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What Is Burial Insurance?

Burial insurance, also known as funeral insurance or final expense insurance, is a whole life policy popular among senior citizens. It covers medical bills, funeral arrangements, burial costs and cremation. Burial insurance keeps families from having to pay the costly expenses associated with the death of a loved one and is not intended to leave large sums to a beneficiary. With pricing as low as $10 a month depending on age, gender, and health, burial insurance is considered one of the more affordable forms of insurance.

Below, you will find out how burial insurance works, the specific costs associated with funeral expenses, the pros and cons of this coverage, and how it differs from other life insurance policies.

How Does Burial Insurance Work?

Burial insurance pays out coverage to the person named as the beneficiary for funeral expenses. A beneficiary is a person, persons, or entity who receives the death benefits from a life insurance policy when someone has passed. In the case of burial insurance, the beneficiary uses the payout to cover medical bills, funeral arrangements, burial costs, cremation, and other related items. These policies are not designed to leave much after the initial expenses have been paid. In this sense, they differ from life insurance which is intended to replace lost income, giving family members and loved one's security after someone has passed. Whatever funds are left over from a burial insurance payout can be used for any additional legal costs or debt.

How Much Does Burial Insurance Cost?

The cost of burial insurance varies from one carrier to another. However, coverage can range from as low as $10 a month to as high as $200 a month with payouts being anywhere from $5000 to $50,000. It also usually depends on the age, gender, and health of the individual. Younger people (starting at 50 years old) will pay significantly less when getting a policy than someone who is older (80 years old). Those on the younger end will find it beneficial to get a policy sooner rather than later so they can lock in a lower rate.

Health is usually a factor when an insurer is deciding rates regardless of the type of life insurance. The basic idea is that the unhealthier someone is, the higher the risk they are. Risk, in this sense, means the insurance company is potentially going to be out someone paying their premiums if they die early. For this reason, insurance companies charge higher rates for people who have major health concerns. This same rationale is applied to age. The older someone is, the likelier they are to die. Once again, the rates will likely go up.

Burial insurance pays out coverage to the person named as the beneficiary for funeral expenses.

And then there's gender. It is not unusual for men to be more expensive than women. There are a few factors that cause this depending on the type of insurance. The general idea being men live shorter lives than women and take more risks. In fact, a 2020 study showed the average age of a North American woman to be 81 years old whereas a man would only be 77 years old. Morbidity tables are used regularly by insurance companies to decide how much a policy will be for an individual. Below is a breakdown from Lincoln Heritage Funeral Advantage showing the connection between age, rates, and gender.

$10,000 Policy with Funeral Planning

Age

Rates for women

Rates for men

50

$25 - $40

$30 - $48

55

$28 - $46

$35 - $55

60

$33 - $52

$43 - $67

65

$41 - $64

$56 - $75

70

$53 - $82

$74 - $93

75

$72 - $108

$100 - $131

80

$93 - $152

$126 - $190

Keep in mind you can still get burial insurance over the age of 80 but be prepared to pay higher premiums due to being considered a higher risk.

How Much Does an Average Funeral Cost?

The median cost for a funeral in 2021 was $7,848. This included the cost of the casket, funeral home fees, embalming, transportation and other related expenses. However, the cost of a funeral can vary greatly depending on the individual circumstances. For example, if you choose to have a traditional burial service with a viewing, the cost will be significantly higher than if you opt for direct cremation. This is because extra preparation for the deceased must be made in order to prep for an open casket. This could add at least another $1,000 to the final expenses.

Coverage can range from as low as $10 a month to as high as $200 a month with payouts being anywhere from $5000 to $50,000.

The type of casket you select can also affect the price. A simple wood casket is priced between $1000 and $3,550. And that can fluctuate greatly depending on the type of wood. A more elaborate metal casket can cost upwards of $5,000 to $10,000.

Cremation tends to be less than a third the cost of a burial and has become the more popular choice in recent years. The reason being there are no extra expenses for the gravesite, headstone, burial process, etc.

