Most people don’t realize that they should consider funeral expenses while planning their future and retirement. Studies show that there has been a 30 percent increase in funeral expenses in the last few years. The average cost of a burial in 2020 was between $7,000 and $12,000. So, it’s a smart decision if you have decided to invest in a burial insurance plan.
A burial insurance policy is intended to cover your burial and end-of-life expenses like bills, debts, and other costs. A burial insurance plan need not have to be costly, as assumed. According to Gary P. Cubeta of Insurance for final expense, you can find a range of affordable burial insurance plans that suit everyone. But it would help if you were informed about the burial insurance to make a proper decision. The following guide will help you with the basics of burial insurance plans.
Estimate Your Burial Expenses
An average funeral expense policy has a coverage of $5000 to $25,000. So, the first step would be to figure out how much money you’ll need to cover your burial expenses. Final expenses will not only cover your funeral costs but other costs like medical bills, credit card bills, legal fees, and more.
So, when you estimate the amount of your burial expense, you should not forget other costs as they are equally important. Make sure that the amount you’re leaving behind is enough to cover the funeral costs. If required, you should take the help of a financial advisor to figure out the expenses that will likely arise after your death.
Type of Final Expense Policies
- Simplified Issue Policy: Most of the final insurance policies are simplified policies. It means they do not require any medical tests, and you only have to fill a questionnaire. The insurer may cross-check the information provided and take your interview. The premiums may vary on your health condition.
- Guaranteed Issue Policy: It is issued without asking any medical questions. But unlike the simplified policy, it has an age limit of 40 to 80 years and has a capped coverage. This policy is ideal for people with pre-existing health conditions, but the premiums are comparatively higher.
Death Benefits You Will Get
The payout of death benefits depends upon the policy you have opted for. The policies are broadly divided into the following categories.
- Level Benefit Policy: In a level benefit policy, you’ll get full benefits from the issue date of the policy, regardless of your death occurring due to accident or natural causes. The death benefit, in this case, is usually the face value of the policy. The approval depends upon your answers which the insurer asks you. There are no chances that you’ll be denied this policy; however, if your responses are unfavorable, your premiums would be higher, or the amount of coverage will be limited. You are eligible to apply if you fall in the age group 18 to 80/85. Compared to the graded death benefit policy, they have lower premiums.
- Modified Benefit Policy: Modified benefit policy has a waiting period of 2 to 3 years. During this period, if you die due to natural causes, you will only get a refund of your premiums plus some interest amount. However, accidental death during the waiting period does qualify for full benefits. After the waiting period is over, the full benefit is payable. The policies can be simplified or guaranteed. This policy is suitable for people with serious health conditions. The premiums are higher in this policy to reduce the insurer’s risk.
- Graded Benefit Policy: Similar to the modified benefit policy, the graded policy has a waiting period. During the waiting period, the payout of death benefits for natural death is a percentage of the face value. For example, if the policy pays 30/70/100, it will mean that death benefits in the first year of the waiting period will be 30 percent and 70 percent in the second year. After that, you can get full death benefits. This policy also works for people with health conditions, but the premiums are higher.
Factors like age, health condition, and amount of coverage largely determine your burial expense insurance cost. So, it’s always better that you decide on a policy when you are relatively young. Your premiums will increase with your age, irrespective of your health.
Also, premiums for healthy individuals are lower than the policy for those with a health condition. But it’s never too late to apply for final expense insurance as most policies are available till the age of 80 years.
Sometimes selecting the affordable burial insurance for which you qualify makes more sense than going for an expensive one. You can take the help of an insurance broker who sells more than one policy to help you make a comparison of all the policies suiting your needs. A broker may be able to give you the best advice and help you understand the pros and cons of each policy.
