Is Funeral Insurance Worthwhile Or Not?

Funeral Insurance, what exactly is it? How does it work?  Is it a good move for me?

In this post, I will discuss a very difficult to talk about but very specific life insurance product.  Yes, Funeral Insurance.  We are going to put enough information into this article for you to decide if Funeral Insurance is worthwhile for you, personally.

While a difficult subject to think about, talk about and financially plan for, as mature adults, we know that there are universal truths that all people will some day face.

One key truth is we are all born and will someday pass on.  Our own mortality ends up bringing about a very large expense and potential financial crater for our family.  A full funeral alone can be in the area of $10,000 on average throughout the country.

Funeral  Insurance can be an answer to that problem.  Funeral Insurance is a very specific type of life insurance designed to cover burial related cost typically.  Coverage may also be referred to as burial insurance.

A standard policy is designed on whole life (permanent coverage) insurance and usually simplified for seniors who are no longer in excellent health.  No examination is usually required for a simple Funeral policy.  Coverage is designed for smaller amounts up to $50,000.

Funeral insurance is sold typically with a funeral home as the beneficiary of the policy.  A policy can also be set up with an irrevocable beneficiary which can help with Medicaid spend down planning.  This may be undesirable for many people and should be carefully though out before executing this strategy.

Typical burial insurance is bought with your loved ones in mind.  Most often they are set as beneficiary, but that does not have to be the case.

Plans are designed to be easy to understand, affordable and fully dependable.  This is another one of a few reasons they are typically designed with whole life insurance at the core.  When planning for burial, a guaranteed form of permanent life insurance protection, like whole life should be at the core.  This is no place for term life insurance, period.  Term policies expire, typically at age 80.  Not good!

With that all said, these are points you can plan on with good Funeral Insurance:

  • Monthly premium cost will not ever increase
  • No examinations are required to qualify
  • This is a permanent policy.  You will not outlive the benefit payout.
  • The death benefit to the beneficiary is guaranteed to never decrease unless the policy owner takes cash value from the policy
  • The full benefits are paid out from the first payment to the last.  You are insured, immediately upon acceptance by the insurer.

These policies are meant to get the job done and be easy to understand.  All life insurance companies know the risk they are taking in accepting applicants.

The way your family benefits here requires you make a firm commitment to keep the monthly payments up.  Insurance companies make huge profits over time with people not keeping the coverage for the whole length of the policy contract.

Note…

Never take out a life insurance policy unless you are comfortable with paying the premium.  The only one who benefits if you drop the burial policy is the life insurance company!  How does that help you or your loved ones?

How To Put Funeral Insurance to Work For Your Family

Like any life insurance policy, burial insurance is a legal binding document stating the life insurance company will pay the named beneficiary(s) a specific death benefit upon the loss of life of the insured individual.

You may take the burial policy to any funeral home of your choosing to plan a funeral and burial.  You many also leave those details for your family.  At the funeral home, they will attach your arrangements to the policy so when end of life has come, it is clear as to what your final wishes are.  At this point, you have completed all the burial planning upfront and the policy will deliver the funds to carry out your wishes.

Upon the your death or that of another insured individual, the life insurance company will promptly remit a check for the full death benefit amount to the named beneficiary…tax free to them.  Be sure to provide all requested information regarding beneficiary(s) so that monies do not go thru probate.  A properly named beneficiary will allow the death benefit to bypass probate.  This ensures that your loved ones will have the funds promptly.  A good life insurance agent should make sure all necessary information is gathered to avoid problems.

None of a burial policy benefits must specifically be used for burial/funeral.  Burial costs are often a burden for the family so many people opt to protect there loved ones from financial problems by purchasing burial insurance.  It just ensures money is there for your loved ones at a stressful time.  Often times, the cost of a funeral and burial are near $10,000.  Since this is a cash payout, the beneficiary can use the money elsewhere to settle other debts, pay of bills etc.

Anything that remains from a burial policy can be kept by family to help in adjustment from the loss of life.  No amount of money will ever replace a life, but most of us would feel a lot better knowing we did not leave a large financial burden behind either.

Sometimes a larger or even more than one policy can be purchased to help create a financial legacy.  Remaining funds after outstanding expenses for burial are covered can be passed on to specific loved ones.  This is all done at the discretion of the policy owner and can be changed as long as the insured (if not the policyholder) is still alive.

Funeral Insurance, with a funeral home as beneficiary will have obvious limitations.  The amount of coverage is purchased to fund the funeral.  It is not written up to help your loved ones cover outstanding bills related to death beyond your funeral

There Are 4 Standard Options Available

The 4 options that are available are determined by your general health and the answer to particular health questions on the application.  Each life insurance company will have some differences in how they question their applicants and apply a specific “rating” to your health respective of being a senior citizen.

