Many people buy life insurance simply to cover their burial and funeral expenses. Did you know there are a variety of burial insurance policies available that are quite different from each other? Before you buy one of these funeral insurance policies, make sure you’re getting what you really need.

Did You Know...

funeral cost infographic
funeral homes infographic
cremation rate infographic
  • In 2010, the average cost of a funeral was $10,000
  • In 2010, there were 19,902 funeral homes in the U.S.
  • In 2008, the cremation rate was 36.02%

What Is Funeral Expense Insurance?

Funeral expense insurance is an insurance policy that pays the costs associated with your funeral. There are several different forms of these policies available to you to assist you with planning for your end of life costs.

Funeral expense insurance can be used to pay for the cost of the funeral alone, or it can cover additional final expenses such as outstanding medical bills, legal costs, or any other debts that you owe, such as credit card bills.

The different types of funeral insurance policies include:

  • Preneed Funeral Insurance: This is directly or indirectly linked to a funeral service provider. It has installment payment plans which can be either 1, 3 5, 7, or 10 years and remains in effect for your entire life after the premiums are paid. This type of policy can be either a term insurance policy or a permanent policy.
  • Final Expense Insurance: This type of policy is not linked to a funeral service provider and tends to be cheaper than preneed funeral insurance. It can consist of either a term or a permanent life insurance policy.
  • Burial Insurance: This type of policy is usually a term life insurance policy with lower death benefits such as $5,000 or $10,000 dollars. The death benefits are paid to a named beneficiary who can use the death benefits in any manner.

You can also factor in funeral coverage in a life insurance policy of your choosing, such as:

  • Term life insurance: This is a type of insurance policy that covers you for a specific period of time such as a 5, 10, 15, 20, 25 or 30 year term. These policies cover death benefits only.
  • Permanent insurance: This can be purchased as either a whole life policy or a universal life policy, and is more expensive than a term policy. It covers you for your entire life and also comes with a cash value accumulation feature.

Additionally, smaller death benefit policies can be purchased in a “guaranteed” life insurance policy. These policies do not require a medical exam or a medical questionnaire for coverage. They are more expensive than policies that do require a medical exam, but are ideal for those who have a life threatening or terminal illness and can’t find insurance coverage from a standard insurance carrier.

What Is Preneed Insurance?

Preneed insurance is a policy often sold directly from a funeral home to the policyholder who has identified a specific future need - in this case, funeral expenses. Licensed insurance agents who work for the funeral home sell these policies which are often in the form of a whole life insurance policy. In some cases the funeral home is the named beneficiary, which provides the benefit directly to the funeral home in order to cover the funeral or cremation costs. However, some states prohibit the funeral home from being named beneficiary, so be sure to find out what the rules are in your state.

You may be able to buy other types of preneed insurance policies, trusts or funeral plans that will allow you to specifically select your beneficiary.

Some preneed policies are guaranteed and some are not guaranteed. With a guaranteed preneed policy, you are assured that the prices being charged for the funeral won’t change, but a non-guaranteed preneed policy means that prices could escalate with the market, so it’s vital you understand the difference when you buy a policy.

The advantage of a preneed policy is that the insurance carrier pays the benefits immediately. You likely won’t have to wait the 30 or 60 days you would usually have to with a traditional life insurance policy.

A preneed insurance contract made directly with a funeral home will cover some or all of the following:

  • Burial plot
  • Casket or urn
  • Grave marker
  • Cremation or embalming
  • Funeral cars
  • Flowers

Who Should Consider a Burial Insurance Policy?

Your need for burial insurance depends on your individual situation; in particular, your financial status and your family’s budget will likely be factors taken into account. You might want to consider a burial insurance policy if:

  • You have no life insurance coverage
  • You have no other means of paying for a funeral
  • You want to cover your entire family
  • You have limited savings with no other means to pay for your funeral expenses and outstanding debts
  • You want a separate policy to specifically cover your final expenses

Can a Life Insurance Trust Cover Final Expenses?

A life insurance trust and life insurance settlement can be used to cover final expenses. This should be arranged and discussed with your financial advisor.

Are Burial Insurance Policies a Good Idea?

A burial insurance policy can be an ideal way to manage your final burial and funeral expenses, especially if you do not have an existing life insurance policy. Setting up a funeral, cremation or burial policy allows you to make small affordable payments over time. If you prefer to have a separate policy to specifically address your final expenses, burial insurance may be ideal for you.

Are Burial Insurance Plans Expensive?

A term insurance policy is typically more affordable than a permanent policy such as whole life. The cost will depend on the results of your medical exam, your age and other variables insurance underwriters measure. Policies can be as low as $5 per month to as high as $1000 per month, so taking the time to comparison shop is crucial when you want to find the most affordable policy for your individual needs.

How Do You Choose a Funeral Insurance Plan?

Planning for funerals should be done thoughtfully and carefully. These events are emotional and can also be incredibly expensive. Thankfully, the right funeral insurance policy can make these events easy to plan and execute.

There are many different types of death insurance policies available, and you will want funeral coverage that is suitable to your individual situation. Research your options ahead of time. You can speak with independent insurance agents, attorneys, and financial planners to get a good picture for your options and the kinds of coverage you can find in your price range. Using all your resources will help you get the policy that fits your needs best.