Age Caps and Health Restrictions on Burial Insurance
While burial insurance (also known as funeral insurance) is a great option for those who want to pre-arrange a funeral for a low upfront cost, it isn’t available to everyone. Like most other types of personal insurance (health and life), your age and health will determine your premium rates and whether or not you qualify for that policy as all.
Why Restrictions are Necessary
Burial and funeral insurance are complicated because there is a guaranteed payout when death occurs. Most types of funeral insurance work by charging you a monthly or annual amount based on your age and health. In this way, someone in their forties in relative good health will pay a small amount, since they will most likely be paying on the insurance policy for decades to come. Older individuals in poor or declining health probably won’t live long enough to make twenty years’ worth of payments, so their premium is higher.
While it might seem mercenary, insurance companies have to turn a profit in order to continue operating their businesses. This means that age restrictions can be found in almost all funeral insurance types—they usually will only accept you up to around 75 years of age (you might also be able to find a policy that will take you up to 80 years of age, but these might be harder to locate and require a physical examination).
Other restrictions might include pay out term limits. Many funeral insurance policies won’t pay out at all for the first two years, and you may be limited in the payout (and only earn a percentage) for a few years after that.
Do You Need Burial Insurance at All?
If you’re nearing the age limits or don’t want a funeral insurance policy that will restrict your ability to get a payout if death occurs in the next few years (as is often the case with those who have a terminal illness), you might want to consider the alternatives. Funeral pre-plan packages (that you pay directly to the funeral home) and traditional life insurance policies might be a better option, and you should talk with your financial advisor to determine what’s right for you.
For those who are in the initial stages of estate planning or who are just now facing retirement, however, the timing might be perfect. You have enough time to search through funeral insurance companies to find the best rates, and you’ll also get to take advantage of savings and discounts due to your younger age.
Funeral insurance can typically be purchased either through a traditional insurance company, your financial planner, or a specific funeral home, so you do have options when it comes to where you do your business.