One of the most common goals for purchasing life insurance is to cover outstanding debts and leave money behind for surviving spouses, children, and other beneficiaries. Often these plan payouts are used to pay for funerals. Did you know that you can purchase a specific policy to cover burial, cremation, and other end-of-life expenses? Funeral insurance is a type of life insurance that often stands as an affordable alternative to whole-life policies.

Learning the History

Burial insurance is one of the oldest forms of insurance protection. The concept was introduced in 600 BCE. Ancient Greeks and Romans would assemble guilds known as “benevolent societies” to pay for funeral costs and provide for the surviving families. Similar charitable groups existed in the Middle Ages, in the 5th to the 15th centuries, and in the Victorian era, the mid to late 1800s.

Understanding Your Coverage

Also known as burial or final expense insurance, this coverage is often used for paying the following expenses:

• Funerals, including viewings, wakes, and services
• Burials, including interment
• Cremations
• Medical bills
• Legal costs and fees
• Outstanding debts

Your beneficiaries can use a payout for any reason, but coverage limits are usually much lower than those of traditional whole-life insurance plans.

Exploring Coverage Types

There are generally three types of burial coverage, each with its own advantages and disadvantages:

• Simplified Issue: While this coverage doesn’t require a medical exam, usually your provider will conduct an assessment, involving several health questions. You can be denied this coverage if you have certain risk factors, such as unsafe behaviors or pre-existing conditions (e.g., smoking).
• Guaranteed Issue: This protection doesn’t require the insured to answer any questions. Because your insurer is taking on more risk, a guaranteed-issue policy can have a significantly higher premium than that of a simplified-issue plan. Often, guaranteed-issue policies have a minimum time period of two to three years before full benefits can be paid. If you were to pass away within this time period, your beneficiaries would only receive a portion of the payout. Accidental deaths usually result in a full payoff amount.
• Pre-Need: A plan of this type involves a contract with your funeral service provider. You can indicate specific features to be included with your burial or cremation. Upon death, the funeral home or mortuary services company is paid directly as a result of this policy.

Carefully consider the type of final expense coverage you think you’ll need when shopping for a plan.

Securing a Plan

Burial insurance coverage is generally available for customers between the ages of 50 and 85. Applicants can secure a policy without a medical exam. Whereas traditional whole-life policies can be prohibitively expensive, especially for older policyholders with pre-existing conditions, funeral insurance is often quite affordable. The average customer can expect to pay around $50 for a monthly premium. Coverage amounts can range from $5,000 to $35,000. 

Considering Other Alternatives

Whole-life and term-life policies can also cover costs associated with death. Whole-life policies tend to come with high premiums, especially for older policyholders. Term-life policies may come with lower premiums, but there’s no death benefit if you outlive the terms of your plan. If you want your beneficiaries to have a significant amount of money left after paying for your funeral, whole-life and term-life plans are better choices. If you just want to make sure that your end-of-life costs are covered, a funeral insurance policy offers a better bang for your buck.

The last thing you want to do is burden your survivors by having to pay for your funeral out of pocket. A funeral or final-expense insurance plan can cover costs associated with death at a more affordable price point. Consider this plan, especially if you’re further along in life and just want to cover the essentials.