Difference Between Burial & Funeral life Insurance | Pro Guide

Planning for final expenses for yourself or your elders is a crucial part of ensuring that elders or seniors you loved once aren’t burdened with financial stress after they pass. If someone wishes to avoid leaving their loved ones with financial stress after their passing, they can consider purchasing a funeral insurance policy. While many people are familiar with life insurance, burial insurance and funeral life insurance are often terms that confuse them. 

Although both are designed to cover funeral expenses, these two types of policies have significant differences that could impact insurance buyer decisions.

In this complete guide, we will discuss the differences between burial insurance and funeral life insurance, how they work, their benefits, costs, and who should consider each type of coverage. By the end of this article, you will have a clear understanding of which option best suits your needs and financial situation.

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Difference Between Burial and Funeral Insurance

The difference between burial insurance and funeral life insurance lies primarily in their coverage, payment structure, and usage. Burial insurance (also called final expense insurance) is a type of whole-life insurance that is designed to cover smaller funeral costs and final expenses. It typically pays a lump sum directly to the beneficiaries, who can use it for funeral-related expenses such as burial, cremation, and other end-of-life costs. 

Funeral life insurance, on the other hand, may be broader and sometimes involves prepaid funeral plans, which are planned for people who want to lock in funeral costs ahead of time, guaranteeing that their funeral expenses are covered according to specific pre-arranged details​. While both types of insurance are meant to reduce the financial burden of death, burial insurance provides quicker access to funds and covers a broader range of final expenses. In contrast, funeral life insurance is often more structured, directly benefiting the funeral home​.

What is Burial Insurance?

Burial insurance, sometimes referred to as final expense insurance, is a type of life insurance designed specifically to cover the costs associated with funeral or cremation. A burial policy is typically a whole life insurance policy that offers a low death benefit, generally ranging from $5,000 to $25,000.

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How Does Burial Insurance Work?

When the policy owner passes away, burial insurance pays out the death benefit directly to the owner beneficiary; the designated person can use the funds for funeral expenses after death. These funds can also be used for other final expenses, such as unpaid medical bills, legal fees, or any remaining debts.

Unlike traditional life insurance policies, burial insurance is designed for individuals who may not have other means of covering their final expenses. A burial insurance policy offers peace of mind to both individuals and their families, knowing that funeral costs will be taken care of without placing a financial burden on loved ones.

Example:

Let’s say, Susan, a 68-year-old woman, purchases a burial insurance policy with a $10,000 death benefit. She has paid affordable monthly premiums for several years. After a long battle with illness, Susan passes away. Her designated beneficiary, her son Michael, receives the death benefit directly from the insurance company.

Michael uses the $10,000 payout to cover his mother’s funeral and memorial service expenses. The remaining funds helped pay off some of her outstanding medical bills and a few debts she had left behind. Having the burial insurance, Michael doesn’t have to worry about scraping together money for funeral costs or handling the financial burden of his mother’s debts. The payout helps him focus on grieving and remembering his mother rather than worrying about money during an already challenging time.

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Benefits of Burial Insurance

• Simplified Underwriting: Most burial insurance policies have simplified underwriting, meaning there are fewer health-related questions to answer, and no medical exam is required.
• No Waiting Period: Some policies have a short waiting period, but many provide immediate coverage after purchase.
• Flexible Use of Funds: The beneficiary can use the funds as they see fit, whether for funeral expenses, outstanding debts, or other final costs.
• Affordable: Burial insurance premiums tend to be lower than traditional life insurance policies, making it a budget-friendly option for seniors and those on a fixed income.

What is Funeral Life Insurance?

Funeral life insurance, also known as preneed funeral insurance, is designed to cover the costs of specific funeral services. Unlike burial insurance, which pays the death benefit to the beneficiary, funeral life insurance is directly paid to the funeral home or service provider you choose. Funeral life insurance helps ensure that the policy owner’s funeral arrangements are paid for in advance, reducing the family from the stress of having to make difficult decisions during an emotional time.

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How Does Funeral Life Insurance Work?

With funeral life insurance, policy owners work with a funeral home to decide what type of service and merchandise they want for their funeral. The insurance policy is purchased to cover the exact costs of those services. These can include everything from embalming and caskets to burial plots and transportation.

The key difference here is that funeral life insurance locks in today’s prices for funeral services, which can help protect policyholders against inflation. As funeral costs continue to rise over time, having a preneed funeral policy can save families from the financial strain of increased prices when the time comes.

For example:

If the funeral costs amount to $10,000, and you have a funeral life insurance policy with a $15,000 payout, your beneficiary will receive that full amount. While some of the funds are used for the funeral, any remaining balance can be used for other expenses such as medical bills, debts, or legal fees, depending on the specific terms of the policy.

In addition, funeral life insurance policies are often more accessible to individuals without significant savings or assets. Unlike traditional life insurance, these policies are typically easier to qualify for and may not require a medical exam. They offer peace of mind, knowing that the financial burden of your funeral will be taken care of and your family won’t have to struggle with the costs at the time of your death.

