What is the Difference between Burial Insurance and Life insurance?

This is one of the biggest questions that we get all the time regarding the differences between Life insurance and Burial Insurance/Final Expense Insurance. We will breakdown the differences between the two and see what is right for you.

• Policy coverage amount can range vastly: Life insurance policies can protect you anywhere between $100,000 to upwards of $5 Million(or more sometimes!). The more coverage you buy, the higher the premiums will be for a plan. Life insurance plans are meant to replace an individual’s income should they predecease early due to unfortunate events. Generally, people who have a change in life events will purchase life insurance(marriage, newborn child or a purchase of a new home)
• There are many different types of Life insurance products: Life insurance has many different types of products and prices. For simplicity reasons, we will cover the two main ones that people tend to purchase.
  
  • Term Life –  A life insurance that provides a death benefit during a specified term period (10,20 or 30years). Term life insurance policies provide a stated benefit upon the death of the insured, provided that the death occurs within a specific time period. Once the term policy ends, there is no value that is returned back to the policyholder (similar to a car insurance plan). These plans are generally very affordable and is ideal for someone who is young and wants to pay the least amount possible.
  • Whole life – A insurance policy that provides coverage for the ENTIRE life of the insured (hence WHOLE LIFE). In addition to providing a death benefit, whole life also contains a savings component which they is called cash value that accumulates money over time that the insured can borrow from. These policies are also known as permanent or traditional life insurance. The plan never expire and will you till the age of 121. Premiums will higher than term life due to life time coverage and the savings that it builds up.
• Your health is a big factor: Your age and health will be a big factor to determine the rates of these plans. If are are dealing with certain medical conditions, the insurance company will charge you more depending on how severe those healh issues are. Your age is also a factor (just like burial insurance), the later you decide to buy the insurance; the more expensive it will be.
  
  

Now onto Burial insurance/Final Expense Insurance and what the differences are:

• A smaller amount of coverage: Burial insurance is essentially another type of whole life insurance but the range of coverage will be from $5,000 to $40,000 (much less than a typical life insurance). The plans are lower than a typical Life insurance policy because they are meant to cover final expenses or funeral expenses.
• Two types of burial insurance plans: Burial insurance are generally whole life insurance products where they cover you your entire lifetime. However, there are two types of products that are offered

  • If you qualify for a Level Benefit plan(no medical exam is needed but they will ask a few medical questions during the application process), the best part of this plan is that it goes into effect immediately once approved and paid for (there is no waiting period). Pricing is locked in for the life time of the policy and the coverage amount never changes.

    • Pros : Premiums are less expensive, Pricing is locked in forever and coverage begins immediately.
    • Cons : There are medical questions which means some people may not qualify if they are dealing with certain severe medical conditions

  • If someone does not qualify for the Level benefit product, they will generally get a Guaranteed Issued Life insurance policy. This plan does not ask any medical questions at all and also does not require a medical exam. However, there will be a 2-year graded benefit period which means if death occurs within the first two policy years for any reason other than an accident, all premiums plus 10% interest shall be paid back to the beneficiary. If death is due to accidental causes within the first two policy years, the full death benefit shall be paid to the beneficiary. Pricing is locked in for the life time of the policy and the benefit never changes.

    • Pros : No medical questions asked during the application, Guaranteed approval, Pricing is locked in forever and Benefit amount never change.
    • Cons : There is a 2 year waiting period before any benefits are paid (unless the death is due to an accident, there is no waiting period for that) and premium are generally more expensive

• Your health isn’t as big a factor:  Burial insurance premiums are more Age factored than they are about health (vs pure Life insurance product that cares about Age and Health). The level benefit plans will usually ask a few medical questions (they generally look for major medical issues) but they are more lenient with regards to your health. The underwriting process looks much more favorably on health issues as they know the consumer that are applying are between the ages of 50-85 years old. No medical exam is ever required for either a Level benefit or Guaranteed Issue (guarantee issue does not ask medical questions). 
  
  
• So how do i know if I Qualify for a level benefit product vs Guaranteed Issue? I would recommend you speak to one of our advisors to see what is best for you base on your health and financial situation. We have over 30 Carriers and we will definetinly find something that will work for you.

To sum it all up, Burial Insurance/Final Expense insurance are essentially a Life insurance policy that provides a smaller amount of coverage and is easier to obtain for seniors (since no medical exam is required). If you are in the market for Burial insurance or Final expense insurance, do not wait any longer as your Age will still play a big factor. Lock in your rates as early as you can or speak with one of our advisors to get a quote to see what is right for you and your family.