| Removal/transfer of remains to funeral home | $350 |
| Embalming | $775 |
| Other preparation of the body | $275 |
| Use of facilities/staff for viewing | $450 |
| Use of facilities/staff for funeral ceremony | $515 |
| Hearse | $325 |
| Service car/van | $150 |
| Printed materials (basic memorial package) | $183 |
| Metal burial casket | $2,500 |
| Median Cost of a Funeral with Viewing and Burial | $7,848 |
Source: National Funeral Directors Association, 2021 median costs
Burial Insurance Alternatives?
Burial insurance is not the only option that will help you and your loved ones cover your funeral and final expenses.
For example, your beneficiaries can use the death benefit from any life insurance policy to pay for your funeral fees.
Take a look at the different types of life insurance and how they can become an alternative to burial insurance.
Whole Life Insurance
Whole life insurance policies are a type of permanent life insurance, traditionally bought by parents for themselves and often their children. Whole life policies pay out a death benefit when the insured person dies.
Over time, whole life plans grow in cash value, which you are able to borrow against or withdraw entirely. Whole life insurance policies don’t typically expire as long as the premium is covered.
However, when you buy this plan, you can’t increase the life insurance proceeds (death benefit) in the future.
Universal Life Insurance
A universal life insurance policy is a type of permanent life insurance. There are key differences between the two.
With a whole life policy, the provider determines the cash value your plan can grow by, whereas universal life insurance policies build value on an interest rate basis.
Universal life policies are more flexible with their premiums and allow increases to the death benefit of the policy.
Variable Life Insurance
Not only does this policy offer a death benefit when the insured passes away, but it can also act as a form of investment.
The policy owner can choose to invest the cash value section of the coverage in stocks, bonds, or money market funds.
These plans are a good way to increase the value of your policy, but if the investment doesn’t show positive results it could reduce the final death benefit.
Term-Life Insurance
A term-life insurance plan is similar to most other insurance policies, but the difference is that the term-life plan only offers coverage for a fixed period. There is a start and end date.
If you choose to buy a term-life insurance policy, the coverage will only last as long as the set number of years agreed upon in the contract.
Once a coverage period ends, the contract will end with the insurance company and you will have to take out a new life insurance policy.
If a person buys a term-life insurance plan with 20-year coverage and the insured dies within the years of coverage, the beneficiaries will be able to collect the policy's death benefit.
However, if the insured passes away after the agreed term has expired, then the contract will end and their beneficiaries will be unable to collect the death benefit.
Pros and Cons of Burial Insurance
If you are still unsure if burial insurance is right for you, or if you’re considering another form of life insurance, first take a look at the pros and cons of a funeral policy.
By looking at the favorable and unfavorable aspects of the policy, you'll be able to make an informed decision.
Pros:
Can pay benefits to your family and loved ones in less than a day after the death of the policyholder, and you might not even require a death certificate to make your claim.
Benefits range anywhere from a couple thousand to upwards of $50,000.
There's no medical exam necessary to qualify for burial insurance, just a simple medical questionnaire.
As long as you keep paying your premiums, the burial insurance policy will not expire.
Most monthly payments will range anywhere from $50 to $200, making burial insurance quite affordable.
The benefits paid to your family can be used for things other than funeral expenses. If they happen to need funds for things like bills or mortgage payments or any debt left behind by the policyholder, the burial insurance can be used to pay for it.
Cons:
Since the benefits paid to your family can be used for things other than funeral expenses, the beneficiaries may decide not to use the payout for the policyholder's funeral, but rather for things such as vacations or personal assets.
If your funeral expenses exceed the maximum payout of the burial insurance, you'll have to cover them out-of-pocket.
With no health exam, you won’t get a discounted rate if you are in good health.
With little to no health information, the cost of the policy can be very high.
Your policy will likely have “graded death benefits,” which only pay out a refund of the premiums if you die within two to three years after buying the policy.
Where to Learn More about Life Insurance
If you’re interested in learning more about life insurance policies, terms, and coverage, visit our Life Insurance Hub to read our latest articles.
We cover topics that will help you make sense of life insurance and find the coverage you need.
Reach out on 1-888-912-2132 or help@policyscout.com to get one-on-one assistance with your life insurance questions. Our life insurance agents can assist if you have any questions or want to speak to someone about your life cover options.