So, for a burial plan, you will qualify based on your honest answers to the specific health questions contained in the application.  Life Insurance companies have differences among their questioning.  Be sure you find a professional that can shop your case for you so you are not overcharged.

Answering a “yes” to a health question on burial insurance will move you up to a higher rated class.  Again, be sure to be totally honest.  Do not even sugarcoat anything.  Everything is investigated.

  1.  Level or “Preferred” Benefits:  You are able to answer “no” to all of the insurers health questions.  You are covered for the full death benefit from day 1 and pay the lowest premium the life insurance company offers for a simplified burial policy.
  2. Graded Benefit Policy:  This is a popular plan for those seniors that have a more significant, but not fatal health condition.  It is the middle of rating classes but is quite different than Level Benefits.  With a Graded policy, the first two years or so of coverage have reduced benefits.  If death occurs during the “graded” period, the life insurance company will return all premiums paid plus interest.  After the 2-3 year “Graded” period (depending on insurer) the policy will pay out the full benefit amount to the beneficiary.
  3. Modified Policy:  This is an upper risk category for applicants in questionable senior health.  Modified policies also have limited benefits the first couple of years.  What this all translates into is return of all paid premiums plus interest if death occurs during that time.   We sometimes recommend that you avoid these policies.  Often times, they cost more than the next category and just don’t make any financial sense.  Don’t get overcharged.
  4. Guaranteed Issue Policy:  These are the savior policies for those with a very, very tough to insure health condition(s).  There are NO health questions to qualify for and designed for people that cannot qualify for a better health rating.  They are “Graded” the first couple of years so the full benefits are not available until the policy matures further.  After that period, full benefits will be paid out.  You can check out this article for the “in’s and out’s” of this type of coverage.

Who is Eligible to Apply For Coverage?

Anyone to age 89 may apply.

Whether you will be accepted depends on:

  • Your health.  Most plans will require you to qualify based on your current health.  Yes, higher priced, but no health question policies are offered as well.
  • Your Age.  Some plans are not available to certain age groups.
  • Your State of Residence.  Many insurers do not market coverage in every state.

If you are in the age bracket of 50-85 we can get you covered.  Outside of those ranges, we have to explore different options to see what is best for you.

Our team is very experienced at finding the best policy for even the toughest of health conditions.  It is a rarity if we are unable to secure a policy for any of our clientele.

Is there a difference between Burial Insurance, Funeral Insurance or even Final Expense Insurance?

While the uses of these terms may create confusion, any of the 3 policies can be designed with death benefits that will get the job done.  What they all do in the end is the same.  Sometimes “funeral insurance” focuses on the funeral home itself as the beneficiary of the policy.

The marketing terminology used by insurers and agents will vary a little bit.  Personally, I tend to throw the terms Burial Policy and Final Expenses around a lot…quite interchangeably.  Another agent might use the word funeral insurance to mean the same thing as burial insurance.  Don’t get caught up in the marketing names of the product.  You just need to know if you want the money to go straight to a funeral home, your family and/or whether you want the policy to provide more than just the cost of the funeral.  Regardless, they are all built on permanent life insurance, most often simplified issue whole life insurance.

Buying Funeral Expense Insurance

There are many different companies out there offering funeral expense and/or burial insurance products.

When you have decided to buy coverage, you are going to be best off having a specialized life insurance agent or broker shop the companies for you.  Often times, seniors have a health condition or 2 beyond high blood pressure and cholesterol that will challenge even the most determined shopper to no end.

An independent agent or broker that works with lots of seniors is your best bet.  Trying to visit the local agent on the corner that sells automobile insurance is not the ticket.  These are not life  insurance specialists.  They may have a product, but not likely competitively priced or in your best interest.

A key point to remember, the bigger insurance companies are not necessarily the best option.  While we really like Transamerica for their very liberal underwriting and first day, full benefits, some of the “little guys” with great financials can be a better place for your business.  They are often “light and fast” which results in good service.

It comes down to your age and overall health to point towards the right company.  We can shop this for you or you can start on your own by using the Burial Insurance instant quote tool on the right.  Make sure you are reasonable about your health so you can get a realistic quote.

If you need more than $25,000 in benefits, we should talk about Guaranteed Universal Life Insurance.  It will be cheaper per thousand and develops no cash value.  By having no cash value, Medicaid will not consider the policy a asset.  It is a bit more involved application, but the savings and permanent coverage more than makes up for it.

Ladies and Gentleman… A Word of  Warning

There are a few companies out there aggressively marketing life insurance policies for burial and final expenses that actually expire on your 80th birthday!!  How much does that help when someone passes away just after hitting their 81st year of life?  Run away from anyone or insurance company trying to sell you one.

