Burial Policies: What You Need to KnowFuneral expenses are not always something most people want to consider.  However, given that the average funeral can cost more than $10,000.00, it is worth taking into account how this expenditure will be paid.  There are essentially three options: 1) leave the matter for your family to pay for from your estate or their own resources; 2) save and designate an amount of money to be used for this purpose, or 3) have a burial insurance policy.    Here are some facts for those who are thinking about purchasing burial insurance:

What is Burial Insurance?

“Burial insurance” is an insurance policy which typically can have a death benefit between $5,000 to $25,000.  This policy is in place to provide money for a deceased person’s loved ones to use for their funeral and burial or cremation expenses.

Types of Burial Insurance

As with any insurance product, there are different types of burial insurance.  A person can purchase a whole life policy which does not expire and therefore lasts for the policyholder’s lifetime.   There are also other policy types known as “graded policies” which offer benefits which are paid in different percentages for the first few years of the policy and then ultimately will cover 100%.  For example, the first year of the policy may cover 40% of the benefit amount, the second and third years will cover 75%, and then after that, the policy will cover 100%.   Another type of policy known as a “modified death policy” may cover the death benefit in increased percentages the first and second years and then reduce to 100% after the third year.  In most cases, as with life insurance products, in order to obtain coverage under these types of policies, the applicant will be required to answer some personal questions regarding their health.

One kind of policy which is frequently advertised is a “guaranteed issue” policy.  These policies usually do not require a health questionnaire and ordinarily promise guaranteed acceptance for any applicant who is in a certain age identified age group. However, most have clauses which protect the insurance company from having to pay on the policy for a set period of time and will only issue payment under very specific conditions.  These policies are ordinarily purchased when the applicant is not able to obtain other forms of burial insurance coverage.

Is Burial Insurance Right for You?

Burial insurance may be an attractive option for people who want to make sure their final expenses do not reduce their estate and wish to spare their loved ones from having to pay.  This may also be true for someone who cannot or has not been able to set aside funds for these costs.  However, burial policies tend to be more expensive than traditional life insurance coverage.  Consequently, this kind of insurance only makes sense for someone who can comfortably afford the premiums.

Understanding burial insurance and determining whether it should be part of your estate plan can be beneficial.  We have knowledge and experience helping people plan for their estates and final expenses.  Please contact us online or by phone if we may be of other assistance.

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