As baby boomers reach their golden years and the average age of the U.S. population continues to rise, an increasing number of adults are concerned about paying for end-of-life expenses, such as funeral and burial expenses. However, in addition to life insurance, people can purchase what is called burial or funeral insurance to offset some of these costs down the line.
Jump ahead to these sections:
- What is a Burial Insurance Policy?
- What’s the Average Cost of a Burial or Funeral Insurance Policy?
- What Elements Make Burial Insurance More or Less Expensive?
- How Can You Figure Out If Burial Insurance Is Worth It?
- Tips for Getting an Affordable Burial Insurance Policy
According to the National Funeral Directors Association, the median cost of a funeral in 2019 was $9,135, but does not include the additional costs that can spring up, such as donations to a church or temple, or accessories such as flowers. Nowadays, more national insurance companies are adding burial insurance to their product line.
Below we discuss what burial insurance is and explore the cost of a policy and pricing. Find out if burial insurance is worth the cost for you, and if so, how you can purchase an affordable burial insurance policy.
What is a Burial Insurance Policy?
Burial insurance is a type of life insurance created specifically to pay for burial and funeral costs (final expenses). It’s sometimes referred to as funeral insurance, end-of-life insurance, or final expense insurance.
Burial insurance is a whole life insurance policy, typically sold in smaller face amounts, like $5,000 to $25,000. These types of policies are specifically purchased to help people pay for burial expenses they’ll be responsible for, not bigger obligations like a mortgage, college funding for children, or income replacement during one’s prime earning years.
For some older adults, their mortgage may already be paid off and the kids are grown and on their own. As a result, paying for a funeral is the only reason they may have a life insurance policy. Burial insurance is often marketed and sold to people in poor health or on a tight budget. They may be people who don’t have the savings to pay for final expenses and/or any other life insurance they could use.
Is Burial Insurance the Same as Pre-Need Funeral Insurance?
Though the names would lead you to think they were the same, burial insurance and pre-need funeral insurance are quite different. The big difference is burial insurance will pay your beneficiaries directly, while pre-need insurance will pay the death benefit to the funeral home where you have arranged your funeral details.
Burial insurance is much more flexible than pre-need funeral insurance because with burial insurance, your beneficiaries will decide how they spend the death benefit, and if you move to another state, your beneficiary can pay for the funeral costs in that state.
What’s the Average Cost of a Burial or Funeral Insurance Policy?
Burial expense policies are usually purchased by older or less-healthy individuals, which means the cost can be exponentially higher than comparable term life insurance policies. Often, a person buying burial insurance will pay the same amount for less expensive term life insurance, but they’ll be getting far less coverage.
Here are sample costs for three types of life insurance for burial expenses (simplified issue life, guaranteed issue life, and term life insurance) for a 60-year-old male that can help illustrate the cost differences.
TYPE OF FINAL EXPENSE INSURANCE
Guaranteed issue life insurance
Simplified issue life insurance
Term life insurance
Methodology: Quotes are based on rates for a 60-year-old male in Ohio who qualifies for a $25,000 guaranteed issue policy, $25,000 simplified issue policy, and a 10-year, $250,000 term life insurance policy in a Preferred health class. Actual rates vary based on each customer’s specific circumstance. Rate illustration valid as of 4/29/2021.
As seen with this chart, a term life policy with a face amount 10 times larger than a guaranteed issue life policy can be available for less than half the cost. If a person medically qualifies for term life insurance, they are far better off applying for a term life policy than a burial insurance policy.
What Elements Make Burial Insurance More or Less Expensive?
The cost of a burial insurance policy can depend on a few variables, namely the type of policy: simplified, guaranteed issue, or term life. That said, whenever people are looking for new policy options, there are other elements at play that can impact the cost, such as age, gender, and health.
But what are the types of policies that people can purchase and how much do they cost?
1. Simplified issue life insurance
Simplified issue policies are perfect for people who likely won’t qualify for a traditional life insurance policy because of age or health conditions, but they’re only considered a “moderate risk” by life insurance companies. Applicants have to answer a detailed medical questionnaire, but they don’t have to take a medical exam. Guaranteed issue life is generally available in face amounts up to $50,000 and is more expensive than term life insurance but less expensive than guaranteed issue life insurance.
2. Guaranteed issue life insurance
With a guaranteed issue life insurance policy, most providers will not disqualify a person for pre-existing medical condition reasons. There is no medical questionnaire, and no medical exam is required. Coverage is usually only available to individuals ages 45 to 85 and in face amounts up to $25,000. Guaranteed issue life insurance costs more than both simplified issue and term life insurance.
