How Does Burial Insurance Work? – Podcast Episode 19

In this podcast, I’m going to be discussing how does burial insurance work? So let’s get started. So burial insurance is a type of life insurance policy that’s designed to cover the cost of a funeral or other end of life expenses, and burial it can be for a burial, but it could also be for cremation, sometimes they’re used interchangeably. Just understand, typically only difference is going to be the coverage amount that is recommended or needed or required.

So if you’re looking at the average cost of the burial, right now, in the United States, it’s around $10,000. So most people would want to look at getting somewhere between 15 to $20,000 worth of insurance. And the reason is, is we want to just factor in inflation, we know prices are going to go up over time, we know things are going to get more expensive over time, including burials and cremations. So, we typically want to build some extra funds in there to allow for that inflation.

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Now, if things are tight financially, what you can do is just get what it would cost today to bury or cremate you. Again, burials are around 10,000 cremation is between 1000 to 2000. So cremation, we typically get a $5,000 policy and burial, a good starting point would probably be $15,000. Just understand that there is flexibility.

If you’re on a fixed or limited income right now, and you can’t afford as much insurance as you would like, go ahead and get what you can afford, because we can always help you add more coverage later. So it’s just extremely flexible. And you know, even if you have another policy through another insurance company, we can still add coverage is perfectly fine to have more than one insurance policy for final expenses.

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So the next point on how burial insurance works is the policy owner, once you have the policy, the policy owner, which would typically be you, which would be different from the beneficiary would be the person who’s going to get the money when you pass away. So the policyholder would pay a monthly or annual premium, or it could be even quarterly or even semi annually. And for when you pay that money, the insurance company gives you coverage now that coverage amount is chosen by you.

So say it’s a a $20,000 policy, and you pay $50 a month, if you pass away, and you have first day coverage, which is what we recommended funeral funds of America, if you have first day coverage, if your policy had even been enforced one day, and you made that $50 payment, the insurance company would have to pay out that $20,000. Now, again, the billing cycle is totally up to you.

However, I will give you some guidelines on what seems to work best for 99% of the people. And that’s to pay monthly. And the reason is most of the people we help are on a fixed or limited income. And it’s just easier for them to spread that out each month knowing that it’s going to come out of their bank account on a specific day, rather than have it all be due once a year, because most people just aren’t very good savers.

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Unfortunately. And I’m not picking on seniors, I’m picking on all of America, but it’s a lot easier to budget on a monthly amount than it is on an annual amount. And sometimes there’s a discount for paying annually. Oftentimes there isn’t it’s just split out. And if there is a discount, a lot of times it would be very small, it might be only 20. So dollars or something like that.

So a lot of times it’s just a lot easier and more flexible on your end, just to have it set up to pay monthly. Now, the other area on how burial insurance works is there’s smaller coverage amounts. So traditional life insurance policies, and I’ll talk about term life insurance, they’re often going to be anywhere from $100,000 up to millions of dollars potentially. Well, it doesn’t cost $100,000 or millions of dollars to get buried or cremated. So therefore we can get by with lower coverage amounts.

Typically, most policies are going to range between five 1000 to $25,000. And all the insurance companies have different coverage amounts, if you wanted to go down to 2000, you could do that with some companies but not others. If you wanted to go up to $40,000, you could do that with some companies, but not others. So that’s really insurance company dependent.

5:18

We work with a lot of different insurance companies. And by doing so, we can typically get everybody the exact coverage they want at the pricing that’s affordable for them, and get them that all important first day coverage so they can avoid those two year waiting period plans. We’ll talk about those in a moment.

The next area about how burial insurance works is when the policyholder or the insured dies, the beneficiaries will receive a payout from the insurance company, that money can then be used to cover Funeral Home burial, cremation or other final expense cost. Now, that’s exactly why we get these policies because, you know, if you’re a parent, and you don’t have this money saved up or set aside or have the burial or cremation already taken care of, then you don’t want your children or family or friends or loved ones to have to pay this for you.

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We’ve all seen people who’ve had to post on GoFundMe, basically begging for money, because somebody knew they were going to die someday, but didn’t take care of making sure everything was paid for didn’t make sure that their obligations were paid for. They didn’t make sure that they had insurance. So somebody else’s gotta pay this for them. And what a terrible legacy to leave behind where everybody’s feeling resentful that you passed away, and you left this, this major expense on them.

So just understand, kind of the basic principle, with this final expense, burial life insurance is that when you die, the insurance company pays, unless you don’t have a policy, and then it’s when you die, some of your friends and family member have to pay and they’re typically going to have to put this on a credit card, probably 26% interest, and they’re gonna have to pay on it for years and years and years. So just be aware of that. Just keep your legacy in mind.

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The other area about how burial insurance works is it doesn’t require a medical exam or a doctor visit. Now, that doesn’t mean the best policies with the lowest rates don’t ask health questions, because the first day coverage plans, they all ask health questions. If you want to plan with no health questions, we’re going to talk about that next. That’s a two year waiting period plans high. We don’t recommend those.

I’m just giving you a little forward insight. We’re going to talk about it but we don’t recommend those to your waiting period plans. So yeah, what actually happens is the insurance companies will just check your prescription records. And they’ll know that if you’re on insulin, that you’re a diabetic. But diabetes is not a problem with almost every insurance company nor has high blood pressure, cholesterol or a lot of things. But if you have diabetic complications, like neuropathy, or retinopathy or anything like that, then there’s a lot of insurance companies that don’t want to accept you for first day coverage. But we got you covered because we do have a few insurance companies that don’t even care about that.

