Maybe you’ve heard of burial insurance, or seen ads offering ‘low-cost life insurance for seniors.’ Some companies even tout burial insurance starting at just $1 per month for thousands of dollars of coverage.
But how true are those claims? Is burial insurance worth it? What’s the catch?
Here are 10 basic things you should know about burial insurance for seniors if you’re considering a policy for yourself or a loved one.
Many people ask, “Is burial insurance the same as life insurance?” And the short answer is yes. Burial insurance is just a type of life insurance — though it has some unique features that set it apart from standard term or whole life.
Namely, burial insurance is intended for seniors. That means:
Of course, there are drawbacks too. You can’t get as much coverage with burial insurance as you would with another policy. And premiums are higher than they would be for an equally-sized term life insurance plan.
But those drawbacks have to be weighed in context.
Burial insurance is meant for elderly people, especially those who can’t get coverage due to health issues. For the right person, burial insurance fills a specific purpose that other kinds of life insurance don’t.
Probably THE most important feature of burial insurance is that there’s no medical exam to qualify for coverage.
Applicants may have to answer a few basic health questions, but you’re not likely to be turned away from a burial insurance policy because of a pre-existing condition. That means almost anyone can qualify, regardless of health.
Unlike other types of insurance, you’re not likely to be rejected for a burial insurance policy because of a pre-existing health condition.
In fact, some might say burial insurance is actually best for seniors who have medical concerns. The truth is that with no medical exam, rates are higher — and those in excellent health might save money with a different kind of insurance.
But for those who cannot qualify for traditional life insurance because of a medical condition, burial insurance is a good way to get the coverage you need.
As a small added benefit, the streamlined application process means you can apply for burial insurance online and get quotes almost instantly. You don’t have to wait days or weeks for exam results. So it’s easier to shop around with a few companies and find the lowest rates.
One big draw of burial insurance is that seniors can get a new policy late in life. Most burial insurance companies will sell policies up to age 80 or 85. That includes major, top-rated insurers like State Farm, Mutual of Omaha, and New York Life.
Seniors may be able to get term life insurance up to age 80 as well. But there’s a key difference.
That’s important because the size of your policy affects how much you’ll pay for it.
All other things being equal, a $50,000 policy will always cost more than a $5,000 one. And rates get higher with age — so a $50,000 policy becomes less affordable in your 60s, 70s, and 80s.
A larger, term life insurance policy might make sense for some. But a burial insurance policy might work better for those who only need a little coverage and have a limited budget to pay for it.
The name “burial insurance” is actually a little misleading. Why? Because the payout does not have to be used for a funeral. Burial insurance can cover other post-life expenses, too.
Burial insurance is a type of life insurance, which means the payout or “death benefit” functions the same way. It’s paid as a one-time, tax-free lump sum to the policy beneficiary. After that, it’s up to the beneficiary to spend the money however they deem most appropriate.
Burial insurance is paid out as a one-time, tax-free sum that the beneficiary can use however they see fit.
Of course, many who purchase burial insurance do so because they intend the money to be used for just that purpose. A funeral with burial costs around $10,000 on average — so many seniors seek coverage to protect their families from paying thousands out of pocket.
But burial insurance can provide seniors with a little more coverage than might be required for a funeral: up to $15,000 or $25,000 in some cases.
That leaves a little extra to be used for things like managing the deceased’s affairs, selling their home, and handling other financial necessities.
How much does burial insurance cost? It’s hard to give a straight answer, as prices vary so much by person. The Insurance Information Institute says burial insurance can cost as little as $2-$3 per week. But different sources give different estimates, depending on the amount of coverage and age of the applicant:
These rates are estimates, intended only as an example. Your own premium will be different.
But what’s plain to see is that burial insurance rates can vary hugely — from just $8 dollars per month to over $200.
How much you’ll actually pay for burial insurance depends on:
As mentioned above, your health won’t block you from getting burial insurance in most cases.
But some companies do ask general health questions on the application. If you answer that you have a serious pre-existing condition, your rates might still be higher than if you were deemed “healthy.”
Burial insurance is “guaranteed” coverage. If you keep up with premium payments throughout life, it promises to pay out after you pass away. That means it’s a secure investment for your funeral funds.
