Is burial insurance permanent? It is one of the most common questions people asked us when shopping for life insurance coverage. In this article, I am going to go into detail about everything related to burial insurance. Our end goal here is to help you understand how burial insurance works.
WHAT IS BURIAL INSURANCE?
Burial insurance is a type of small whole life insurance that most people can qualify for between the ages of 50 and 85. The primary purpose of burial insurance is to provide financial protection to your family who will otherwise have to pay for your final expenses and burial costs.
Burial insurance is frequently referred to as funeral insurance or final expense insurance (which is interchangeably used in this article). Burial insurance gives your beneficiary a sum of money upon your death. The death benefit is designed to cover the expenses that your family will face after your death. These costs will include medical bills, burial or cremation expense and other things associated with funeral expenses.
TYPES OF BURIAL INSURANCE
There are two types of burial insurance on offer in the U.S. today:
Simplified Issue Plan – life insurance application is simplified because this plan does not require you to undergo a medical exam. All you have to do is just answer a few health questions to qualify.
This plan offers immediate coverage if you qualify, meaning you are covered from day one and you don’t have to wait two years before your policy is in force. Your beneficiary will receive full death benefit any time you pass away.
Sample Health Questions:
- Are you currently confined to a hospital or medical facility?
- Do you require assistance to feed, bathe, dress, or take medication?
- Do you have a terminal illness?
- Are you currently receiving kidney dialysis?
- Have you been diagnosed with any cancer in the last 12 months?
If you answer “no” these health questions, your application will be approved.
If you have severe health conditions that will prevent you from life insurance eligibility, there is one burial insurance that can be your best option.
Guaranteed Issue Plan – also called guaranteed acceptance life insurance is a burial insurance policy where all applicants will be approved regardless of their medical condition as long as you fall on the age category.
This plan is available for people between the ages of 50 and 85. Guaranteed issue plan does not require a medical examination or health questions. It is your last option if you can’t qualify for any other type of life insurance.
This type of policy has a slightly higher premium because insurance carriers do not determine your risk level through underwriting.
Guaranteed issue plan has mandatory two year waiting period. Your beneficiaries will not receive the full death benefit if you die during the waiting period. They will only receive the return of premium paid plus interest.
WHO NEEDS BURIAL INSURANCE?
Funeral costs are continually rising, along with many other final expenses. With no other way to pay for these expenses, your family will be left with a great deal of undue stress.
You might need burial insurance if:
- You have no life insurance coverage
- You have life insurance coverage, but you want a separate policy to cover your final expenses
- You are not sure if you have enough money to cover your final expenses
- You only have limited savings with no other means to pay for your burial expenses
- You have no other means to pay for your funeral expenses
- You don’t want to burden your family with your burial expenses
Burial insurance coverage can help ensure that your family is not burdened with coming up with a substantial amount of money during an emotional time. Taking out a burial expense policy can be a smart solution to protect your family from financial burden.
WHY DO YOU NEED BURIAL INSURANCE?
Funerals are expensive – the average cost of an adult funeral with viewing and burial according to the NFDA– National Funeral Directors Association is $8,755 the cost is broken down as follows:
- $2,100 – Basic services fee
- $325 – Removal and transfer of remains to funeral home
- $725 – Embalming
- $250 – Other preparation of the body
- $425 – Use of facilities for viewing
- $500 – Use of facilities for the funeral ceremony
- $325 – Hearse
- $150 – Service car
- $160 – Basic memorial printed package
- $2,400 – Metal Casket
- $1,395 – Vault
- $8,755 – Total cost of a funeral with viewing
The cost estimate listed here does not include an additional cost for obituaries, headstone, grave plot and flowers. Funerals can cost more than you think, that’s why burial insurance can be a clever way to relieve the financial burden after the death of a family member.
Burial Insurance is affordable – burial insurance policy is cheaper because the face value is smaller than traditional life insurance policies. You can buy coverage up to $50,000, but all the way down to $1,000. You have the option to purchase what you need that fits your budget. It can be a small price to pay to help your family get the financial protection they need.
Underwriting is easy – most burial insurance policies have simplified underwriting. There is no medical examination necessary. You only need to answer some health questions.
If you answer no to the health questions, your application is approved. If you have severe health issues, you can still buy guaranteed issue burial insurance. There is no medical exam and no questions asked. You don’t have to have the perfect health to qualify, your approval is guaranteed.
IS BURIAL INSURANCE PERMANENT?
Burial insurance policy is whole life insurance which is a form of permanent life insurance used to cover burial expenses and other end-of-life expenses. Burial insurance is permanent life insurance that does not expire.
The policy will be in force as long as premiums are paid on time. Getting a burial insurance policy gives you the coverage you need, for your entire lifetime.
A burial insurance policy can be an excellent way to manage your final expense, particularly if you do not own a life insurance policy. Setting up a burial policy allows you to make affordable payments over time. It also provides your family with the financial means to pay a medical bill or remaining debts.
