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Casey Bond
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If you don’t have funds set aside to help your family pay for a funeral, medical, or other expenses after your death, burial insurance can be one way to ensure your loved ones can afford those costs.
Burial insurance—also known as “funeral insurance” or “final expense insurance”—is a type of life insurance meant to cover final expenses and funeral costs. It’s a whole life insurance policy that’s purchased in smaller amounts, usually, around $5,000 to $25,000.
Since burial insurance is designed for a specific purpose, it’s not meant to serve as life insurance for families with major financial obligations such as a mortgage or college tuition. It’s often marketed toward older people with tight budgets who would otherwise not have the savings to cover burial costs when they die.
When you take out a burial insurance policy, you select the amount of coverage you want and designate a beneficiary. When you die, the beneficiary can initiate a claim to receive the death benefit and use those funds to cover funeral-related expenses. These may include funerals and viewing, cremation, medical expenses, legal costs, and more.
Burial insurance often has a graded death benefit, which means your beneficiaries won’t get the full death benefit if you die within the first few years of the policy. Instead, they’ll get a refund of the premiums you paid and some interest.
Burial insurance is typically either a simplified issue or a guaranteed issue life insurance policy.
When it comes to finding the best burial insurance, you need to consider your estimated final expenses, your budget, and any specific policy needs, then choose a reputable insurer that can meet those needs.
Here are a few considerations as you shop for burial insurance.
Many major insurers will allow you to get a burial insurance quote online. It’s a good idea to compare life insurance quotes from several insurance companies before making a decision.
Factors that contribute to the cost of burial insurance include:
Burial insurance tends to be a more expensive option than other forms of life insurance when you compare the death benefit to the cost of premiums. That’s primarily because burial insurance policy applications usually don’t require a medical exam or detailed medical information, which increases the insurance company’s risk.
The national median cost of a funeral with a viewing and burial was about $7,848 in 2021, a 6.6% increase over the previous five years, according to the National Funeral Directors Association. The median cost of a funeral with cremation was approximately $6,971, an 11.3% increase over the previous five years.
Remember that your own funeral costs could be much higher or lower, depending on your choice of services and where you live.
Burial insurance is worth it if you need a small policy only to help cover final expenses.
A burial insurance policy is convenient because it doesn’t typically require a medical exam or lengthy application. The premiums are also cheaper than more comprehensive permanent life insurance, and coverage is guaranteed.
On the other hand, since burial insurance doesn’t pay out a high death benefit, your family could be on the hook for additional expenses after you die. Also, since there is often no medical exam, you won’t enjoy a discounted rate for being healthy, either.
Depending on your situation, burial insurance may not be as good of a value as other types of life insurance.
Burial insurance isn’t your only option for covering final expenses. Before you commit to a policy, consider these alternatives first.
This essentially works as a payment plan for burial costs that you set up ahead of time. You choose the specific funeral home, as well as your preferred final arrangements. It then prices out your final expenses, which you can pay all at once or in installments over time.
This type of insurance covers you for your lifetime (as long as the premiums are paid). It’s quite a bit more expensive than term life insurance, but there are a variety of permanent life insurance options, such as whole life, universal life, and variable life, that come with different costs and benefits. Permanent life insurance also has a cash value that grows over time, which you can withdraw or borrow against.
While you can certainly set aside money in a traditional savings account to pay for funeral expenses, the money could get tied up in probate after your death. A POD account, on the other hand, allows you to set aside money for a funeral without the risk of it going to probate. You name a person who is allowed to access the money when you die. They are not allowed to withdraw before then, but you can add or withdraw money from the account at any time.
You can set up a trust so that it owns your existing life insurance policy. When you die, the trustee makes a claim, and funds are distributed according to your instructions. There are also specific funeral trusts, which allow you to set aside money for a funeral and name a trustee. The trustee will use those funds to pay for your funeral costs after you pass away.