Since life insurance became an online product, there has been a big push, for “cheap” term life insurance.

Term means temporary.  Your renting coverage for a defined period of time.

Understand, your family will not get any money back unless you die prior to age 80 with a policy like this.  If not, the coverage cancels automatically and now at age 80, your health is not as good due to the aging process.  Even if your health is still pretty good, life insurance becomes quite expensive at age 80.  In most cases, we do not recommend buying burial insurance at age 80 and above.  Other alternatives such as self insuring or a prepaid burial may be in your best interest.

Some big household names are in this business.  You have probably heard of them.  AARP and Globe Life offer this type of coverage.  These products offer low initial premiums that increase every 5 years until they are either unaffordable or the policy expires.  So, the insured loses coverage because they no longer can afford the higher premium or it expires.  Your notice of expiration will be in the original policy.

Mark your calendar…when you turn 80, coverage terminates and there are no refunds and no cash value though that is not a key factor with burial insurance.  The cost of ownership ends up being high for the benefits received.  The sad thing is, these companies allude to the coverage being designed for burial or final expenses.  These particular household name insurers offer so called “cheap” products that reputable agents would not suggest let alone market to a trusting consumer.  Here is an example of coverage you should avoid.

Avoid these products.  They are enticing because of the initial cheap price, but under the hood, of poor design. These products have absolutely no business being sold as burial policies!!

Don’t waste your time or money on companies that send solicitations in the mail advertising coverage for $1.  It is junk mail.  Those are not the real rates.  That is a teaser for a month.  Put it in the circular filer.  Why do you think they don’t market thru independent agents who work 99% of the top life insurance companies?

That’s right.  They don’t want to be side by side with the top carriers.  They know you will probably select the best option rather than their offering.

The ads you see on TV, watch out.  Those are marketing the most expensive kind of funeral insurance called guaranteed acceptance life insurance.  It is for people in very poor health (at best) and even terminal health conditions.

You just aren’t getting clear information about the program.  They don’t want you to be on “high alert.”

Truth is, these companies are carefully hiding some of the details and touting common, industry standards that are a matter of law.

Again, having an experienced, professional advocate shopping for you is the answer.  Heck, it costs you nothing.  Rates are identical if you talk with an agent/broker or the home office of the insurer.

Don’t get the wool pulled over your eyes.

Question? Where do you think you are going to get the most honest answer, ABC Insurance Company or a reputable independent agent that works with dozens of life insurance insurance companies?

In Closing…

We do not know when we are going to die.  To ensure benefits for our loves ones, permanent coverage is needed.  Be sure you are only working with a specialist that can help you make a good decision on what is best for you, not some insurance company.  We are very accustomed to working with individuals that are in less than good health.  It costs you nothing to have the expertise.

I started working with seniors in the late 90’s.  I have watched many clients live well into their 80’s.  Male and female alike.  Don’t get sucked into the low price game.  Your not going to save all but a few bucks a month at best and have a big problem if you outlive the coverage.  Reputable agents and agencies will refuse to market low quality or inappropriate products all together.  The alternatives that are clearly superior for seniors.

Whether you hear the term burial insurance, funeral insurance, burial policy or final expenses, you are essentially talking about the same thing.  These are permanent life insurance policies designed for seniors with one or more significant health conditions.  Whole Life insurance is commonly used as the core, but Guaranteed Universal Life Insurance would be an option if you need a larger policy and low premium.   Your overall health will have some bearing on which policies are available to you, though coverage is is available even available for the toughest health conditions.

We do not recommend that you make a funeral home the beneficiary of your funeral insurance.  Funeral homes go out of business is good enough reason to think twice.

We advise you to select a reliable family member to handle your final needs.

Further, an irrevocable life insurance trust can be set up that will protect your policy benefits from a Medicaid spend down in the instance you end up in a nursing home.

However, you will not be able to make any beneficiary changes or access any cash value of the policy if you place it in a irrevocable trust.  That is how the money is compliant with Medicaid spend down laws in the event of nursing home confinement.

Quality Burial Insurance or Funeral Insurance can be purchased and paid on a monthly basis.  Your cost of coverage will never increase while the benefits will never decrease.  Benefits are immediately available upon your acceptance.  When the end of life is reached, the policy will pay the death benefits to the beneficiary you have selected.

For many people, these policies are an excellent way of covering the financial loss that occurs when a key family member passes on.

You may get a quote in less than a minute in the sidebar to your right.  These are free to you. It can get you in the ballpark with all the top funeral insurance companies out there.   Again, just be reasonable with your health evaluation in the health class menu.  If you are not sure, you are welcome to give us a call and we can get you the help you need.

Let us know how we can be of assistance. 800-598-6445

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