While most of us don’t want to think about the day that we have to say goodbye to our loved ones, the reality is that we all are going to face it at one time or another, and there are expenses to deal with.
Buying a policy for burial life insurance for seniors is making sure you are prepared financially, for whenever the unthinkable occurs. Burial insurance isn’t actually a line of insurance like a term, whole or universal life are.
Burial insurance (also known as funeral insurance) is life insurance with a low death benefit (face amount payout), usually $5,000-$25,000. This type of coverage is solely intended to cover the expenses associated with the death of the insured.
There are a few different types of burial or funeral insurance and we are going to look at the pros, cons, and sample rates.
Who Needs Burial Insurance?
It’s an obvious question to ask. To answer this question, let’s start with the expenses that you may have to face, should you need to bury a loved one.
By the way, if you are considering relying on social security’s death benefit, think again; it’s only $255.
The average funeral in the US costs over $11,000. This includes the service at the funeral home, burial, and the headstone installation. This doesn’t include other expenses such as an obituary, flowers, food for guests, etc.
If you have $11,000 or more in savings, then you don’t need burial insurance. Save your money, and spend your time with the loved ones. If, however, you don’t have that money saved, and the people around you will go into debt because you don’t have that money (and you care about them), then you should buy a burial life insurance policy.
How Does Burial Insurance Work?
Burial insurance is technically considered a whole life policy, and can’t be canceled by the insurance company, providing you make your payments. Just like any type of life insurance policy, the policy owner names a person, trust, or individuals to collect the benefits (death amount) after you pass.
You want to make sure you put someone you can trust because nothing on the life insurance policy says that they must use this money for burial expenses. Legally they can do whatever they wish with the money.
Which Type of Policies Are Burial Insurance?
You could really buy any type of life insurance to cover burial expense, such as term, whole or universal life. However, if you are looking for a death amount of $25,000 or less, aren’t in the best of health, and are between the ages of 50-85, there are three types of coverage you should be looking at:
This is a whole life policy, which means this policy doesn’t have an expiration date, and it will last a lifetime. These types of policies are for people who are in decent health who can answer yes/no health questions.
They also have level benefits, which means that there is no waiting period in which the policy is in effect. Once the underwriter issues the policy, the insurance company will pay the benefits right away should the policyholder die.
There are a few different types of policies that offer graded benefits, which will vary from one insurance company to another. The first type is called Graded Death Benefit, which will pay 40% of the death benefit amount for the first year, 75% after 2 years, and will only pay 100% of the benefit in year three. Keep in mind that you still need to answer some health questions, this isn’t a guaranteed issue.
The second type is Modified Death Benefit, which will pay 110% of the total premium paid for the first year, 220% of the paid premium for the second year, and only 100% of the total death benefit in year three and beyond.
Not all graded benefits are guaranteed issue. Some policies have graded benefits BUT still, require you to answer some yes/no health questions on the application. For example, Assurity has a product called LifeScape, which is a simplified issue whole life insurance: there is no medical exam and only some health questions on the application.
Guaranteed issue life insurance policies are policies that guarantee your acceptance…with a CATCH. They all have 2-year clauses or an exclusion that says that if you die within 2 years, not accident-related, they will not pay the full death benefit amount.
In other words, if you bought a graded benefit plan with a $10,000 face amount and die after 6 months, all you get is your monthly premiums back, and 10% interest (depending on the insurance company).
This is how the insurance company hedges their odds, because they don’t ask you any health questions before issuing your policy. These type of policies are considered a last resort for individuals who can’t get approved for other types of life insurance.
With a guaranteed issue policy, you will not have any health questions to answer or an exam to take. Your approval depends on 3 things. You must be:
- Between the ages of 50-85.
- A US citizen or legal resident.
- Able to pay the premium.
Pros for Burial Insurance
- They are the simplest form of life insurance policy you’ll ever buy. The application usually takes only a few minutes over the phone or online. There are a few health questions for the level benefit policies and no health questions for the graded benefit policies.
