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What Is The Difference Between Burial Insurance And Life Insurance?

Burial Insurance



Planning for the future, especially when it involves end-of-life considerations, is a topic most people would rather avoid. Nevertheless, it’s an important issue that requires careful thought and financial planning. Two types of insurance policies can help in this regard: Burial Insurance and Life Insurance. Though they serve similar end goals—to provide financial relief after the death of the policyholder—they are not identical. This blog post aims to provide an exhaustive, detail-oriented guide to understanding the differences between these two insurance types.

What is Insurance?

Insurance is a financial arrangement that provides a safety net against various types of risks. By paying a premium to an insurance company, you can safeguard yourself and your loved ones against financial loss arising from unforeseen events.

Types of Insurance

  • Auto Insurance
  • Home Insurance
  • Health Insurance
  • Travel Insurance
  • Business Insurance
  • And many more

Among these, Life and Burial Insurance are unique in that they focus specifically on providing financial security around end-of-life events and posthumous expenses.

Importance of Having Insurance

Insurance serves as a risk management tool, allowing you to mitigate financial loss due to various circumstances. It offers peace of mind, knowing that you or your beneficiaries will receive financial aid when it’s most needed.

What is Life Insurance?


Life Insurance is a contract between you and an insurance company. You pay premiums regularly, and in exchange, the company offers a lump-sum payment, known as a death benefit, to your beneficiaries upon your death.

Historical Background

The concept of life insurance dates back to ancient civilizations, but the modern insurance industry began to take shape in the 17th century. It has since evolved into a sophisticated financial service, offering various products to meet different needs.

Types of Life Insurance

  • Term Life: Provides coverage for a specific term, often 10, 20, or 30 years.
  • Whole Life: Provides coverage for a lifetime and has an investment component known as ‘cash value.’
  • Universal Life: A flexible version of whole life with greater freedom in premium payments.
  • Variable Life: Allows the policyholder to invest the cash value in various investment options.
  • Indexed Universal Life: A type of universal life insurance that ties the cash value to a market index.

How Does Life Insurance Work?

  • Premium Payments: You pay a regular premium to the insurance company, either monthly, quarterly, or annually.
  • Death Benefits: Upon your demise, the insurance company pays out a predetermined amount to your beneficiaries.
  • Cash Value: Some policies accumulate a cash value that can be withdrawn or borrowed against.
  • Beneficiaries: You designate individuals who will receive the death benefits.

Why Do People Buy Life Insurance?

  • Family protection: To ensure the financial stability of family members after the breadwinner’s demise.
  • Estate Planning: To cover estate taxes and other financial obligations.
  • Business purposes: To safeguard the business against the loss of a key person.
  • Charitable giving: To leave a financial gift to a charity.

Eligibility and Cost

Life insurance policies require an underwriting process, which might include medical examinations, lifestyle questionnaires, and background checks. Your age, health condition, and lifestyle factors like smoking will influence your eligibility and premium rates.

How to Purchase Life Insurance

  • Through an agent
  • Directly from the insurance company
  • Online through various portals

Pros and Cons

  • Pros:
    • Extensive coverage options
    • Investment potential in some policies
  • Cons:
    • Can be expensive
    • Complex underwriting and terms

What is Burial Insurance?


Burial Insurance, also known as final expense insurance, is a type of life insurance policy that covers the costs associated with your funeral and burial or cremation. Unlike traditional life insurance, the focus is on relieving your family of the financial burden associated with end-of-life expenses.

Historical Background

Burial insurance is a relatively newer form of insurance compared to life insurance, originating in the 20th century as a way to make funeral arrangements more affordable.

Types of Burial Insurance

  • Pre-need Funeral Insurance: A policy linked to a specific funeral service provider.
  • Final Expense Insurance: A policy that pays a lump sum to the beneficiaries for them to use at their discretion.

How Does Burial Insurance Work?

  • Premium Payments: Typically, these are lower compared to life insurance and are paid either as a lump sum or regular payments.
  • Death Benefits: A modest sum, often between $5,000 and $25,000, is paid out to cover funeral expenses.
  • No Cash Value: These policies generally do not accumulate any cash value.

Why Do People Buy Burial Insurance?

  • Lack of savings
  • No existing life insurance
  • To avoid burdening family members
  • For advance funeral planning

Eligibility and Cost

Burial insurance usually involves a simplified underwriting process. It’s generally easier to qualify for and is often available to older individuals who may not be eligible for traditional life insurance.

How to Purchase Burial Insurance

  • From funeral homes
  • Through insurance agents
  • Directly from insurance companies

Pros and Cons

  • Pros:
    • Simple application process
    • Focused coverage
  • Cons:
    • Lower coverage limits
    • No investment potential

Key Differences Between Life Insurance and Burial Insurance

Purpose and Scope

Life insurance aims to provide extensive financial support to beneficiaries, which could include mortgage payments, education, and more. Burial insurance focuses solely on covering funeral and burial costs.

Premium Payments

Life insurance premiums are generally higher but offer larger death benefits. Burial insurance premiums are lower, and so are the death benefits.

Eligibility and Underwriting

Life insurance often involves a rigorous underwriting process, including medical examinations. Burial insurance usually features simplified underwriting, with no medical tests.

Death Benefits

Life insurance death benefits are significantly higher and can be used for any purpose. Burial insurance benefits are lower and are meant primarily for funeral expenses.

Investment Potential

Some life insurance policies, like whole and universal life, offer an investment component. Burial insurance policies typically do not have this feature.

Flexibility and Customization

Life insurance policies often offer riders and options for customization. Burial insurance policies are generally straightforward with fewer options for customization.

Policy Riders

Life insurance often offers additional riders like accelerated death benefits, term conversion, and accidental death benefits. Such options are generally not available in burial insurance.

Long-term Financial Planning Vs Immediate Needs

Life insurance is often a component of long-term financial planning, while burial insurance addresses more immediate, end-of-life concerns.

Case Studies

Example 1: A young family considering life insurance

A young couple with a newborn baby is looking into life insurance options. In their case, term life insurance could provide a safety net for their child’s upbringing and education should one parent pass away unexpectedly.

Example 2: An elderly individual considering burial insurance

An elderly individual without life insurance or significant savings could benefit from burial insurance to ensure their funeral expenses are covered without burdening the family.

Example 3: A person considering both types of insurance

Consider a middle-aged individual who wants both long-term financial planning and funeral expense coverage. This person could opt for a term life insurance policy along with a burial insurance policy to meet both needs.

Frequently Asked Questions

  • Can I have both life and burial insurance? Yes, you can have both. They serve different purposes and can co-exist.
  • What happens if I outlive my term life insurance policy? The policy will expire, and you’ll have the option to renew at a higher rate, convert to a permanent policy, or let the coverage end.
  • Is the cash value of life insurance taxable? The cash value growth is generally tax-deferred. However, withdrawals may be taxable under certain conditions.
  • What are the typical costs of a funeral? According to the National Funeral Directors Association, the median cost of a funeral with burial in 2019 was approximately $7,640.
  • How can I ensure my insurance payouts go toward my funeral expenses? By designating a reliable beneficiary and discussing your wishes with them, you can help ensure that the payout is used for your funeral expenses.


In summary, both life and burial insurance serve the noble purpose of easing financial burdens during emotionally difficult times. Understanding the key differences between the two can help you make an informed decision based on your individual needs and circumstances.

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