Burial Insurance, Part One: Introduction to Burial Insurance
Funeral insurance, burial insurance, final expense insurance, preneed funeral insurance—these terms are often used interchangeably to talk about the same thing. With any of these types of insurance, money is paid out to a beneficiary to cover part or all of your funeral costs, including everything from traditional burial to cremation.
Unlike other types of insurance, which are designed around a “what-if” scenario (what if I crash my car, what if I need to go to the doctor, what if my home catches on fire), burial insurance is a guaranteed pay out. As long as you keep current on your premiums or pay the amount required up front, this money will be available upon your eventual death.
What Burial Insurance Covers
As the name suggests, burial insurance is most often used to pay for a burial. Because funerals can cost anywhere from $2,000 to up to $20,000, it’s rare for a family to have all of the money on hand at the time of a loved one’s death. Burial insurance takes the stress out of funeral planning by ensuring that the money is earmarked in advance.
However, one unique feature of burial insurance is that the funds don’t have to go 100 percent to funeral costs. In most cases, it pays out the same way a life insurance policy would, in that a lump sum is provided upon death. The idea is that the person named beneficiary will then use that money to pay for the funeral (as well as other final expenses like medical bills, hospice charges, estate fees, or to settle accounts in the name of the deceased).
Should you wish it, you can ensure that burial insurance goes directly toward your funeral by naming a funeral home as the beneficiary and signing a contract for future services. Like any other kind of pre-need arrangement, this provides a way for you to cover all costs in advance and to make sure your wishes are carried out.
Why Get Burial Insurance?
Most people who purchase funeral or burial insurance do so as part of their regular retirement or financial planning. When you’re already preparing yourself for the future, it makes sense to include a stipulation for your death as well as your end of life.
Benefits to burial insurance include:
- Ensuring your family will not have to pay out of pocket for your funeral
- Saving money by locking in rates or making pre-arrangements
- Providing a quicker payout than you get from traditional life insurance or an estate in probate
- Allowing your family freedom of choice to plan your funeral (without the burden of cost)
Just as no two home or car insurance policies are the same, so too do you have choices when it comes to burial insurance. Always be aware of the fine print and total financial investment before you sign any contracts.
For more reading on Burial Insurance, read parts 2 and 3 of this iMortuary blog series, About Burial Insurance.
Please share your thoughts on this article
By Amy Johnson