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So just understand, with most health issues, really 90 to 95% of the time right now, we’re getting people covered for first day coverage or benefits, so that you can avoid. The next topic about how burial insurance works is those two year waiting period plans, we don’t recommend two year waiting period plans at all.

What that means is that if you die of any health or medical reason, in the first two years, the policy is not going to pay out a penny in life insurance benefits, it will just return the premiums that you paid in plus a small percentage of like 7% or 8%, or in some cases 10%. But here’s the deal. You don’t want your money back. You don’t want your kids to get just the premiums that you’d paid back. But here’s the thing. You don’t want your children just to get the money back that you put into the policy. You want them to get the full death benefit. That’s why we get first day coverage.

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And unfortunately, there’s a lot of plans out there that only offer that two year waiting period. If you see it advertised on TV for the most part. Yeah, it’s got a two year waiting period. You probably seen those 997 plans right? advertised by that one company. That sounds so good. You can get it today and there’s no health questions and just sign up because you’ve put you’ve put this offers far too long. And then you call the insurance company and you find out that they’re going to be issuing you a two year waiting period policy. And it’s sold per unit. And it’s going to be very expensive. We it’s going to be very expensive, but also you don’t get a lot of coverage. We’ve seen policies were, you know, 995 is only going to get you like three or $400 worth of coverage. What good is that going to do?

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That’s not even going to cover a cremation, right? So, yeah, we don’t recommend those, the only time you should accept it to your waiting period plan is if you’ve got really significant health issues like a terminal illness, where you’re gonna pass away in the next 12 months, you got dementia, you’re on dialysis in a hospital or in the nursing home. But here’s the deal. A lot of times, if you’ve got that serious of an illness, you’re not going to even live two years. So why even bother getting a two year waiting period plan. If there’s any confusion about that, just give us a call, we can help you understand if you can get first day coverage, and then we can help you out.

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The next topic about how burial insurance works is the age restrictions. So with most companies, they’re going to offer policies, and the age restriction is going to be anywhere between 50 to 80 years old and 50 to 85 years old. But with that said, we do have some insurance companies we work with that will go all the way up to age 89. And all the way down to age 18.

We even have some insurance companies that have children’s policies. So just understand it’s really dependent on your age and what insurance company now, you can go onto our website if you know funds.com. And we’ve got a free quarter on just about every page. And it will automatically it’ll automatically tell you which companies are going to offer you coverage based off your age and the state and your gender and all that other stuff to take full advantage of that funeral funds.com funeral fu nd s.com.

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The other thing about how burial insurance works is they can be purchased either through an Insurance Agents Brokers or directly from some insurance companies working through their agents. So there’s a thing called captive agents, those insurance companies only sell their own product, and often not recommended, because when a company only sells one thing, it’s often an expensive thing. And we just really see that time and time again. In so many cases, you’re going to be better off going through an independent agent, or an independent broker like us at funeral funds.com. Where we work with and represent multiple insurance companies, we are not tied down or committed to any one of them, except for our main goal, which is to get you first day coverage at the lowest pricing.

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So just understand that if you’re going to get this insurance, you want somebody to shop around now I will say this, you will hear some insurance agents say, Hey, we’ve got access to 3040 or 50 of the best life insurance companies in the world. I mean, they’ve got access, it doesn’t mean they’re contracted with them. It doesn’t mean they can do business with them. It’s like going to a car lot and saying, Hey, I’ve got access to all 200 of these cars.

Well, yeah, but you don’t own it, you’re not going to drive it away. Just because you can walk up and touch it doesn’t mean you have access to it. So just watch out for agents saying goofy stuff like that. And if you want, you can check all the insurance companies they’re they’re contracted with typically on your State Department of Insurance website, just do a name search on him, find out if they’re telling the truth or not. And the last thing about how burial insurance works, it’s just kind of an FYI, after you’ve gone through everything and done everything, you should carefully review the Terms and Conditions on the policy.

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And what that means is, unfortunately, there’s some agents out there that care more about getting a commission check than you getting a policy that’s actually going to stand the test of time and pay out when you need it the most. When you sign that insurance contract, and you know, you’re gonna have to answer health questions, chances are the agents going to kind of fill that out for you and check all the boxes. And we’ve seen it before where agents don’t tell the truth. Like maybe you were a smoker and they say you don’t worry about that you qualify as a nonsmoker.

Well, all the insurance companies are going to ask, have you used any tobacco, nicotine vaping or chewing tobacco type products in the last 12 months? And if your agent writes No, when it should have been a yes. And then you sign it. You’ve actually just agreed to everything on the policy. And when you lie on an insurance policy that’s called insurance fraud, and insurance companies don’t have to pay out policy is where there’s insurance fraud.

So if you said that if you were a smoker and your agent wrote, you’re not a smoker, and you die, three years from now, from cancer from smoking, the insurance company could come back and say, Well, no, we see that you were actually smoking at the time you got this policy, and we don’t have to pay that. And your family won’t get that money.

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So honesty is the best policy. Number one, you’ve got to be honest. But always when you get your policy, always open it up and review all the health questions. And make sure that your agent check everything perfectly. Because if there’s any errors, you’re responsible, you’re responsible for it. And probably nothing will happen to the agent, unfortunately. So yeah, just be very careful. You know, I don’t want to be doom and gloom on this because it’s very straightforward as long as you’re working with honest and ethical agents. And, you know, we’d love to be that person that helps helps you out. So I hope that explains how burial insurance works. And I hope this podcast has been helpful for you.

NOTE: Show notes are AI transcribed, so there may be some spelling or grammatical errors.