3. Term life insurance
Term life is available for all ages up until age 85, has almost unlimited face amounts, and is less expensive than just about any other type of life insurance available, including whole life insurance and variable life insurance.
Unlike burial insurance, it is available only for a specific term of years (5, 10, 20, or 30 years), not a person’s whole life. Depending on the applicant’s age and the policy’s face amount, applying for term life insurance will require answering medical questions and taking a medical exam.
What makes burial insurance more expensive?
Typically, the longer you wait to purchase a burial policy, the more costly it will be. However, there are other specific variables such as the ones mentioned above that can affect the overall price point.
A person’s age is also going to affect the monthly cost of a burial policy. Generally available only to people from ages 45 to 85, burial policies get more expensive every year you get older, as do other types of life insurance. Because of this, the earlier in life you purchase a burial insurance policy, the better off you’ll be.
A significant determinant in the rates for a burial policy is going to be the applicant's health.
As mentioned previously, based on the insurance policies one is looking for, term life tends to be the least expensive type of policy, followed by simplified issue life, and then guaranteed issue life. The rates for these policies get progressively higher because the poorer a person’s health condition is, the more they will pay for coverage.
The face amount of the policy will determine how expensive the monthly premiums are. The higher the face amount, the more expensive the policy will be.
Interestingly enough, the most common face amount of a burial insurance policy is $10,000, which nearly coincides with the average cost of a funeral and a headstone.
What makes burial insurance less expensive?
On the whole, most defining elements at play will raise the cost of a burial insurance policy, but there are a few things that can work to your advantage when you look.
Time of purchase
Of course, with age, the earlier you purchase a policy, the less it will cost as you will be saving thousands of dollars over the life of the policy. The options available however when you purchase at a younger age cost less, so you will give yourself a leg up if you buy at 45 versus 55 and upwards.
Gender is also always a factor in life insurance pricing, as women on the whole tend to live longer than men. With this in mind, insurance companies charge women lower rates because they’ll collect premiums longer, and ultimately limit their financial exposure.
How Can You Figure Out If Burial Insurance Is Worth It?
Burial insurance is a good option if covering funeral expenses is the primary reason you want a life insurance policy, though it does have its drawbacks. Let’s look at some of the pros and cons of burial insurance.
- Typically, it doesn’t require a health exam
- The application asks few, if any, health-related questions
- You can’t be turned down for certain policy types, such as guaranteed issue life insurance
- Because there’s no health exam, you won’t get a discounted rate for being in good health
- The insurance company collects little to no health information, so the cost of a policy can be very high
- The policy will likely pay out a “graded death benefit,” which is only a refund of the premium if you die within the first two to three years after buying the policy
Tips for Getting an Affordable Burial Insurance Policy
Unlike many purchases you make, you can directly influence the cost of your burial insurance policy. Here are five tips on how you can do that:
1. Buy it while you’re young
Every year you get older, your cost of life insurance coverage goes up. The difference between buying a burial policy when you’re 50 years old versus when you’re 60 can add up to thousands of dollars in saved premiums by applying earlier.
2. Buy it while you’re healthy
As we get older, we’re more prone to develop health conditions such as high blood pressure, diabetes, and heart disease. Having pre-existing medical conditions can disqualify you from getting standard rates on a traditional life insurance policy like a term policy and push you into getting a much more expensive type of policy, like a guaranteed issue policy.
3. Shop around
You have many options when it comes to buying burial insurance from reputable companies. Some companies you can choose from include:
- Mutual of Omaha
- Gerber Life
- New York Life
4. Budget for what you need
Only factor in the final expenses you want and need for your life insurance policy’s face amount. For example, some funeral homes will rent you a casket if you don’t want to buy one, and you may not need one at all if you plan to have a cremation or use an alternative such as a “green burial.”
Try to negotiate prices with the help of a family member or friend. Funerals and final expenses can be stressful and time-sensitive. Let someone you trust talk with the insurance agents from the different companies and help you make the final decision.
Buying Burial Insurance Can Be Cheap if You Know Where to Look
Researching burial insurance and finding the best life insurance policy will not only save you money, but will also provide you with peace of mind knowing that your loved ones will have the funds they need to pay for your final expenses. Independent insurance agents can get you quotes from multiple companies and determine how much life insurance you may need.