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Burial insurance and final expense insurance policies are typically whole life insurance policies with low death benefits and limited underwriting. Though these policies may be referred to as burial insurance, final expense insurance or funeral insurance, these are just the different names used to market the policies. Burial insurance is primarily designed for seniors that want to make sure their family has money to cover the costs of a funeral or pay off a debt when they pass away.
- What is Burial Insurance?
- Should I Buy Final Expense Insurance?
- Burial Insurance vs Pre-Need Funeral Insurance
- Best Final Expense Life Insurance Companies
What is Burial Insurance?
Burial insurance and final expense insurance aren’t actually different types of life insurance policies. They’re both just terms that typically refer to whole life insurance policies for seniors with death benefits below $50,000. This means coverage lasts for the entirety of your life and, when you pass away, your beneficiaries will typically just receive a payout large enough to cover the cost of your funeral.
Burial insurance policies typically have a shortened underwriting process, either with no medical exam or guaranteed acceptance. Since there’s limited health information provided to the insurer, final expense insurance policies are typically more expensive than fully underwritten whole life insurance policies.
Final expense whole life insurance policies also typically have a cash value component, which is basically the amount of money you would receive back if you gave up the policy to the insurer. A portion of your premiums goes to fund the cash value, another reason why burial insurance policies can be quite expensive.
Depending on your health and insurer, you may have up to three options for how you can pay for final expense insurance:
- Lump sum - Particularly unhealthy insurance shoppers may be required to make a lump sum premium payment for burial insurance. However, this can also be a helpful option if you’re concerned about keeping track of payments each month and is sometimes when favored when children buy coverage for their parents. Since there’s only one premium payment, coverage can’t lapse later when your family needs the policy in place.
- Fixed period - This option is typically preferred if you’re currently working and have additional income to pay premiums, but are concerned about your ability to cover payments after retirement. You essentially pay higher rates for permanent coverage over a period of 10 or 20 years, then the policy is locked in for your lifetime.
- Periodically (monthly or annually) - Making regular payments for your lifetime means each premium payment will be lower but you may pay a higher total amount, depending on how long you live. It also opens up the possibility of coverage lapsing if you forget to make a payment later on.
Should I Buy Final Expense Insurance?
Whether you actually need final expense life insurance is entirely dependent on your current financial situation and objectives. The first question to ask in this process is whether it would take you less than 10 years to save $10,000. Funerals typically cost around $10,000 and seniors can typically find term life insurance policies that provide at least 10 years of coverage. Given term life insurance policies are cheaper than the cost of burial insurance, we would recommend buying term coverage and saving if this is an option.
The next step is determining what life insurance policies you qualify for. The more underwriting during the application process, the lower the rates you’ll typically receive. Assuming you want permanent coverage and are just interested in a death benefit to pay your beneficiaries, you have a few options for final expense insurance:
|Guaranteed Universal Life Insurance||Simplified Issue Whole Life Insurance||Simplified Issue Guaranteed Universal Life Insurance||Guaranteed Acceptance Whole Life Insurance|
|Underwriting||Health questions and medical exam||Health questions, no medical exam||Health questions, no medical exam||None|
|Maximum Death Benefit||Over $1 million||Usually less than $100,000||Usually less than $250,000||Usually less than $25,000|
|Waiting Period||None||None||None||2-3 years|
If you’re a relatively health senior, you’ll likely qualify for guaranteed universal life insurance. This is essentially a term life insurance policy that lasts until you’re 121, or a particular age specified in the policy document. Since you can choose how much coverage you need and there’s a short medical exam, a guaranteed universal life insurance policy will be your cheapest option for covering funeral expenses. It also has the benefit of offering much higher death benefits if you have a mortgage or other financial obligation to cover.
If you’re unable to pass a medical exam but can still participate in normal activities without assistance, you should consider simplified issue whole or guaranteed universal life insurance. Since there’s no medical exam, it’s costlier, but still affordable as final expense insurance. Some insurers offer less than $100,000 in coverage, while a couple provide death benefits up to $500,000, meaning you can also cover other financial obligations if needed.
Guaranteed acceptance life insurance is the most expensive form of coverage, and we wouldn’t recommend this policy for burial insurance unless you were unable to qualify for any alternatives. And, if you are that unwell, be sure to note how long the policy’s waiting period lasts. During the waiting period, if you pass away, your beneficiaries will only receive the sum of your premiums paid plus interest. You typically need to pass away at least 2 years after purchasing coverage for your family to receive the full payout.
Burial Insurance vs Pre-Need Funeral Insurance: What’s the Difference?
Burial insurance is sometimes referred to as funeral insurance, but these are both distinct products from pre-need funeral insurance. We do not recommend pre-need funeral insurance and suggest you instead purchase final expense coverage in whatever form best fits your health and financial situation.
Pre-need funeral insurance is similar to a burial insurance policy with a few key differences:
- The beneficiary is either a particular funeral home or funeral director.
- The death benefit is typically tied to the cost of a particular set of services offered by the funeral home.
- Payments are typically only offered for a fixed period, during which you pay installments.
- If you decide that you no longer want the policy and ask for it to be cancelled, you may either receive a portion of premiums back or nothing at all.
- Policies are typically sold by the funeral home or an insurer associated with them (such as the Funeral Directors Life Insurance Company) instead of an independent agent.
If you’re considering a pre-need funeral insurance plan, you should first note that it’s not actually legal in every state for a funeral home to be named the beneficiary of a life insurance policy. You should also consider that, while insurers have financial strength ratings, funeral homes do not. This means that a funeral home may simply go out of business before you pass away.
Pre-need funeral expense policies are also very inflexible. If you want to make any changes to the funeral later on or move and need to change the funeral home, you may not be able to. In addition, if you purchase non-guaranteed funeral insurance instead of guaranteed funeral insurance, prices aren’t locked in. Therefore, if the funeral home’s costs for services increase and become greater than the policy’s death benefit, your family would need to pay for the difference. On the other hand, if prices go down, your family won’t receive any excess death benefit.
Best Final Expense Life Insurance Companies
If you’re in good health or can even qualify for simplified issue life insurance, there are dozens of companies that offer permanent coverage. However, if you are looking for final expense life insurance companies with guaranteed acceptance, the pool of options becomes much smaller.
We evaluated the burial insurance companies and found the five insurers with the best burial insurance rates and coverage options:
|AAA||AIG||Gerber Life Insurance||Mutual of Omaha||New York Life|
|Waiting Period||2 years||2 years||2 years||2 years||2 years|
|Payout During Waiting Period||Premiums paid + 30% interest||Premiums paid + 10% interest||Premiums paid + 10% interest||Premiums paid + 20% interest||Premiums paid + 10% interest|
While all these companies offer competitive final expense insurance quotes, we particularly recommend AIG. AIG will provide a portion of your death benefit early if you are diagnosed with a terminal or chronic illness, making it simpler to cover medical expenses associated with your condition.