It also means the burial insurance policy could pay out more than you pay in. But that depends on how long you pay premiums for.
Remember, burial insurance is a lifelong contract. No matter what age a senior first purchases the insurance, they’re expected to pay premiums for the rest of their life. If they stop making payments, the coverage can lapse.
So while burial insurance offers financial security, it’s also a big investment — one that needs to be considered carefully.
Burial insurance is often lumped together with “preneed funeral insurance.” In fact, many people describe pre-need insurance as a type of burial insurance. This makes sense, as both policies are geared toward seniors as a way to put aside funeral funds during life.
But there’s a key difference between burial insurance and preneed funeral insurance. It has to do with how the money and funeral arrangements are handled.
Burial insurance is a lot more like traditional life insurance in this regard.
The insured pays premiums to their insurance company, who then writes a check to the family after that person dies. The family can use those funds however they see fit — whether for a burial, cremation, or anything else. It doesn’t have to be a funeral.
But preneed funeral insurance is a lot less flexible.
With a preneed funeral plan, the insured person selects a funeral home and makes arrangements during life. Premiums are paid directly to that funeral home, so everything is covered when the insured passes away.
The biggest benefit of a preneed policy is that the family is relieved of having to make funeral arrangements. That’s already taken care of. But they aren’t able to use the funds for any other post-life expenses like they could with a burial insurance policy.
What’s more, if the funeral home goes out of business, the preneed insurance disappears. That’s a big risk to take with such a large investment.
Here’s the tricky thing about burial insurance: You can get coverage almost instantly, but you aren’t actually covered right away. Most policies include a two-year waiting period or “contestability clause” where the insurance not yet in full effect.
If the insured person passes away during the two-year waiting period, their policy won’t pay out in full. Instead, the insurer will likely refund paid premiums plus interest to the beneficiary. This will be a much smaller amount than the full policy value.
You can purchase burial insurance coverage almost instantly. But your coverage does not take full effect for the first two years.
This is an important distinction.
Many companies highlight the fact that burial insurance lets you get coverage “with no waiting period.” But those claims can be misleading.
While it may be possible to fill out an application and get approved in mere hours or days, your coverage will still be subject to the two-year contestability clause.
In plain terms: If someone buys a burial insurance policy knowing they are sick and will pass away in a few months, they should not expect their beneficiaries to receive the full amount of coverage in their policy.
So if you’re considering a company that offers “no-waiting-period” burial insurance, make sure you’re clear on what those terms mean before signing on.
Depending on where you look, you might read that burial insurance is the perfect financial solution for seniors. Or, you might read that burial insurance should be avoided at all costs. It’s hard to find opinions in between.
So — what’s the truth? Is burial insurance worth it?
That has to be answered on a case-by-case basis. Burial insurance might be completely worth it for one person, but better avoided by the next.
Luckily, it’s relatively easy to figure out whether burial insurance is worth it for you. All you need to do is check rates — which you can do for free online — and map out the long-term cost versus the policy’s overall value.
Take a look at a few examples below:
|Age of Purchase||Cost Per Month||Cost Over 2 Years||Cost Over 6 Years||Cost Over 10 Years||Cost Over 15 Years|
If you’re likely to pay more in premiums than the policy is worth, then burial insurance might not be the best choice. But if the policy is worth more than what you expect to pay in, it could be a wise investment.
Of course, it’s impossible to know exactly how much you’ll spend on burial insurance. Premiums are a lifelong commitment. So you’ll likely want to make a long-term projection to be on the safe side.
Remember to check rates from more than one burial insurance company before deciding.
Rates vary a lot from one insurer to the next, so burial insurance might be worth it from one company but not another.
Burial insurance might be worth it if you need a small amount of coverage in your 60s, 70s, or 80s. But the only way to know for sure is by checking prices and comparing your rate with the policy’s overall value.
Luckily, you can check burial insurance prices without having to get on the phone with an insurance agent. This allows you to compare plans and rates on your own time, without being pushed toward any specific policy before you’re ready.
This site offers a tool for you to compare rates from multiple burial insurance companies in one place. Just answer a few simple questions about your age, gender, desired coverage, and basic health status to see rates. You can get started using the link below.