What Is Burial Insurance Work?
Burial insurance is a final expense product and whole life policy that offers limited underwriting and minimal death benefits. Burial insurance is often referred to as funeral insurance or final expense insurance. This product is primarily designed for seniors wanting to ensure the financial security of their family by providing them with the means to cover funeral costs or pay off existing debt once they pass away.
The underwriting process for burial insurance is minimized. Typically, no medical exam is required or acceptance is guaranteed. However, due to the fact that only limited medical information is required by the insurer providing burial insurance, these policies are usually more expensive than their fully underwritten counterparts.
Burial life insurance policies possess a cash value component, which is the portion of contributions you would receive if you surrender the policy. Unfortunately, this cash value feature does add to the costly premiums.
How Does Burial Insurance Work?
Burial insurance is typically offered to those between the ages of 50 and 85. However, there are some providers that will extend coverage to those over age 85.
What is burial insurance? Burial insurance offers permanent coverage, unlike term life insurance policies. This means that as long as the premiums are paid, coverage will continue. As mentioned before, these policies have a cash value component that is tax-deferred and grows over time. The policyholder has the ability to withdraw needed funds or take out a policy loan. It is important to note, however, that any unpaid loans or withdrawals will be deducted from the policy’s death benefit.
Burial insurance policies offer two benefit levels:
- Level Benefit – Full face amount of burial insurance policy will be available from the date the application is approved.
- Graded Benefit – There is typically a 24-month waiting period before the full face amount of the burial insurance policy is available. In the event that the insured passes prior to the end of the waiting period, the insurance carrier will return all premiums paid in, plus interest. Interest varies among carriers, but 10% is the amount most often used.
Those with severe health issues will benefit from the graded life plans, which are similar to guaranteed issue life insurance plans (for ages 40-80) because no health-related questions are required. This is a plan you cannot be turned down for and should be considered if you have a serious health-related condition. Although the premiums are pretty steep for someone who cannot get approved elsewhere, it will give you peace of mind that your family is provided for.An applicant with minor health-related issues and/or medications for such issues can qualify for a level benefit plan.
The age of issue for most insurance companies is 50, while some companies accept a younger age. The maximum age of issue for most companies is 85.
How Much Coverage is Offered?
Most insurance carriers offering burial insurance policies will insure an individual up to $50,000, with a few carriers offering up to $100,000.
Since most insurance carriers will only provide burial insurance up to $50,000 in coverage, it is difficult for some to obtain enough coverage that meets all of their needs. If this is the case, a guaranteed universal life insurance policy (GUL) is recommended. These policies offer coverage starting at $50,000 and increase from there.
Guaranteed universal life policies are a combination of whole and term life insurance policies. These policies are perfect for those expecting substantial debt following a death.
Who Needs Burial Insurance?
Burial insurance policies are a fantastic way of providing your family with the financial means to cover your final expenses upon your death. While these policies are an affordable form of coverage, they may not be the best fit for your situation. It is important that you consult your independent insurance agent about how to best cover your particular needs.
Older applicants will certainly want to consider burial insurance plans. With these burial insurance policies, there is a broader age range that allows individuals into their 90’s to apply and be accepted for coverage. Furthermore, no medical exam is required, so your health cannot exclude you from coverage.
If you are looking to save money on your life insurance rates, consider utilizing a burial insurance plan. As mentioned, burial insurance policies offer smaller coverage amounts, so the premiums will be much lower than traditional life insurance policies offering higher amounts of coverage. If you don’t need millions of dollars in coverage, but don’t want to leave your funeral expenses to your family, a burial insurance policy is a wise choice.
Finally, the primary goal for any life insurance policy is to help pay off any debts left behind or to replace your income should the unexpected happen to you. A burial insurance policy is not going to provide you with nearly enough coverage to provide for either of those situations. However, if you are in the financial situation that is free from debt, consider purchasing a burial insurance policy.