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Benefits of Funeral Life Insurance

• Prepaid Funeral Expenses: Policyholders can pay for their funerals in advance, which removes the burden from their family.
• Lock-In Prices: Many preneed funeral plans lock in current prices, protecting from inflation in funeral costs.
• Peace of Mind: Knowing that beneficiary funeral expenses are covered and that beneficiary wishes are honoured can bring peace of mind to both you and your family.
• No Need for Beneficiary Decisions: Since the funeral provider directly receives the payment, your family does not have to make difficult decisions about how to allocate funds.

Burial Insurance vs. Funeral Life Insurance: Key Differences

Although both burial insurance and funeral life insurance are meant to help cover funeral expenses, there are some crucial differences between the two policies.

1. Payout Structure

• Burial Insurance: The death benefit is paid directly to the beneficiary, who can then use the funds for any final expenses, including funeral, medical bills, or legal costs.
• Funeral Life Insurance: The death benefit is paid directly to the funeral home or provider to cover the specific services and merchandise you have chosen in advance.

2. Flexibility

• Burial Insurance: Offers flexibility in how the funds are used. The beneficiary has complete control over the distribution of the death benefit, which can include any final expenses beyond the funeral itself.
• Funeral Life Insurance: Has limited flexibility as the funds are used exclusively for the funeral services. If there is any remaining money after covering the funeral, it is typically not refunded or can be difficult to access.

3. Cost and Premiums

• Burial Insurance: Typically, burial insurance policies are more affordable, especially for seniors. The premiums tend to be lower because the death benefit is smaller and the underwriting process is simpler.
• Funeral Life Insurance: May cost more, especially if you are purchasing a comprehensive plan that covers a wide range of services. However, locking in today’s prices can potentially save you money in the long run as funeral costs increase.

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4. Underwriting Process

• Burial Insurance: Many policies offer simplified underwriting, meaning there is no medical exam required. Health-related questions are typically limited, which makes burial insurance more accessible for people with pre-existing health conditions.
• Funeral Life Insurance: Typically does not require a medical exam, and underwriting is often simpler as well, but some plans may require additional health assessments depending on the provider.

5. Age Considerations

• Burial Insurance: Most burial insurance policies are designed for seniors and those who may not have access to other life insurance options. Since the policies tend to have lower coverage limits, they are generally more affordable for older individuals.
• Funeral Life Insurance: Funeral life insurance is also an option for seniors, but it may be more appropriate for individuals who want to set aside funds specifically for a planned funeral.

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Who Should Consider Burial Insurance?

Burial insurance is an ideal option for individuals who:

• Do not have other life insurance or sufficient savings to cover funeral expenses.
• Want to cover final expenses like funeral costs, medical bills, or other outstanding debts.
• Are older and may not be eligible for traditional life insurance policies.
• Need a simple, affordable solution to plan for funeral expenses without complex underwriting.

Burial insurance is perfect for those who want to relieve their families of the financial burden associated with funerals and other end-of-life expenses.

Who Should Consider Funeral Life Insurance?

Funeral life insurance is ideal for individuals who:

• Want to prepay for funeral services and ensure that their family does not have to make decisions regarding funeral arrangements.
• Are looking to lock in today’s prices for funeral services to avoid rising costs in the future.
• Want to control their funeral arrangements in advance and specify exactly what they want.
• Have the ability to pay upfront or in installments for their funeral services.

Funeral life insurance is often best for those who are planning ahead and wish to ensure that their funeral expenses are fully covered and prepaid.

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Cost of Burial Insurance vs. Funeral Life Insurance

The cost of both types of insurance policies depends on several factors such as your age, health, and the amount of coverage you choose.

• Burial Insurance: Premiums typically range from $30 to $188 per month, depending on the coverage amount and age of the policyholder.
• Funeral Life Insurance: Can range from $50 to $200 per month, depending on the funeral home, the services selected, and the payment plan chosen.

Conclusion: Which One is Right for You?

Choosing between burial insurance and funeral life insurance depends on individual personal needs, preferences, and financial situation. If beneficiaries want flexibility in how the funds are used and a straightforward, affordable way to cover final expenses, burial insurance may be the right choice for them. On the other hand, if members want to ensure that their funeral services are prepaid and their wishes are fully honoured, funeral life insurance offers a more structured approach.

Ultimately, both options offer peace of mind, knowing that someone’s loved ones won’t be left with a financial burden. Whether individuals choose burial insurance or funeral life insurance, making arrangements now ensures that the family won’t have to worry about funeral expenses when the time comes.

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FAQs

1. Can life insurance cover funeral costs?

Yes, a standard life insurance policy can be used to cover funeral costs, but the beneficiary must decide to allocate the funds for this purpose. The payout may take time to process, which can delay funeral planning.

2. Is there a difference between burial insurance and life insurance?

Yes, burial insurance is a specialized life insurance policy designed to cover funeral expenses, while life insurance offers broader financial protection for your beneficiaries.

3. How much does the average funeral cost?

The average cost of a funeral in the U.S. can range from $6,000 to $10,000, depending on the type of service and the location.