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Burial insurance: What is it?

Fact-checked with HomeInsurance.com

Mortality can be uncomfortable to think about, but as frightening as it may be for us as individuals, it can also have a significant impact on our loved ones. Our demise can leave a plethora of financial troubles in our wake. Bad enough in the best of times, but these expenses arise amidst the early stages of grief. Burial insurance is one of the tools designed to prevent this intrusion of cost during our loved ones’ time of mourning.

What is burial insurance?

Burial insurance is a type of life insurance designed specifically to cover funeral and burial costs. As a result of this design, burial insurance generally has both lower premiums and smaller death benefits than other forms of life insurance. Policies most commonly fall under the whole life insurance category and can cover either individuals or entire families.

How burial insurance works

Like all types of life insurance, you must pay a regular premium to maintain your burial insurance. These rates are generally paid either monthly or weekly and can be as little as a few dollars per week. The low cost is reflected in the small size of the death benefit (policy payout). The premium price per payout size is less for younger and healthier people, as they are at a lower risk of death.

When an insured individual dies, their burial insurance policy will pay the death benefit to whoever is listed as the beneficiary within the plan. This payout is intended for funeral and burial costs but is not restricted to these things.

For instance, if Jeremiah dies and has his brother Bart listed as his beneficiary, then Jeremiah’s burial insurance policy will pay Bart the death benefit. Jeremiah chooses to use this money to pay for his brother’s funeral but still has some left over and decides to use the remaining amount to pay his bills while he takes a few weeks off work to grieve.

Burial insurance cost

Burial insurance quotes are among the cheapest in life insurance. Spending around $40-$50 per month can often pay for a policy with a sizable enough benefit to cover the funeral basics.

Payout

Death benefits of burial insurance are small, within $5,000 to $25,000. However, unlike other types of funeral insurance, payouts from burial insurance may be spent in any way the beneficiary chooses. 

Who needs burial insurance?

For each of us, there comes a day when such assurances as burial insurance are needed. The closer we are to that day, the more necessary these policies become. As such, insurance companies see older people as the primary audience who may benefit from having burial insurance. In part because of its intended audience, burial insurance is relatively easy to qualify for. There are sometimes stipulations about health conditions, but medical exams are not required. Burial insurance for seniors will often have a simple health questionnaire and few, if any, restrictions.

What’s covered by burial insurance?

As a subtype of whole life insurance, burial insurance policies do not generally have restrictions on how the beneficiary may spend the payout. Despite this lack of stipulation, burial insurance policies are typically thought of and marketed as being for a series of specific expenses related to funerals and burial. For perspective, the average cost of a funeral in the U.S. is around $7,000 to $10,000.

  • Funeral officiation: Unless friends and family are the only ones expected to speak at the funeral, the odds are good that there will be someone hired to officiate and speak.
  • Urn or casket: While urns are generally cheaper than caskets, either one can represent a sizable cost. Whether opting for cremation or burial, one of these items will be necessary.
  • Burial: Even after the casket is paid for, the burial plot and the labor involved can be quite expensive. The cost of transportation to the burial plot will also factor in.
  • Cremation: Cremation is less expensive than burial but still costs around $1,000 on average in the United States.
  • Preparation of the deceased: Cosmetics, clothing, and arrangement all require resources, experienced labor and time. These costs can be expected in any funeral that includes a viewing and even some that don’t.
  • Facilities: Funeral homes are necessary but can be expensive. Making use of a funeral home even for their basic services can set you back a few thousand dollars.

How much does burial insurance cost?

The cost of burial insurance is dependent on a few different factors. Still, it is generally one of the cheapest forms of life insurance. The main variables that determine this cost are age, health, gender and payout size. These factors will determine your rates, although they can vary between insurance companies. On average, burial insurance in the U.S. costs $50 monthly, with a death benefit size of $10,000, according to the insurance company Choice Mutual.

Burial insurance companies

If you’re wondering who has the best burial insurance, below is a list of some of the most popular and respected burial insurance companies. Most of these companies can compete, but burial insurance AARP stands at the top.

Is burial insurance worth it?

Burial insurance is worth it when the circumstances are right, but for many people it is unnecessary. Generally, a standard term life insurance policy will preclude the need for burial insurance. Life insurance policies are common and relatively inexpensive, and any traditional life insurance will pay out more than burial insurance. However, for people who do not want a larger life insurance policy and who do not have the funds saved up to cover funeral expenses, burial insurance can be a good fit.

With this scenario in mind, insurance agents see older people as being in the best position to benefit from burial insurance. Specifically, they are thinking of older folks who want just enough coverage to cover their funeral expenses, so that their families don’t have to.

Alternatives to burial insurance

  • Traditional life insurance policy: A term life insurance policy isn’t significantly more expensive than a burial insurance policy, but it provides a much greater payout. Most traditional life insurance policies can compete with burial insurance in this way.
  • Pre-need funeral trust: In essence, this is paying for your funeral ahead of time. You place money within a trust specified for your funeral expenses. That money accrues interest over time until it is used for your funeral.
  • Self-funded burial: The cheapest way to pay for a funeral is out of pocket. This has the highest one-time cost but takes the least amount of money overall. If you can afford to set aside $9,000 -$17,000 for your funeral, this is a good plan.
  • Pre-need insurance: This is a type of insurance that you can take out from some funeral homes. You pay a regular premium, and then it covers the cost of your funeral. The details of the funeral and what is covered are all agreed to on the front end.

The takeaway

  • Burial insurance is a type of whole life insurance with low premiums and a payout of $5,000 to $25,000.
  • If you have no other life insurance or plans for funeral costs, burial insurance can fill that gap.
  • Traditional life insurance, pre-need funeral trusts, self-funded funerals and pre-need insurance are all alternatives to burial insurance.
  • The use of burial insurance payouts is not restricted to specific expenditures.

Some policies, like auto insurance, are mandatory. Burial insurance isn’t, but funeral costs are unavoidable, nonetheless. If you do not have another plan for covering your funeral expenses, then burial insurance can be a wise choice. That said, you should consider a few alternatives, as well. If you are shopping around for burial insurance, also consider traditional life insurance policies, pre-need funeral trusts, self-funded funerals and pre-need insurance. Comparing policies takes effort on the front end but results in better coverage and a better experience overall.

Sources

  1. https://www.iii.org/article/what-%C2%93burial-insurance%C2%94
  2. https://choicemutual.com/burial-insurance-costs-age/#:~:text=Average%20Burial%20%26%20Final%20Expense%20Insurance,the%20face%20amount%20you%20purchase
  3. https://www.nylaarp.com/Landing-Pages/Easy-Acceptance
  4. https://6nu3.globelifeinsurance.com/final-expense-insurance?dd_pm=none&dd_pm_cat=insurance_other
  5. https://www.mutualofomaha.com/promo/life-insurance/364850?dd_pm=none&dd_pm_cat=insurance_other
  6. https://fidelitylife.com/products/final-expense/rapidecision-final-expense/
  7. https://www.gerberlife.com/
  8. https://www.coverage.com/insurance/life/guide/
  9. https://www.coverage.com/insurance/auto/cost-of-car-insurance/
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