Is Burial Insurance for You?
Burial policies may be designed to cover one person or everyone in a family.
Under some state laws, funeral homes may be licensed to sell burial insurance, but it is mainly sold through brokers and agents of insurance companies licensed to sell life insurance.
An approach that is similar to burial life insurance (and sometimes called burial or “pre-need” insurance) is pre-payment of your funeral arrangements. Under this program, you may select the funeral home, type of service, casket (or cremation), flowers, headstone, burial plot, the cost of digging and filling the grave, and other items, and lock in the prices for them by paying in advance.
Three types of coverage for funeral expenses
There is no standard type of funeral insurance. The term "funeral insurance" describes any insurance policy or other legal contract purchased with the intent of providing for final expenses. The amount of funeral insurance coverage depends on how much you want final expenses to cost. In most states, the only people licensed to write a burial policy are life insurance agents and funeral directors.
Variations range from traditional whole life insurance to policies or agreements that only cover funeral expenses:
Life insurance with family member as beneficiary - Many people who already have traditional life insurance simply purchase enough to include funeral expenses. But, if you do not have life insurance, you can purchase life insurance with the intention of using the proceeds to cover funeral expenses. You can name a family member as your beneficiary, and discuss your funeral plan with them.
Life insurance with funeral director named as beneficiary - A funeral home may include a small whole life policy with a contract for funeral services, with the requirement that the funeral director is the beneficiary of the policy. In this way, you pay for part or all of your funeral expenses using a life insurance policy that you pay for - and the death benefit goes exclusively to the funeral home - not to your family.
Pre-need contract with funeral home - A pre-need contract often covers the burial plot, grave marker, casket or urn, embalming or cremation, flowers and funeral cars. Some policies may not specify what the death benefit can be used for. In that case, the money can be used however the beneficiary decides.
Paying for funeral insurance
Depending on the type of policy or contract you buy, you may either have one, lump-sum payment, or continuing monthly payments. A contract with a funeral home will most likely include a payment plan.
Your coverage may determine what kind of payment schedule you have:
Single-premium policy - Once you make the lump-sum payment, you have immediate coverage for the full death benefit. If you are over 70, you may only be offered a single-premium payment option.
Graded death benefit - This means the coverage amount increases over time. If you choose a five-year payment policy, you may have a death benefit that is 30 percent of the face amount in the first year, 70 percent the next year, and 100 percent thereafter.
Traditional whole life policy - The coverage amount stays the same as long as you pay the premiums, but coverage ends if you stop paying.
Tips for considering funeral insurance
-Determine whether you have life insurance or other savings that may be used for funeral expenses. Don't buy coverage that's not essential.
-Review your state's laws on pre-need insurance before you meet with a planner at a funeral home.
-Discuss a burial policy with your family and lawyer.
-Research different companies and options.
-Remember that insurance policies have a "free-look" period. This 30 to 60 day time period entitles you to review your policy and cancel it without penalty if you don't approve.
When you're ready to purchase
-Get all agreements in writing.
-Verify all licenses (insurance company and agent/funeral director).
-Be sure all documents are filled out in your presence. Never sign anything that has been altered or created without your consent.
-Ask your funeral director if they offer price guarantees, and if they don't, find out what their policy is.
-Be sure you have (in writing) that the services, arrangements and products that were sold to you or that you are agreeing upon are included in your pre-need plan.
-Check if funeral arrangements can be moved at any time to any funeral home - in case you move after buying your pre-need insurance.
-Find out if there is a policy cancellation fee or if you can be refunded for services and products if you do decide to cancel.
Check with your agent for choices and options.
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