What is Burial Insurance?

Thinking about how you’ll pay for your funeral may not be at the top of your to-do list. But with the average cost of a funeral hovering around $8,000 and climbing, planning your end of life costs in advance could be a good idea—especially if you don’t want to leave your family with the burden.[1,2]

Here's what to know about this type of insurance, so you can decide if it's right for you.

Burial insurance, also known as funeral insurance or final expense life insurance, is a type of whole life insurance that can be used to cover final expenses. Benefits are usually paid out immediately upon death as a lump sum. You can get a plan to cover just yourself or everyone in your family.[2,3]

“Burial Insurance helps cover the cost of your funeral and/or cremation expenses upon your death, says Seth Buckley, president of Buckley Financial, a concierge life insurance planning firm based in Massachusetts. “The death benefit can be used at the beneficiary’s discretion to pay off any debts including medical bills, credit card bills, loans, etc.”

Meet the Expert

Seth Buckley, President of Buckley Financial, a concierge life insurance planning firm based in Massachusetts

Depending on your policy, burial insurance can help cover a range of expenses at the end of life, including:

• Funeral arrangements

• Funeral expenses such as flowers, obituary, music, etc.

• Burial or cremation expenses

• Medical bills and special care costs

• Other outstanding bills

You may also be able to use the cash to cover a post-funeral gathering, a charitable donation, a gift to a family member or even a special trip. Beneficiaries usually aren’t locked into how to spend the cash after your death—like they would be if you prepaid at a specific funeral home—so burial insurance can offer added flexibility should you pass away out of state, or if there’s no funeral or in rare cases, no body for cremation or burial. [3,4]

While your beneficiaries can choose how to use the benefits, it’s unlikely they’ll be able to use it to cover large expenses like college tuition or paying off a home since the benefit is relatively low [3,4]

Funeral insurance premiums are typically paid weekly or monthly. Policies are generally affordable and offer coverage between $5,000 to $25,000—but they may go up as high as $50,000.[2,3] The age of policy holders usually ranges from 50 to 80.

You typically won’t need to get a medical exam to qualify, but the price you’ll pay for the policy and your benefit amount will likely depend on the age of the policy holder. For example, a 36-year-old man may pay $3 a week for a $6,000 death benefit, but the same premium may cover $18,000 for a 9-year-old boy. [2,3]

Burial insurance is typically available through insurance brokers or insurance agents that are licensed to sell life insurance policies. You may also be able to purchase it directly through a funeral home, depending on your state’s laws.

Tip

Before you select a plan, it’s a good idea to shop around to find a policy that fits your financial situation and end of life needs.[2]

Buckley cautions, “This type of insurance can be expensive for the relatively small death benefit, so do your homework.”

Both burial insurance and pre-need, or prepaid, insurance can help you cover end-of-life expenses, but pre-need insurance differs in a few key ways:[2,5]

It’s set up directly through a funeral home.

Unlike burial insurance which is typically purchased from an insurance provider, pre-need insurance is set up with a specific funeral home that is also often named as the beneficiary.[2,5]

There are limitations on how the death benefit payout can be used.

Pre-need insurance death benefits aren’t as flexible as burial insurance and can only be used to cover funeral expenses at the funeral home where the arrangements were made.[2,5]

Not all services are guaranteed.

Pre-need insurance may be used to cover a certain amount of set costs with the funeral home, but there could be a gap in expenses and your loved ones may have to foot the bill to cover the difference. [2,5]

Not necessarily. While burial insurance is specifically designed to cover final expenses, it’s not mandatory to carry like auto or homeowner’s insurance. If burial insurance isn’t right for you, here a few other options to consider to help cover the cost of final expenses:

Life insurance

You can opt to use a standard life insurance policy to cover your funeral expenses. In fact, according to the 2020 Life Insurance Barometer industry report, 84% of life insurance policy holders purchased life insurance to help cover their end of life expenses.[6]

Funeral trust plan

You can consider exploring different trust options, including a funeral trust plan, where your money is held in a special account that accrues interest and the funeral director is usually named as the beneficiary.[7]

Payable upon death account

If you have the means, you can set aside cash for your family after you’re gone in a POD, or “payable on death” account to help cover the cost of your final expenses.[7]

Social Security

Your spouse or children may be able to collect your Social Security death benefit if your work history made you eligible, but the one-time $255 payment isn’t likely to stretch very far to cover funeral expenses.[8]