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Compare burial insurance to cover funeral costs
Also known as final expense, you can help ease the financial burden of your passing with burial insurance.
Burial insurance insurance, also called final expense insurance can cover the costs associated with medical bills and a funeral to ease the financial burden on your family. Knowing how it works and what to watch out for can help ensure your loved ones don’t have to worry about how they’ll pay the bills.
What's in this guide?
- What is burial insurance and how does it work?
- Average cost of burial insurance
- Pros and cons of final expense insurance
- Types of final expense insurance
- Where can I buy burial insurance?
- Understand the fine print
- Is final expense insurance the same as a preneed plan?
- Is final expense insurance right for me?
- Ask an expert: What's the main difference between final expense and life insurance?
- Alternatives to burial insurance
- Bottom line
- Frequently asked questions
What is burial insurance and how does it work?
Burial insurance is a type of permanent life insurance with death benefits designed to cover the cost of medical bills and a funeral. Coverage typically starts at $5,000 and tops out at $25,000.
Because it’s permanent life insurance, it remains in effect as long as you continue paying your premiums. After you die, the death benefit is paid out to your beneficiaries. Despite this policy’s name, your beneficiaries can spend the money however they wish.
Typically, final expense insurance is marketed to seniors who don’t have enough savings to cover their end-of-life costs. It’s also a good option for people with underlying health conditions that may prevent them from buying a traditional policy. Unlike traditional life insurance, these policies do not require a medical exam for underwriting. But many companies require at least a health questionnaire to learn the basics of your situation. If you’re suffering from a terminal illness, you may face high premiums or even rejection.
The way this policy works is simple. You buy a final expense policy from a life insurance company, indicating the benefit amount and your beneficiaries. Then, when you pass, your beneficiary can use the money to pay for your funeral costs, medical bills and/or unexpected expenses.
Average cost of burial insurance
The two most important rating factors in final expense insurance are age and gender. Unlike traditional life insurance policies, health status is not a determining factor.
The older you are, the more you’ll pay for a final expense policy. Men pay higher premiums than women, simply because data suggests that women live longer. A person in their 50s can expect to pay around $400 a year for a $10,000 or $20,000 policy. A person in their 80s can expect to pay more than $1,000 a year.
Pros and cons of final expense insurance
- Offers peace of mind. If you want to make sure your loved ones won’t be left with your funeral, medical bills and end-of-life costs, a final expense policy can ease that burden.
- No-medical exam policies available. With a simplified or guaranteed issue policy, you won’t need to take a medical exam to qualify for coverage.
- Premiums can be high and benefits low. This is because the insurer doesn’t have a complete picture of who they’re covering, so they’re assuming much more risk.
- Costs can exceed the benefit. If you buy the policy too early or outlive the term, the high price of the policy may not be worth it.
Types of final expense insurance
There are two main types of coverage, and anyone can apply for either:
- Simplified issue policies skip the medical exam but require you to fill out a health questionnaire. Unless you answer “yes” to one of the knockout questions — like if you’re in a wheelchair — there’s a good chance you’ll be approved.
- Guaranteed issue policies forgo both the medical exam and health questionnaire. Since the insurer doesn’t know anything about the person they’re covering, the coverage limits are usually low and the premiums are high.
Where can I buy burial insurance?
Most major insurers sell final expense insurance policies, including Mutual of Omaha, Transamerica and AIG.
Can I buy final expense insurance while I’m hospitalized?
Yes, you can purchase a final expense policy at any time — even if you have a medical condition, or you’re in the hospital. The policy doesn’t require extensive medical underwriting, so depending on your health profile and insurer, your coverage could go into effect immediately.
Understand the fine print
Final expense plans can either be bought as a term policy or as a whole life policy, which usually ends at age 100. Term policies are typically for a period of 10, 20, or 30 years, while whole life policies are guaranteed until either age 100 or 120.
Final expense policies sometimes have a waiting period before they pay the full benefit amount. For example, if a policy has a two year waiting period after the policy has been issued and you pass away in those first two years, the company will either pay out a reduced benefit amount or no benefit amount.
There are policies without a waiting period, so thoroughly check and compare policies before you buy.
Is final expense insurance the same as a preneed plan?
It’s similar to a preneed insurance in that it’s designed to lift the financial burden of your funeral or burial from grieving family members.
But final expense insurance differs in three key ways:
- Place of purchase. Preneed plans are typically bought directly through a funeral home to cover the costs of burial services, whereas final expense insurance is bought through a life insurance company.
- How it’s paid for. You pay for your preneed plan directly to a funeral home, with the money earmarked for a stated burial plan. Final expense insurance, however, remains in force as long as you continue paying your premium, paid out at your death.
- Benefit use. Unlike with a preneed plan that sets aside money for services at a specified funeral home, your final expense insurance benefit goes directly to your beneficiaries, who can use it however they see fit.
Is final expense insurance right for me?
Final expense insurance is a solid option for those who don’t have a traditional life insurance policy or let their term policy lapse. It doesn’t require a medical exam, which could be a relief if you’re health excludes you from a traditional life insurance policy.
Final expense insurance is a good option if:
- Underlying health issues prohibit you from getting a traditional term or whole life insurance policy.
- You are older and traditional life insurance premiums would be too expensive for your budget.
- You are concerned about paying for the costs of a funeral and burial only and don’t have any other debt or expenses to pay off.
Alternatives to burial insurance
There may be some situations in which a final expense policy isn’t the best option for you. But these policies can also help to take care of your end-of-life expenses:
- Term life insurance. A potentially cheaper option if you’re under age 65 and healthy enough to pass a medical exam. It can provide a higher benefit than a final expense policy for the same premium or less.
- Whole life insurance. A permanent life policy that also grows cash value, but with higher premiums than other options. It could be a good option if you’re healthy, under age 65 and want cash value growth to use however you wish later.
- Through an estate. Funerals and burials can be paid through the deceased’s estate, but executing an estate takes time and likely can’t happen before the funeral and burial. Also, the executioner of the will is the only person able to make decisions and allocate funds.
Is prepaying for a funeral an option?
Yes. You can buy a preneed plan directly from a funeral company to satisfy your wishes without putting a financial strain on your family.
Potential downsides to a preneed plan are that it’s specific to a particular funeral home, which could be a problem if it goes out of business, move out of your location, raise expenses, or isn’t one your beneficiaries wish to use.
If you’re in your 70s or 80s and don’t own a life insurance policy — or if you know you won’t be able to pass a medical exam for a traditional policy — look into final expense coverage.
But if you’re younger than 65 and in good health, there may be better or cheaper alternatives for you. Compare the various types of life insurance to find the right fit for your situation.
Frequently asked questions
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