Funeral Insurance: What Does It Cover?

Funeral insurance is a whole-life policy with the intent to be used to cover the costs necessary for funeral and burial, often referred to as “final expense” or “burial” insurance. While most funeral expense policies can be used without restriction for things outside of funeral expenses, these policies have a lower benefit as they only provide basic funeral costs and are less expensive than other policies. This policy is ideal for families struggling to pay these expenses after the insured dies.

What does funeral insurance cover?

Each policy may differ in coverage and should be carefully read for a correct understanding of the provisions covered for funeral and burial costs. Most policies even specify that there is no limit to how the death benefit can be used, even though the intent is that the policy benefit be used for funeral expenses. However, because these policies are often intended for final expenses, we will take a look at those costs specifically. Three general categories fall under the title of final expense:

• Funeral expenses. These may include funeral home services, including the viewing and funeral, flowers, casket, obituary notices, cremation, urn, and transportation.
• Burial costs. These may include burial plots, grave opening and closing, headstones, and transportation to and from the burial site.
• Additional costs. These are important, but are often overlooked. However, they may not apply, depending on the policy. They include final medical bills, any potential legal expenses, and outstanding debt such as loans or mortgages.

While this list isn’t extensive, it paints a picture of the costs associated with final expenses. These expenses are often higher than expected and should be considered carefully when determining a funeral insurance policy.

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Are all funeral insurance policies the same?

Not all funeral insurance policies are the same, although they share the goal of covering final expenses. Each offers different plans, riders, and exclusions. While these policies may differ from company to company, three different funeral insurance policies have a basic format. They are simplified issues, guaranteed issues, and pre-need life insurance. These policies do not insure different parts of a funeral. Instead, these different types of funeral expense insurance approach the insurance process in different ways.

Simplified issue life insurance

Simplified issue life insurance is a policy with a simplified process to issue the policy to the insured. Like a typical whole life insurance policy, an application process and questionnaire ask about family medical history and the insured’s overall health. The company may also use a third-party company to assist in the underwriting process.

However, this process is simplified because no medical exam is usually required as part of the underwriting process. The waiting period usually lasts 24-36 months, after which the full benefit can be paid should the insured pass away.

Guaranteed issue life insurance

Guaranteed issue life insurance is unique because no medical exam or questionnaire is required. In fact, guaranteed issue life policies mean no one can be denied coverage if they meet the conditions. These conditions usually require the insured to be at least 50.

Because guaranteed life is so easy to obtain, some factors offset this benefit. Usually, these policies have a lower benefit, typically $25,000 or less. Likewise, these policies are more expensive to offset the cost of insuring people with far less discretion than other policies. These policies often have a waiting period as well. However, guaranteed life policies are excellent options for those with a high medical risk looking for funeral insurance.

Pre-need life insurance

Pre-need life insurance functions like whole life policies, except they are typically sold via contract with a funeral director. These directors obtain licensing to sell life insurance and offer contracts to insureds that cover funeral expenses.

However, these policies can dictate the policy must cover funeral expenses, and the funds go directly to the funeral home. These policies allow insureds to make the insurance policy easy on their family by getting the exact amount of coverage needed for the outlined funeral costs and removing the added stress on the family to find necessary arrangements.

What is the best funeral insurance policy?

There are several options to choose from. While these options are highly situational:

• Guaranteed life is best for those at high medical risk or who have a family history of concerning medical conditions.
• Pre-need policies are best for a smooth and easy process that doesn’t involve interaction with an insurance company.
• A simplified life policy makes the most sense for those seeking a typical insurance experience.

However, it should be noted that it may be tempting to consider burial insurance vs. life insurance, especially term insurance, instead of a whole life funeral insurance policy. However, it is essential to remember that term policies only last for a specific time and can result in a lack of coverage should the policy end before the insured dies. Whole-life funeral insurance may offer additional benefits that should be considered, depending on the insurance company.

How much funeral insurance to purchase?

Funeral insurance costs, while perhaps easier to predict regarding how expensive the premiums will be, can still be fairly unpredictable. However, you can get a good idea by creating a burial definition or determining the costs you want the policy benefit to pay. Once you determine your needs, you can contact companies for comparison quotes.

To help with this process, we have included a chart to serve as a funeral costs calculator. The chart includes the average costs of the most common funeral expenses:

Can seniors purchase funeral insurance?

Not only is funeral insurance an option for seniors, but this policy has the most options for burial insurance for seniors since guaranteed life insurance can only be purchased at the age of 50 or above. While insurance policies do indeed increase their premiums as one increases in age, the fact that funeral insurance carries a comparatively low benefit amount next to other whole-life policies means that these policies are affordable.

Some funeral insurance policies may carry living benefits to assist the insured like other whole-life policies. These include the terminal illness rider, allowing the insured to use a portion of the benefit to pay for unexpected medical expenses resulting from a terminal or grave illness. One should just make sure to keep the waiting period in mind as well to make sure the benefit is accessible.