Life Insurance Made Easy

Why Should I Purchase Burial Insurance?

Introduction

Death is an inevitable part of life. While the thought of planning for our own demise is often unsettling, it’s a responsible step that can significantly ease the emotional and financial burden on loved ones left behind. That’s where burial insurance comes into the picture. So, what exactly is burial insurance and why should you consider purchasing it? In this exhaustive guide, you’ll learn about the ins and outs of burial insurance, how to select the right policy, and much more. Stick around to find out why securing a burial insurance policy can be one of the most considerate decisions you’ll ever make.

What is Burial Insurance?

Definition and Clarification of Terms: Burial Insurance vs. Funeral Insurance vs. Final Expense Insurance

While often used interchangeably, the terms ‘Burial Insurance,’ ‘Funeral Insurance,’ and ‘Final Expense Insurance’ can mean slightly different things. Here’s how they differ:

Burial Insurance: This is a whole life insurance policy designed primarily to cover the costs associated with your funeral and burial. It generally has a lower coverage amount, ranging from $5,000 to $25,000.
Funeral Insurance: Often synonymous with burial insurance, but it may have options directly tied to funeral service providers, covering specific items like caskets or cremation.
Final Expense Insurance: A broader term, this insurance also includes other end-of-life expenses like medical bills, legal fees, and even outstanding debts.

History and Evolution of Burial Insurance

Historically, burial insurance has its roots in ‘burial societies,’ which date back to ancient times. These societies collected funds from members to pay for funerals and burials, ensuring dignified send-offs regardless of a family’s financial situation. Over the years, formal insurance companies adopted this concept, developing structured burial insurance policies that we know today.

How it Works: The Basics

A burial insurance policy is a type of whole life insurance policy but with lower coverage amounts. It’s straightforward to understand:

You pay a premium, usually on a monthly or annual basis.
The policy remains in effect as long as you continue to pay premiums.
Upon your death, the benefit is paid out to your designated beneficiary, who can use it for your funeral, burial, or any other expenses.

The Cost of Dying

Breakdown of Funeral and Burial Costs

Planning a funeral and burial can be costly. Here’s a breakdown of some typical expenses you might encounter:

Coffin: $2,000 – $10,000
Embalming: $500 – $1,300
Funeral Service: $1,500 – $2,500
Grave Plot: $1,000 – $4,000
Headstone: $500 – $5,000
Flowers: $100 – $1,000
Additional Services (limousines, memorial prints, etc.): $1,000 – $3,000

Additional Expenses Often Overlooked

Beyond the obvious funeral and burial costs, there are additional expenses often overlooked:

Legal fees for probate and will execution
Outstanding medical bills
Travel and accommodation for out-of-town family members

Inflation and the Future Cost of Funerals

The cost of funeral services has been rising consistently, outpacing general inflation rates. According to the Bureau of Labor Statistics, the cost of funerals has increased by over 220% from 1986 to 2014. This means that planning now for these expenses is not just sensible, but financially prudent.

Emotional Cost for the Family

While the focus is often on the financial aspect, the emotional cost for families dealing with an unplanned funeral can be overwhelming. Making arrangements, coordinating with relatives, and handling paperwork during a time of grief is emotionally taxing and can lead to hurried or regretful decisions.

The Financial Implication for Families

Real-life Examples and Anecdotes

Consider the story of Jane, who lost her mother unexpectedly. With no burial insurance in place, the family had to scramble to gather funds for a funeral and burial, putting a strain on their financial reserves and creating tension during an already difficult time.

Financial Strain on Loved Ones

Not having burial insurance can lead to a significant financial strain on families. From taking out high-interest loans to going into credit card debt, the financial repercussions can last for years and impede their financial future.

Statistics on How Many People are Affected

According to reports, nearly 60% of American adults do not have life insurance, and among those who do, many don’t have sufficient coverage. This leaves a large gap in planning for end-of-life expenses, affecting millions each year.

Types of Burial Insurance

Pre-need Funeral Insurance

This type of insurance is directly tied to a funeral service provider. You choose the kind of service you want, and the policy covers those specific expenses.

