Insurance is something the majority of us are all too familiar with. From car insurance to home insurance to things like boat insurance and even pet insurance, it seems there's always another thing for us to insure to better prepare for every single, worst-case scenario imaginable. One of the most critical forms of insurance is, of course, life insurance.
Surely you've heard of life insurance before. But have you heard about burial insurance too? Is there a difference between the two?
On the most basic level, burial insurance is a policy designed to help your loved ones cover your funeral expenses once the time comes. Many don't realize that all kinds of added costs and fees come with even the simplest funeral until it's too late. Getting a burial insurance policy helps to end this problem before it begins by setting aside funding for things like a burial plot, any cemetery fees, a grave marker, flowers, and anything else that falls under the umbrella of funeral expenses.
It's important to note that burial insurance is more or less untouchable while the policyholder is still living. It is not used for medical costs, doctor's appointments, prescriptions, or anything having to do with a living, breathing person's wellbeing.
Usually, there are two kinds of burial insurance: Your standard burial insurance (described above) and pre-need insurance. This pre-need insurance is highly customizable and, as a result, a much more specific kind of burial insurance than your standard fare. This form of burial insurance is optimal for those who already have a particular funeral home or burial plot picked out. Pre-need insurance policies are established with the funeral home so you can ensure there will be no hidden fees or inflation. It makes for a slightly more expensive form of burial insurance with a much shorter payment period, but it's worth it for many people in the end.
If burial insurance is something that appeals to you, you'll be happy to hear that the process of signing up for a policy is relatively simple and hassle-free. Unlike other forms of insurance, there's no medical exam required to qualify for burial insurance. Approval typically comes after an application is filled out, a few questions about medical history are answered, and any medications you're currently taking are listed.
Once approval comes, a burial insurance policy can quickly cover the costs associated with the funeral. These costs include the ones listed in the section above and things like the hearse, the casket, and a whole slew of other funeral expenses that you might not have planned for otherwise. Some policies have even been known to pay out in less than 24 hours without a death certificate needed.
Now that you have a clear picture of what burial insurance is and how you obtain it let's get into the details of a basic life insurance policy. Simply put, life insurance is intended for your family to help cover the cost of living after the policyholder has passed. The policyholder will never actually see a dime of the life insurance money. It all goes to the benefactors — i.e., the family members named in the policy — instead. Think of it as a way for a single parent to account for a sudden loss in half of the household's income or a grandparent's way of bestowing their wealth onto their spouse or their children after they've passed away.
Life insurance money is spent on things like the mortgage, school tuition, credit card bills or other forms of debt left behind, and even simple things like groceries or utilities. Anything that the policyholder's income would have helped to cover can be paid with life insurance.
Typically, there are a few different kinds of life insurance for a future policyholder to choose from. The first, term life insurance, is usually broken up into easily-digestible terms with 15. 20, or 30-year contracts. This makes it the ideal option for young families who are just getting started: It's affordable, for starters. It gives you an excellent place first to begin to establish a life insurance policy for yourself. The second, whole life insurance, differs from term life because it does away with the terms and covers the policyholder for the remainder of their life. A whole life insurance policy lasts for the rest of our days and can even accrue cash for use in case of emergencies. The third, universal life insurance, is the most flexible and comprehensive life insurance policy. At the highest price tag, it brings the most coverage and the most benefits.
To qualify for life insurance, most people will have to go through an extensive medical exam. This helps the insurance company establish what kind of health you're in and how much your policy will need to cover to provide for family and loved ones in your absence. Your medical exam will go as far as to analyze blood and urine samples to determine your rate and assess your medical risk so that you can be set up with the fairest, most appropriate life insurance policy imaginable.
Once you're approved, and your insurance policy is chosen from the three options, you'll start making payments and rest easy knowing your family and your loved ones will be taken care of if the worst happens. From house payments to car payments to bills to any additional living expenses, the goal of life insurance is to take care of the natural worry and fear that comes in the wake of a loss when finances are involved. Who knows? If your policy is comprehensive enough, there might even be some money left over that your family and loved ones will be able to place into savings.
If you're still confused over the difference between burial insurance and life insurance, or you're simply torn over which kind of insurance policy is going to be best for you and your family, let's weigh the pros and cons of both. That way, by looking at the best and the worst of both insurance policies, you'll be able to make a much easier decision. Let's begin with weighing the pros and cons of burial insurance and then moving onto the pros and cons of life insurance.
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 need 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 up with your premiums, there's never going to be a time where the burial insurance policy will expire.
Most monthly payments will range anywhere from $50 to $200, making burial insurance quite affordable.
The benefits paid to your family can only be used for 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't be used for it.
If your funeral expenses exceed the maximum payout of the burial insurance, you'll have to cover them out of pocket.
Your family will not have to worry about the financial fallout of the policyholder's death because the life insurance money will provide for them in the same way an income would have.
Payouts range anywhere from $50,000 to millions of dollars.
Your family's living expenses will be taken care of in the policyholder's absence, thus relieving a lot of unnecessary stress in the final weeks or months of life.
There's always going to be a life insurance plan that fits your budget — some have cost policyholders as little as $15 or $20 per month.
Payments may take upwards of 30 days or more to arrive to the benefactors.
A death certificate is almost always required in order for death benefits to be paid out, so this could prolong the payout process even further than 30 days.
Unless you have whole life insurance or universal life insurance, your policy will eventually expire and no death benefits will be paid outside the set term limits.
A comprehensive medical exam is required and may keep you from getting the ideal life insurance you imagined.
As you can see, there's a lot of little things to consider (and even a few big things) when trying to choose between burial insurance and life insurance. It raises the question: Is it worth it to pursue both? Do people really need burial insurance AND life insurance? Let's think about this.
At first glance, it might make a lot of sense to sign up for both burial insurance and life insurance. Your family won't have to use any of your life insurance money on funeral costs, and vice versa. Your family won't need to stress outside expenses that they wish they could cover with the burial insurance money. However, this might not be practical for everyone's unique situation.
If you're paying top dollar for a substantial universal life insurance policy, you probably won't need to worry about extra money set aside expressly for the funeral. Alternatively, if you're not planning on having a big funeral and you've already made plans for the day (when it comes), you also likely don't need to invest in burial insurance.
However, if you've signed up for a moderate life insurance policy and worry your payout might not be enough to cover funeral expenses, feel free to pursue a burial insurance policy in addition to your life insurance policy. Because the payouts can be used on more things and the terms aren't as specific or restrictive, it goes without saying that a good life insurance policy will go above and beyond the limits of even the best burial insurance policy. Ultimately, though, the choice is yours alone to make.
If you still have questions about whether or not an insurance policy is best for you, you should consider reaching out to the experts at PolicyScout. Our expertise and knowledge of the insurance industry are unparalleled. We are positive in our ability to help further educate you on what the best insurance policies are and how you can get set up with the unique coverage that fits your needs. Regardless of if you're ready to get signed up for an insurance policy or you simply want to know more about a certain subject, PolicyScout is here to help.
Contact us today for more information.