- They are simplified issue policies, which means there is no health exam, and the approval takes only a few hours to a few days.
- If you have no savings, let’s be honest, this is probably a good choice, provided you can afford the premium payments and care about keeping your loved ones from going into debt trying to pay for your funeral and burial.
Cons for Burial Insurance
- It’s not cheap. They are more expensive than traditional types of life insurance, such as term policies. This is because the nature of these policies is very different. It’s very different to buy a life insurance policy when you are young and healthy, compared to buying life insurance when you are in your 80’s.
- The face amounts are low. Some policies are $50,000 or more, but the max you can buy on the graded benefits is $25,000 or less.
Burial Insurance Sample Monthly Rates
Level Benefits Male
Level Benefits Female
Graded Benefits Male
Graded Benefits Female
Guaranteed Issue Male
Guaranteed Issue Female
Don’t Confuse Simplified Issue with Guaranteed Issue
I get this question a few times a week, so I decided to clarify some misconceptions out there.
For starters, most, if not all burial insurances are considered to be whole life policies, simplified issue. This means that they all last a lifetime, and have either no or a few health questions to answer on the application. If you have to answer health questions – this is guaranteed issue.
If you have a few health questions, it’s still simplified because there is no exam, but your issuance of a policy is based on a few health questions, to which you must be able to answer “no.”
Not everyone will qualify for a simplified issue policy because some of them have health questions, such as:
- Has the Proposed Insured been medically diagnosed as having a life expectancy of 12 months or less?
- In the past 5 years, has the Proposed Insured had heart disease requiring bypass surgery, angioplasty or placement of stents or cardiac defibrillator?
- Has the Proposed Insured had a medical test and not yet received the results, or been advised to have surgery or receive medical treatment?
How Do Graded Benefits Policy Payout?
Not all life insurance policies are the same. If you have a graded benefit by Gerber Life, for instance, and you die within 6 months after buying your policy, your beneficiary will receive the monthly premium plus 10%. Since at the time of the article I don’t know any bank who can promise you this kind of return on your investment, it’s a no-brainer. If you need this policy and can’t get approved anywhere else, you have nothing to lose.
Tips for Getting the Best Burial Insurance for Seniors
- Shop around, shop around, and shop a little more. The Internet has made it very easy to get things done quickly and efficiently. The old days of getting things in the mail and waiting weeks to get things done are a thing of the past. You can use a quick quoter, like we have her on our website, and see all the quotes instantly.
- Consider your health situation and the amount of coverage you are after. If you are not in good health and must have coverage, GI (guaranteed issue) is probably your best option. Don’t waste your time trying to qualify for a plan you can’t get. However, if you are in decent health, you may want to get a term insurance policy, fully underwritten because that is how you get the best rate.
- Use an insurance broker. It costs you absolutely nothing, and he/she will be able to sort things out for you. A broker represents many different insurance companies and does not have loyalty to any one of them in particular. Instead, a broker’s commitment is to his/her clients. His/her job is to match you with the best company for your specific needs and desires, all within your budget.
- Make sure you buy what you intended to buy. Let me explain more – you want to purchase life insurance. Otherwise, you wouldn’t be reading this post, but someone on the phone sold you an accident plan, not a life insurance policy. An accident plan will only cover you if you die from an injury or an accident. You bought it because the price was very appealing to you, not realizing you weren’t buying life insurance. Make sure you understand what you are getting.
- You may be self-insured and don’t need life insurance or a burial policy right now. Self-insured means that you have enough money to cover your final expense obligations so that your loved ones won’t incur any of costs.
- Stay away from companies such as Globe Life and Colonial Penn.
If you buy the wrong insurance policy when you are 30 years old and in perfect health, all you need to do is change it to another policy, no harm. If you buy the wrong policy when you’re 70 years old, this may cost your loved ones not to get the death benefits you intended, because nobody read the fine print of the policy you bought.
If you don’t want to use a broker, this is fine, just make sure you understand the policy, exclusions, and benefits before you spend your hard-earned cash.