Thinking about insurance is not usually a high priority. Thinking about insurance that’s used specifically for your final arrangements even less so. However, pre-planning how to finance your final disposition (be it terramation, cremation, aquamation, or burial) is a very important step in financial responsibility and education. Here we’ll break down what burial insurance is, why it’s important, and how it can benefit you and your loved ones in the future.
What is Burial Insurance?
Burial insurance is insurance specifically designed to cover the costs associated with a person’s final expenses. These final expenses include funeral/memorial services as well as the disposition (what physically happens to your body, i.e. terramation). It is an affordable insurance policy that provides financial reassurance to your loved ones when you die.
Burial insurance policies traditionally come with low monthly premiums. This makes them accessible to a large number of people, including younger or older elderly people who might be worried about their overall financial situation. Burial insurance policies also come with a simplified underwriting process. This means that unlike traditional life insurance, applicants do not have to go through extensive medical exams or provide a detailed history of their health in order to qualify. In fact, people who are ill often sign up for burial insurance without problem. Along with that, most burial insurance policies guarantee issuance as long as you meet the age requirements. Many of them do not take your current health conditions into account. This serves as peace of mind for anyone who has a pre-existing condition for which they might be disqualified for with traditional life insurance.
Why is Burial Insurance Important?
Burial insurance might seem like a distant need but is one that eventually everyone will have. Pre-planning sooner, rather than later, has many benefits. The first, and perhaps most prominent, benefit being financial reassurance. With age often comes more financial responsibility. Burial insurance is designed to cover the cost of your funeral expenses so that no one is burdened by that expense. Depending on your preferences, your funeral could cost thousands to tens of thousands of dollars. Choosing to arrange for burial insurance will ensure you do not deplete your savings (or that of your family members). You are able to pay small premiums over time in order to accumulate the funds needed for your funeral services and your family does not have to worry about paying out of pocket when the need arises. This peace of mind can be invaluable.
How Does Burial Insurance Work?
Signing up for burial insurance is fairly easy. An insurance company or agent can help you get started. Your local funeral home will also have licensed pre-planning agents who can draw up the policies for you. Insurance policies procured through a funeral home are held by a third party to ensure that even if a funeral home goes out of business your money is protected. That policy would still be valid and able to be transferred to a new funeral home of your choice. Once your policy is accepted (no matter who you go through to create it), you’ll pay a regular premium on a monthly or annual basis in order to maintain coverage. This is just like with traditional life insurance.
If you plan with a funeral home, you’ll tentatively design your funeral (i.e. choose your type of disposition and services/merchandise) in order to get an estimate on how much money to put into your policy. Your pre-planning agent will also help you write in enough money to cover additional incidentals. This would be for things like additional death certificates, newspaper obituaries, or keepsake merchandise for your loved ones.
As with traditional life insurance, you can name a beneficiary to your policy. When you pre-plan with a policy through a funeral home, the funeral home is usually designated as the primary beneficiary. This is done so that your money will pay out for your funeral expenses before the excess (if there is any) goes to your next of kin or familial beneficiary. Essentially, writing it this way is just guaranteeing that the funeral home is paid for their work and your services covered.
Another guarantee is that with burial insurance, as long as the premiums are paid, your policy will pay out. As long as the policy is in good standing and nothing has been done to cancel/override it, you’re covered. In addition, no medical exams are required and as long as age requirements are met, the policy will pay out to your family/funeral home. This provides some peace of mind in knowing that your final expenses will not burden your family.
In the event of hardship, some burial insurance policies also have an accumulated cash value. This can be accessed or borrowed against if needed to provide some financial flexibility. However, if a policy is borrowed against and you die before repayment is made, your policy will not be worth the original estimated value. In that case, your family would be responsible for paying the difference when your death occurs.
Should You Consider Burial Insurance?
Burial insurance is a viable option for nearly everyone. If you are on the younger side, getting burial insurance now provides you with more payment options (as you could choose to pay smaller amounts over a longer period of time) and would allow your policy to collect interest that could be used in the event of any inflation for non-guaranteed items (such as state taxes or fees). On the flip side, burial insurance is a great option for senior citizens who may have limited access to traditional life insurance policies due to age or medical history restrictions. Burial insurance would give people in this age range coverage despite those things.
Aside from age, other people who should consider burial insurance are those with low-income and specific wishes. If your financial responsibilities do not allow you to have a lot of disposable income, pre-planning your funeral expenses with burial insurance is a great way to go. It will allow you to manage your payments and give you more reasonable options than traditional life insurance. Additionally, if you have specific wishes regarding your death care arrangements or funeral services, writing it down is of the utmost importance. If you are issued burial insurance through a funeral home, that pre-planning agent will help you put in writing (in the insurance policy paperwork) your preferences. This will then become the guideline with which the funeral home cares for you after your death. It also means that your family will not have to worry about what you might have wanted, or how to pay for it, when your death occurs.
Peace of mind really is full circle when it comes to burial insurance. Not only is it a necessary topic to discuss for everyone but it is an important step in financial education and planning. Pre-planning and burial insurance provide a practical, well thought out way to ensure that your final expenses are covered. As we age and take on more financial responsibilities, responsibilities that impact others in our lives, it’s important to not skip this last responsibility. Over time the benefits of burial insurance will only grow for each person that chooses it. In the end, not only are you securing things for yourself but you’re also providing your express wishes and a worry-free future for your loved ones.