Here’s a funny thing about burial insurance: It doesn’t actually exist as a specific insurance product. You may see references to “burial insurance,” “final expense insurance” or “funeral insurance” when you’re buying life insurance. But burial insurance is simply a common way to refer to a small whole life insurance policy — generally $5,000 to $20,000 — that’s purchased so beneficiaries have money to pay for a funeral.
Not all life insurance companies sell whole life insurance policies in small amounts, but here are some that do.
|Company & A.M. Best financial strength rating||Burial insurance options|
|AARP/New York Life|
|AARP members can buy whole life insurance from New York Life for final expenses in amounts from $2,500 to $25,000. The policies are guaranteed acceptance, meaning you can’t be turned down. In most states you must be age 50 to 80 to buy this policy.
|AIG offers up to $50,000 in guaranteed acceptance whole life insurance coverage for those ages 50 to 85.
|Colonial Penn offers whole life insurance for ages 40 to 75 in amounts up to $50,000. It also offers guaranteed acceptance whole life for ages 50 to 85 in maximum amounts that vary by age and gender.
|Foresters’ PlanRight policies are small whole life policies in three variations, depending on whether you want the full death benefit to be available right away. Amounts range from $2,000 to $35,000, depending on your age and plan. You generally must be between age 50 and 85 to buy.
|MetLife offers guaranteed acceptance whole life insurance policies to those between ages 50 and 75. You cannot be turned down.
|State Farm Life|
|State Farm offers a $10,000 whole life insurance policy that can be used for final expenses. You must buy the policy between the ages of 50 and 80.
|Settlers Life Insurance Co.|
|Settlers Life Insurance Co. sells four kinds of whole life insurance policies intended for final expenses. Coverage amounts range from $1,000 to $50,000, for people up to age 85.
Finding the best burial insurance policy
If you’re looking for the best burial insurance policy, you have two main decisions:
How much money will be needed for your funeral? The median cost of a funeral with burial is about $7,200, according to the National Funeral Directors Association. The median cost with cremation is about $6,100.
There are a variety of ways to save money on funeral costs, unless you’d prefer to go out with a lavish production of flowers, limos and catered food. The best burial insurance policy will ideally cover the costs of the event you have in mind so your family doesn’t have to dip into savings to send you off properly.
What type of life insurance policy do you want? Among the various life insurance types, whole life is commonly used as burial insurance because it lasts your entire life and is the simplest form of permanent life insurance.
Whole life policies in small amounts (typically under $25,000) are often sold as “simplified issue” or “guaranteed acceptance” policies, meaning there’s no life insurance medical exam needed and few or no health questions to qualify. But be careful here, because these policies don’t pay out the full amount if you die within the first few years after buying them. A “fully underwritten” whole life policy — with health questions and possibly a medical exam — will pay out immediately.
Term life insurance is no good as burial insurance because it lasts only as long as the policy term, such as 10 or 20 years, and you may live longer than that. Term life insurance is ideal for covering specific financial obligations, like the length of a mortgage, the cost of raising children or the number of years until you plan to retire.
Here’s another funny thing about burial insurance: It doesn’t guarantee that your family will spend the payout on your funeral. When your beneficiaries make the life insurance claim and receive the money, there are no restrictions on how they can use it. Of course you should make your wishes known about what you want for your funeral, but in the end there’s nothing stopping your family from cutting corners on your burial and then heading to Vegas with the rest of the money.
One way to guard against that possibility is to buy “pre-need life insurance.” This policy name isn’t widely known to consumers, but funeral directors will know it: It’s a life insurance policy that’s linked directly to the costs of a prearranged funeral and burial or cremation.
Whole life insurance in general can be pricey, and guaranteed acceptance policies even more so.
Under this arrangement, you generally select your funeral home, choose all the details of the funeral, and then purchase the policy from the funeral director (who also would be a licensed insurance agent). In some cases the funeral home will guarantee to hold costs the same no matter when you die. This way the policy is sure to cover the arrangements you have chosen. The life insurance payout from a pre-need policy may go directly to the funeral home and never pass through your family’s hands.
Pre-need life insurance is good for people who want to make sure their final wishes are carried out, that their family isn’t burdened with funeral decisions, and that all the money goes toward the event. If this interests you, contact the funeral home of your choice to see if it offers pre-need plans.
Whole life insurance in general can be pricey, and guaranteed acceptance policies even more so. But burial insurance offers peace of mind by knowing that your family will have money to pay for a funeral.