FEATURES OF BURIAL INSURANCE
Burial life insurance has several features that make it different from other forms of life insurance:
- Permanent coverage
- Level premiums
- Death benefit does not decrease
- Builds cash value
Permanent coverage – Coverage can’t be canceled because of age or health conditions. Coverage will last for the whole life of the policyholder, unlike term life insurance which expires after a specific term like 10, 20 or 30 years.
While term life is best for short-term financial planning such as paying off students loans, caring for young children, or paying off a mortgage. Permanent life insurance is designed for estate planning, burial expenses, and charitable donations after you die.
Coverage will be in force as long as you don’t allow your permanent life insurance policy to lapse due to non-payment; you’ll have the coverage for life.
Level premiums – whole life insurance premiums stay the same for the duration of the policy. You’ll pay the same amount every month, without increasing. Level premiums give you the advantage of predictability. You can easily fit the payment in the budget since you know what is due every month.
Some insurance carriers offer the option of limited payment plans, where you are allowed to pay the full premium over a short period such as ten or twenty years. The premiums are still the same each month, but you have the option to pay the insurance faster, rather than paying the monthly payment for the rest of your life.
Death benefit does not decrease – Permanent life insurance pays a benefit if you pass away. The policy gives a guarantee that the death benefit amount will not decrease due to your advancing years or your health condition.
The death benefit is payable when you pass whether you live to be 75 or 105, permanent life insurance will pay the benefit as long as premiums are paid.
This is the difference with term life insurance where death benefits are paid during a specified timeframe – for example, you are 40 years old, and you bought a 20-year term life insurance. Your beneficiary will only receive a death benefit if you die before the age of 60.
Permanent life insurance does not have a timeframe; it will give your family continued protection as long as you live.
Builds cash value – Aside from the death benefit, permanent life insurance policies lets you build up cash value with every premium payment you make during your life. It is a form of forced savings that can help you stay insured while building an asset that grows on a tax-deferred basis.
Permanent life insurance cash value is an available asset that can be borrowed for emergency funds. You can use your cash value if you don’t want to apply for a loan with a high-interest credit card.
However, you need to repay the policy loan with interest, or your beneficiaries will receive a reduced death benefit. You can also use the cash value to pay your premiums.
TYPES OF PERMANENT LIFE INSURANCE
All forms of permanent life insurance policies are designed to last for the remainder of your life, and they also build cash value over time. There are 5 types of permanent life insurance policies:
- Whole life
- Universal life
- Variable life
- Variable Universal
- Indexed Universal
Whole Life insurance – this is the most common type of permanent insurance. Burial insurance or final expense insurance falls under this category. Premiums are fixed and will remain the same, it is guaranteed not to increase for the duration of the policy.
The death benefit will not decrease for any reason. There is cash value build up, and participating whole life policies pay out dividends. You may use the dividends to pay premiums, receive them as cash or leave them to accumulate interest.
Universal Life – unlike whole life insurance where you pay fixed premiums, Universal life offers greater flexibility. Premiums can be adjusted, and this gives you the option to pay higher premiums when you have extra cash or make lower premiums when money is tight.
You can also increase your death benefit and pay your monthly premiums once you accumulate sufficient cash value in your policy.
Variable Life – this policy provides death benefits and cash values depending on the performance of a portfolio of investment options. It is designed to combine the protection and savings features of regular life insurance with the growth potential of common stocks.
This policy provides you with a guaranteed minimum death benefit, and cash value that may increase or decrease daily. The benefits of variable life insurance are payable upon death or surrender.
Variable Universal – allows you to have premium dollars to be allocated to a variety of investment options that can have varying degrees of risk and reward. It also provides the flexibility to increase or decrease your amount of coverage.
There is also an option to make a lump-sum payment to increase your policy’s cash value. You can also skip a premium payment and let the accumulated cash value to cover your payments.
Indexed Universal – part of the premium you pay in Indexed Universal policy goes toward the cash value account and the other part to the death benefit. The money in the cash value account has the potential to earn interest based on the index chosen by your insurance carrier. The index tracks the performance of the specified investment such as stocks or bonds.
Your insurance carrier selects the index and then calculates the interest rate based on the performance of the index. They credit the interest to your cash value account. If you have money in your cash value account, you may use those funds to help pay your premiums.
HOW CAN YOU FIND THE BEST BURIAL INSURANCE POLICY
Now that you know about burial insurance and how it can help your family with final expenses, it’s time to choose the best policy for your needs. The best burial insurance policy is the one that cost the least and protects you immediately.
You can start your search now by asking for quotes from different insurance companies, or you can work with an independent life insurance agency like Funeral Funds. Working with us is going to save you time and money on your life insurance policy. We can shop around to find the best policy to fit your needs and budget.
Once you are ready to purchase your burial insurance policy, fill up our Instant Quote Form to get updated quotes from the different insurance company or you can call us on (888)862-9456 if you have any questions about burial insurance. We are here to help!