Burial insurance is a type of life insurance used to pay for funeral services and merchandise costs after a death. The policy can be bought online or by telephone without waiting for an insurance-company doctor exam. In fact, burial insurance does not require a medical exam at all. Applicants are asked about age, smoking history and whether they have serious conditions. For some policies, acceptance is guaranteed. Others require a two-year premium-paying period before collection is possible and only provide coverage to 100 years of age.
Burial insurance is a cash policy, which means it builds a cash value over time. Burial insurance can be purchased for small amounts, such as $5,000 and $10,000, while other term or whole life insurance may require substantially larger minimum coverage. The premiums for burial insurance may therefore seem more affordable than bigger benefits policies. Premiums for this type of insurance do not change, and this policy provides permanent coverage. Some of the costs covered by this insurance include funeral service, cemetery plot and headstone, casket, funeral procession and other miscellaneous costs.
Consumer advocates have raised red flags about burial insurance. Some consider it a predatory type of insurance targeted to people who tend to be less educated, minority and low-income. That a medical exam is not required and acceptance is guaranteed means the pool of insured people is high risk. In order for the insurer to make a profit, the premiums have to be high relative to the benefit. Yet most people, even with severe health issues, qualify for policies many times better than burial insurance. If the pressing issue is to make sure there are sufficient funds available to survivors to pay for a funeral and settle bills, a term or permanent life insurance policy can be purchased. If the main concern is to ensure that the individual’s wishes for burial, cremation or memorial service will be funded and followed, and the demise is expected in the next few years, it may also pay to make pre-paid pre-need arrangements with a funeral provider.
Another strategy for making sure survivors have money to pay for final costs is to contribute regularly to a savings account for that purpose, set up either as a trust or simply as a joint account with a designated survivor. This money could be withdrawn immediately if needed after you die; survivors won’t have to wait for the insurance check or probate.