Funeral Cost Breakdown

Below is a table with the median funeral costs from a 2021 study from the National Funeral Directors Association (NFDA).

Type of cost

Median price

Description

Non declinable basic services fee

$2,300

Basic services fee to recover costs in arranging the funeral for its overhead and funeral director.

Removal/transfer of remains to funeral home

$350

The body is typically taken away by a staff member from the funeral home.

Embalming

$775

The body is prepared for longevity. 

Other preparation of the body

$275

This could include specific clothing, makeup, jewelry, etc. provided for the deceased.

Use of facilities/staff for viewing

$450

Staff used to operate the funeral home.

Use of facilities/staff for funeral ceremony

$515

Staff used to operate equipment associated with burial.

Hearse

$350

Transport to the burial site for the deceased.

Service car/van

$150

Transportation to the burial site for close family and friends.

Printed materials (basic memorial package)

$183

Informational pamphlets and event schedule for the funeral.

Metal burial casket

$2,500

Permanent storage for the deceased.

Median Cost of a Funeral with Viewing and Burial

$7,848


Vault

$1,572

Typically concrete enclosures to protect caskets from the weight of dirt and vehicles and protection against insects.

Total with vault

$9,420


Are There Different Types of Burial Insurance?

There are a few different options for burial insurance.

Simplified issue: This insurance is typically chosen for its quick turnaround. A simplified issue can be either term life or permanent. Term life refers to the possibility of the policy expiring before a payout. Permanent means the policy does not expire and will pay out when you die. A simplified issue also doesn't usually require any medical exams and can be obtained within days of applying as compared to the typical weeks or possibly months. However, because there is no exam it is considered to be a high-risk loan meaning the premiums will be higher.

Guaranteed issue: Like a simplified issue, a guaranteed issue does not require a medical exam. It's also permanent insurance, meaning it will stay with you until your passing as long as you pay the premiums. Keep in mind it's graded, so if you die before that graded period has ended, the payout may not be as much. Grading is in place in order to protect the insurance carriers from paying a full payout only weeks after someone has taken out the policy should they pass away unexpectedly. Insurance companies make a lot of their revenue from the premiums paid by policyholders. They will then offset their potential losses from high-risk clients by establishing a grading period that only releases a set amount of money depending on when the insured died.

Note: A graded period refers to a 2-3 year timeframe that's used to protect carriers from taking losses due to policyholders dying shortly after taking out insurance policies.

Pre-need insurance: Pre-need insurance refers to arranging your afterlife expenses in reference to burial or cremation directly with a funeral home. You pay for the expenses upfront either in one payment or in installments. It should also be noted that pre-need insurance only covers the costs of funeral expenses. There is no additional payout, whereas any excess from your more traditional life insurance policy could be used by your beneficiary to pay off medical bills or other debt.

Keep in mind the idea of a guaranteed service and a non-guaranteed service associated with pre-need insurance. A guaranteed service means the cost of the funeral arrangements is fixed. There is no increase should funeral home expenses rise. A non-guaranteed service, on the other hand, can fluctuate in price over time. Say you paid $5,000 for your funeral expenses and it's guaranteed. Even if prices rose to $6,000 for the funeral home, there would be no extra charge to you or your family. A non-guaranteed service would require you or your loved ones to pay the increased cost.

Burial Expense Coverage - Get Life Insurance Quotes

Burial Insurance Pros & Cons

Burial insurance does have its upsides and downsides.

Pros:

  • Insurance can start as low as $10 a month depending on your age, gender, health

  • Medical exams are usually skipped in lieu of a medical questionnaire

  • Some policies don't require a health questionnaire

  • Funeral expenses can be paid for without worry

  • Burial insurance offers reassurance for your loved ones

  • Payouts traditionally have a quick turnaround

Cons:

  • Older policyholders will pay higher rates

  • Poor health will cause your rates to be higher

  • The payout is for funeral expenses, not leaving much of a death benefit to your family

What's the Difference Between Burial Insurance and Other Life Insurance?