Simplified Issue Life Insurance

It doesn’t require a medical exam but does have some health-related questions. Coverage amounts are usually lower, but acceptance is generally quicker.

Guaranteed Issue Life Insurance

No health questions or medical exam are required for this type, making it accessible for those with health concerns. However, premiums can be higher.

Traditional Whole Life Insurance

This type offers broader coverage, including investment and savings features. It builds cash value over time but is generally more expensive.

Pros and Cons of Each Type

Pre-need Funeral Insurance
- Pros: Guaranteed services, no effect of inflation on your chosen services
- Cons: Limited to specific funeral homes, less flexibility
Simplified Issue Life Insurance
- Pros: Quick approval, no medical exams
- Cons: Higher premiums, lower coverage
Guaranteed Issue Life Insurance
- Pros: Accessible, no health questions
- Cons: Expensive, often has waiting periods
Traditional Whole Life Insurance
- Pros: Broader coverage, builds cash value
- Cons: More expensive, may require medical exam

What to Consider Before Purchasing

Current Financial Situation

Your current financial standing will play a significant role in the type of burial insurance you can afford. Make sure to assess your monthly and annual budget before deciding on a policy.

Health Condition and Age

The older you are or the worse your health, the higher the premiums you will pay. Therefore, it’s usually advisable to get burial insurance sooner rather than later.

Family’s Financial Ability

If your family has the means to cover burial costs without financial strain, you may not need as much coverage. However, it’s always good to consult with them beforehand.

Specific Wishes for Funeral and Burial Arrangements

Your specific wishes for your funeral and burial arrangements will also impact the type and amount of coverage you’ll need. Whether you prefer a simple ceremony or a grand farewell, account for these when determining your coverage amount.

How to Choose a Burial Insurance Policy

Assess Your Needs and Budget

Firstly, evaluate what you truly need. If you’re looking for a simple burial without a fancy funeral service, then your coverage amount will differ from someone wanting an elaborate ceremony. Align this with your budget to find a policy that satisfies both conditions.

Shop Around

Don’t settle for the first policy you come across. Multiple insurance providers offer various plans with different terms and conditions. Compare rates, benefits, and policy limitations.

Read the Fine Print

Always read the terms and conditions before signing anything. Look for any policy limitations, such as waiting periods or specific conditions that are not covered.

Consult a Professional

If you’re feeling overwhelmed, consult an insurance advisor or financial planner. They can offer tailored advice based on your financial situation and needs.

Where to Purchase Burial Insurance

Insurance Companies

Many traditional insurance companies offer burial insurance as part of their product portfolio. Research online, make some calls, and even consider visiting local offices to get quotes.

Funeral Homes

Some funeral homes partner with insurance companies to offer pre-need funeral insurance. This allows you to plan your funeral service in advance and pay for it through the policy.

Online Brokers

Online insurance brokers provide a platform where you can compare multiple policies in one place. This can be a convenient way to shop around without visiting multiple companies.

Directly from Providers

Some insurance providers offer direct purchase options through their websites. However, it’s still advisable to consult a professional before making a decision.

Common Pitfalls to Avoid

Overbuying

While it’s essential to have enough coverage to meet your needs, overbuying will only lead to higher premiums without added benefits.

Falling for Gimmicks

Watch out for policies that offer ‘extra benefits’ which may be irrelevant for your situation. Always read the fine print and understand what you’re signing up for.

Forgetting Inflation

When purchasing a policy, account for inflation to ensure that the coverage will suffice in the future. Some policies offer inflation riders, which automatically adjust the benefit amount over time.

Conclusion

Purchasing burial insurance may not be at the top of your to-do list, but it’s a decision that can offer immense relief to your family in a time of sorrow and stress. Whether you’re young and healthy or have started aging gracefully, a burial insurance policy can provide the financial support that will make a significant difference during a difficult time.

Additional Resources

For further reading and understanding of burial insurance, consider visiting the National Funeral Directors Association which offers comprehensive resources on planning and funding funerals.