Burial Insurance for Seniors

What is Burial Insurance?

Burial insurance is the common name for whole life insurance that pays out a death benefit when the owner of the policy dies. This is different from a term life policy that pays out only if the owner of the policy dies within the specified term. Generally, these are small policies in that their value ranges from $2,000-$25,000. While the benefit is not usually specified, the money paid out from a burial policy is generally to cover the expenses of a funeral. In this way, burial insurance is different from a whole life policy that is purchased to cover the loss of wages or income. An income replacement policy carries a much large value.

  • Whole Life Insurance – A policy that so long as the premiums are paid, and death is of natural causes, pays out a benefit upon the insured's death.
  • Term Life Insurance – Term life pays out a death benefit if the policy premiums are paid and if the insured dies within a specific time frame. If you buy a term policy that lasts until you are 70 and die at age and you live past age 70, then the policy ends.

These two definitions are important because they represent two different types of insurance policies.

What is Covered by Burial Insurance?

How a death benefit is used is determined by the person who pays for the policy. What the beneficiary uses the money for is usually spelled out in a will or last testament and is directed by whoever set up the policy.

In general terms – the money is used to pay for the burial expenses, the funeral, and sometimes to help the family recover from the loss. Much of what is covered is dependent upon the amount of the death benefit.

Another way to look at “what is covered” is to look at who is covered. Some policies cover a single person while others might cover an entire family or specific members of a family.

People generally buy burial insurance to reduce the financial and stressful burden that follows the passing of a loved one.

How Does Burial Insurance Work?

Generally, a burial insurance policy is purchased and then the premiums are paid either weekly or monthly. If the premiums are paid and the policy is in force at the time the insured passes, then money is paid to a beneficiary that the insured person names.

Burial insurance is different from another type of service which is sometimes called “Burial Insurance” is when you pre-pay for your funeral. This is not a form of insurance even though it is referred to as insurance. When you opt to prepay for your burial, then you are purchasing the items you agree upon before you need them so that when you need them the service is already paid in full.

Burial Insurance vs. Life Insurance: What's the Difference?

Burial insurance is a type of whole life policy that pays out a smaller amount that is generally used to cover the expense of a funeral and for bills or debt that might be outstanding when someone dies.

Life insurance has a different purpose, even though both types of policies pay out a benefit when someone dies. Life insurance is either a whole life plan or a term plan. Generally, life insurance is a policy that has a much higher value than that of burial insurance. The purpose of life insurance is to replace the lost wages or income of someone who dies early.

If you are 30 years old and have a family then you would buy a life insurance policy that helps to replace the money you would earn if you died at age 30. Most people work to age 67, so in this example, a life insurance policy would cover the lost wages and income over the next 37 years. It would do so in one lump sum.

People of all ages buy life insurance, even if they are retired. The reason for this is to pay for large amounts of debt if you should die. If you are 65 and retired but still owe $100,000 on your home, then you would take out a life insurance policy to help cover that debt. you would take out a separate whole life policy to cover your funeral expenses.

How Much Does Burial Insurance Cost?

The cost of burial insurance varies from one person to the next. You can find cheaper rates when you are younger than when you are older. There are plenty of ads on the internet that claim to provide burial insurance for as little as $1 per week.

Where Can I Buy Burial Insurance?

Most people buy burial insurance from their insurance broker or from an insurance company. Sometimes a funeral home may sell burial insurance, but make sure you are buying insurance and not pre-paying for your funeral. You must be licensed to sell insurance and insurance policies have strict regulations that help protect the buyer.

Can I Buy Burial Insurance for My Parents?

It can sometimes be possible that a child can buy burial insurance for their parents. The laws that make this possible or that deny it, vary from one state to the next.

Usually, this is permitted if the parent cannot afford to pay for burial insurance or if they have a debilitating disease that makes it difficult or impossible for them to make financial decisions.