Burial Insurance is a form of life insurance specifically geared towards your funeral expenses when you pass. Life insurance is broadly meant to help support your family once you've gone. This could be through paying for funeral costs, but also to help with possible lost wages and other expenses. Below is a table from Lincoln Heritage Funeral Advantage which highlights some of the key differences between burial insurance and life insurance.

Burial Insurance

Life Insurance

A specific type of life insurance meant to cover funeral costs when someone passes

A broad category that includes several different types of insurance (term, whole, variable, annuity, etc.)

Pays a lump sum almost immediately upon death due to the amount of coverage being much smaller than other types of life insurance

Can pay a lump sum or monthly amounts. Benefits can be delayed depending on the type of insurance and the amount of coverage

Policies usually don't exceed $50,000

Policies can be in the millions

Often don't require a medical exam due to coverage being issued based on answers to a health questionnaire

Often requires a medical exam to qualify. Family history, health questions, and occupation are often determining factors

The policy remains in effect until you die as long as premiums are paid

Insurance may expire before you die depending on the type of policy you select

Usually accumulates cash value

May not accumulate cash value depending on the type of coverage

Note: Cash value refers to money put into a savings component every time you make a premium payment towards your life insurance. This money can be withdrawn or borrowed against, depending on your needs.

Do Funeral Homes Offer Burial Insurance?

Funeral homes offer burial insurance in the form of pre-need insurance. The funeral home usually has pre-paid packages available for purchase. You find your fit and pay upfront either all at once or through installments. Remember, pre-need insurance only covers funeral expenses. There aren't any additional benefits paid to your family as with life insurance. This means any extra debt or medical bills will need to be paid out-of-pocket by your loved ones unless you have an additional insurance policy. Also bear in mind that should the funeral home goes out of business or change ownership, there is no guarantee of reimbursement. You may very well lose all your coverage and any investment you made into your final expenses.

The median cost for a funeral in 2021 was $7,848.

You must also consider whether your insurance is for a guaranteed service or a non-guaranteed service. A guaranteed service means you pay for your funeral expenses, and should the funeral home's prices go up, you will not have to pay the excess amount. A non-guarantee service would mean you will be charged extra to meet the adjusted costs of the funeral home. As is the case with things like inflation, the costs of goods and services go up making you spend more. And with this, insurance rates go up as well making you spend more.

Burial Insurance FAQ

Should I have more than one beneficiary?

It isn't a bad idea to have multiple beneficiaries. You would have your primary beneficiary (the person the payout goes to first) and a contingent beneficiary (the person the payout goes to should your primary be unavailable due to death, being unreachable or refusal).

Should I get a prepaid funeral plan instead of burial insurance?

Getting burial insurance is a good idea. The point of burial insurance is to avoid paying large out-of-pocket expenses. While a prepaid plan could afford you with a discounted price, you'll still be paying the bill yourself.

Is funeral insurance worth it?

This depends on your financial situation. Burial insurance is great if you can't afford a typical life insurance policy. Funeral expenses can be quite large, and burial insurance may be worth purchasing.

Can burial insurance be used for anything?

It can. Though it is specifically meant to be used for funerals and other related expenses, beneficiaries can allocate the payout as they see fit.

Make Sure You're Covered

Burial insurance helps cover funeral expenses. This includes whether you are cremated or buried, the overhead for the funeral home, body preparation, etc. And with the median funeral price being well over $7,000, burial insurance could be a wise investment in your future. Keep in mind that your rates will likely depend on your gender, age, and health. Also, be aware that simplified, guaranteed, and pre-need insurance are all options when choosing your coverage.

While funeral homes do offer a form of burial insurance, these packages don't pay for anything beyond funeral arrangements. This means there is no excess for your loved ones to use towards debt, a mortgage or medical bills. If you are looking for more comprehensive coverage at a low price, enter your zip code below and fill out a quick questionnaire. SmartFinancial will send you free quotes for the lowest rates in your area based on your answers.

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