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Everything you need to know about burial insurance

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Planning for final expenses like burial costs can provide relief and support to family members at a difficult time. But if you’re on a shoestring budget, saving for your own burial expenses might be a little daunting.

In 2021, the National Funeral Directors Association data indicates the median cost of an adult funeral was $7,848 with viewing and burial. Fortunately, burial insurance is an affordable tool that can help cover those funeral costs as well as other end-of-life expenses.

What is burial insurance?

Burial insurance, sometimes referred to as funeral insurance or final expense life insurance, is a type of whole life insurance designed to cover the costs associated with burial, funeral home services, and other final expenses.

There are several kinds of burial insurance policies, and while each offers a death benefit, there are specific differences in coverage and how benefits are structured.

In general, funeral insurance isn’t designed to leave a large amount of money to your beneficiaries. Instead, it’s a way for the insured to provide financial support after their death so their families don't have to run up credit card bills trying to carry out end-of-life wishes.

How does burial insurance work?

Burial insurance works differently depending on whether you’ve opted for a traditional life insurance policy that covers burial expenses or a final expense policy through a funeral home. The following are the three main types of burial policies.

Simplified life insurance

A simplified life insurance policy requires the insured to answer basic health-related questions, although a medical exam is not necessary. While these burial life insurance policies are more affordable than guaranteed issue policies, simplified life insurance coverage usually has a graded death benefit. That means your beneficiaries don’t get the full insurance payout if you pass within a few years of taking out the policy.

Guaranteed issue life insurance

Guaranteed issue policies are pretty much what they sound like. You’ll have to be 50 or older to qualify, but there are no health questions or medical exams and you can’t be denied coverage. The premiums for this type of whole life insurance can be expensive and return relatively small death benefits.

Pre-need insurance

This type of burial policy isn’t offered through traditional life insurance companies. Instead, a funeral home can offer pre-need funeral insurance that will cover funeral expenses and other costs associated with arrangements. The caveat is that the funeral director needs to be a licensed insurance agent, and the full death amount goes directly to the funeral homes to cover funeral costs.

The advantage to contracting with a life insurance company or burial insurance company versus a funeral home is that a whole life policy from an insurance company has cash value. This means once your beneficiaries cover the cost of your funeral expenses, the remaining funds can be used to pay other final expenses such as medical bills.

Read more: The total guide to life insurance

What does a burial insurance policy cover?

Depending on the type of policy, burial insurance can cover specific funeral costs or a wide array of other expenses associated with the end of life. Here are a few of the costs to consider when you’re deciding your coverage amount.

  • Burial plot or cremation

  • Embalming or preservation

  • Grave and headstone

  • Obituary notices

  • Casket or urn

  • Flowers

  • Transportation

  • Music

  • Funeral or memorial service fees

If you’ve chosen a whole life insurance policy, there are a few other expenses the death benefit can be used to pay such as medical bills, legal costs, or even the insured’s outstanding debt such as mortgage loans or personal loans. Consult the U.S. Consumer Financial Protection Bureau to understand what happens to debts upon death and who’s financially responsible.

Burial insurance policy vs. life insurance policy

Most burial insurance policies are a type of life insurance policy. In fact, some insurance companies don’t even offer stand-alone burial insurance.

Burial insurance is really just a term for whole or universal life insurance that pays a small death benefit to cover the deceased person’s final expenses. Term life insurance pays out a larger death benefit meant to replace the income of the deceased person to support their beneficiaries.

If you’re under 50 and have a young family, the generous death benefit of a term life insurance policy is probably more appropriate for your situation. If you’re over 50 and retired, the lower cost of burial insurance may make more sense.

Read more: What is term life insurance?

How much does burial insurance cost?

Burial insurance premiums are fairly affordable, even for older applicants. However, coverage and benefit amounts can vary depending on whether the insured is willing to answer a policy health questionnaire and how much underwriting is involved.

eFinancial, an insurance marketplace, says final expense insurance rates start at $53 per month with coverage ranging from $5,000 to $35,000. Choice Mutual has a more specific breakdown where 50-70-year-olds pay premiums anywhere from $12-$193 per month depending on age, gender, health conditions, and the coverage needed.

How much burial insurance do I need?

Given that the average cost of a funeral is over $7,000 depending on whether cremation or burial is involved, most burial insurance policy coverage starts at a death benefit of $5,000.

To decide how much coverage you’ll need, consider the funeral costs outlined on the Federal Trade Commission (FTC) website or use the New York Life online funeral cost and final expense calculator.

Alternatives to traditional burial or funeral insurance

If you’re trying to decide if burial insurance is worth it or looking to save money, consider the following alternatives.

Burial or other trust

You can work with an attorney to create a trust that would set aside money for funeral costs and name a trustee that could withdraw the money upon your death. In this case the trust owns the life insurance policy.

Payable on death (POD)

Some banks offer an option to create an account that’s payable upon presentation of a certified death certificate to a specific beneficiary. POD accounts avoid having funds tied up in probate and allow you to still access the money while you’re alive.

Savings account

You can also squirrel away funds for a funeral in a joint savings account. However, these types of accounts can get tied up in probate so they’re not always the best solution to address immediate end-of-life needs like funeral expenses.

What happens when there’s no money for a funeral?

And last but not least, what happens if there isn’t any cash on hand for a funeral? A few of the following programs work to subsidize funeral costs for families.

Veterans burial benefits

The federal government’s Department of Veterans Affairs works to defer the funeral costs of both veterans and active-duty military personnel. The amount awarded or reimbursed depends on several factors, including when the death occurred and if it was service-related.

FEMA assistance

The Federal Emergency Management Agency (FEMA) works with state agencies to cover the costs related to funerals for many natural disasters, including COVID-19-related deaths. See the FEMA website for more information about how to apply for assistance.

State government assistance

If you can’t afford a funeral for a loved one, many states have organizations that work to provide relief and funeral services. You can search a state-by-state directory of burial assistance programs here.

Victim compensation funds

If the deceased was the victim of a crime, the family may be entitled to financial support for funeral-related costs from the state crimes victims compensation fund. You can learn more information on the federal benefits website.