With about 40% of adults in the U.S. foregoing life insurance, it makes sense to discuss how this can affect family members and close friends. For those of you who have played a part in financing a funeral when an uninsured family member or friend has passed away, certainly, you are intimately familiar with the financial burden that can accompany the grief of losing a loved one or close friend.
When the market crashed in 2007, practically every working person in America felt the impact. Many seniors who were hoping to stop working postponed their retirement parties for financial reasons while others had to make tough decisions in order to make ends meet. For most, identify and reducing non-essential expenses was necessary so that essential expenses could be met. Some seniors cut off cable TV, others stopped eating out and going to the movies, and a fairly large group either cashed in or canceled their life insurance.
When you reach the point of “do I pay for my life insurance or do I get my meds refilled?” the answer is typical. I’ll cancel the insurance and then buy more later. Certainly, not taken into consideration is how you will buy more life insurance when you are 65 with multiple health conditions.
Maybe you have noticed that life insurance companies responded by consistently advertising their life insurance products targeting these seniors with health issues and letting them know that getting burial insurance is not as difficult as it may have appeared.
What is Burial Insurance?
Burial insurance is actually not a type of life insurance, but rather a purpose for life insurance. When you get a burial insurance policy, you will not find “BURIAL INSURANCE” prominently stamped on the front of the policy.
The Insurance Information Institute refers to burial insurance as :
“a whole life insurance policy with a death benefit of from $5,000 to $25,000. As its nickname implies, people buy this type of policy to provide money for funeral and burial costs for themselves and/or family members. It is possible to buy a policy after answering a few health-related questions on the application and with no medical exam.
Premiums are payable weekly or monthly. The premium is usually collected at the policy owner’s home or workplace, and the premium is usually a small round number, such as $2 or $3 per week; the death benefit is whatever that premium will buy given the insured’s current age. For example, a $3 per week premium might buy a $6,000 death benefit for a 36-year-old man or an $18,000 death benefit for a 9-year-old boy.
Burial policies may be designed to cover one person or everyone in a family.
Under some state laws, funeral homes may be licensed to sell burial insurance, but it is mainly sold through brokers and agents of insurance companies licensed to sell life insurance.” Read More…
The burial insurance policies being offered today are typically sold over the phone or online and are very affordable for the seniors they were designed for. There are two sub-types of burial insurance available, and we will discuss them near the end of this article.
Why Should I Buy Burial Insurance?
The most common reason that consumers give for buying burial insurance is that they do not wish to leave the financial burden of their funeral or cremation to their surviving loved ones and friends. Many folks understand how this burden can lead to additional stress that must be dealt with while survivors and grieving at the death of a loved one.
When you think about it, purchasing burial insurance is an act of love that you are leaving to your surviving loved ones instead of a financial burden. Knowing this, a burial insurance policyholder should speak with their designated beneficiary in advance to let them know that the insurance is available and provide instructions on filing a claim and dealing with last wishes.
For seniors with grown children, the decision is very simple. You don’t want your kids to have to pay for your funeral, so you buy burial insurance to make certain the funds are available. It makes complete sense to most people, but not everyone acts on it, that’s why we see television ads every day about purchasing burial insurance; also referred to as final expense insurance.
How much Burial Insurance do I Need?
It’s surprising that most adults have never considered how much a funeral or cremation costs. In fact, unless you’ve participated in paying for or arranging a funeral, you are likely unaware of what is involved and how much it costs. This goes for cremation as well.
Fortunately, there are several websites that offer advice on funeral planning and how to purchase products and services at a discount. The following websites serve as great resources for planning a funeral or cremation and offer certain strategies for reducing the costs:
Everplans.com is all about planning. Not just funerals but also advance directives, wills and trusts, final wishes and complete funeral planning. Check them out for the ultimate funeral planning checklist.
Parting.com takes funeral planning one step further by allowing you to compare funeral costs among funeral homes in your area. Their blog contains many articles about strategies to help you save money on your funeral arrangements.
Funeralwise.com can provide answers to anything funeral related, including funerals for Pets. Their “Funeralwise Forums” tab will take you to a plethora of articles dealing with everything from funeral etiquette to pet loss.
The number that is most commonly put out there for the cost of an average funeral is $8,000. It’s important, however, to do your own research for the area where you live and also consider that with any life event, unexpected expenses are likely on the horizon.
Which Insurance Companies should I Consider?
Which company you should purchase burial insurance from depends on several different factors. For example, some companies might offer a $10,000 policy for an 80-year-old male at $145 per month while others charge $210 per month. The rate you pay is based on that particular company’s claim experience with different age brackets.
While not appearing to dodge the question here, let’s just say that the insurance companies you consider will be based on several individual factors regarding the applicant. The factors that all these companies will inquire about is:
- Your age
- Your current health and your health history
- Your lifestyle
- The amount of coverage you require
Let’s consider, for example, a 65-year-old female non-smoker looking for a $10,000 death benefit. The following rates are for a level benefit with first-day coverage:
|Insurance Company||Monthly Premium|
|Mutual of Omaha||$41.01|
|Americo Insurance Company||$42.80|
|Liberty Bankers Life||$42.81|
|United Home Life||$42.45|
|Foresters Life Insurance||$42.80|
Based on the assumptions provided, the above-listed companies fall in the top five, and all have similar premiums listed. If the assumptions change, for instance, a 70-year-old female wanting $12,000 in coverage, these five companies may not remain the top five.
The good news for seniors looking for burial insurance is that there are many independent agents out there who offer burial insurance, and those agents who specialize in the senior market are likely to represent all of the insurance companies that offer burial insurance. This means that you can contact one broker who will shop your policy needs with all the companies they represent. Doing so will allow the broker to offer you the most affordable insurance solution based on your needs.
The Two types of Burial Insurance Policies
It’s important to know that there are two types of burial insurance policies and that if you qualify for one you should not apply for the other.
- Level Benefit Coverage – Level benefit policies are whole life insurance policies, and although they rarely require a medical exam, there are various health insurance questions on the application and your answers to those questions will determine if your application is accepted or declined.
Level benefit policies provide coverage for the full benefit amount from the first day of coverage. Although there are health questions on the application, if you are approved for this coverage you will pay less premium and your policy will be active on the first day for death for natural or accidental causes. Applicants who qualify for this coverage should not purchase the second option which is graded benefit or guaranteed issue.
- Graded Benefit Coverage – This coverage is also known as modified whole life or guaranteed issue whole life insurance. This type of policy is suited for applicants who cannot qualify for a level benefit policy because of health issues. Although practically anyone in the required age group can qualify for this coverage because no health questions are considered for coverage, there are three caveats that the applicant should understand.
- Waiting Period – There is a two or three year waiting period before the full death benefit will be paid when death is the result of natural causes. If the insured dies during the waiting period, the insurer will typically refund all the premiums paid into the policy, and with some insurers, they will include an additional percentage of five to ten percent of that amount. Death resulting from an accident is covered from the first day for the full death benefit.
- Higher Premiums – Since the insurance company does not require any health information, they are accepting an unknown medical risk and will, therefore, charge more premium than a level benefit policy.
- Lower Death Benefit – Many of the insurance companies that offer graded benefit insurance policies place a lower cap on the death benefit. In fact, in some cases, the available death benefit is based on the age of the applicant.
How much will my Burial Insurance Cost?
As we stated previously, the cost of your burial insurance will depend on your age and the amount of insurance you are asking to purchase. To provide a comparison between level benefit and graded benefit policies, we have provided some actual rates below.
These rates are for a $10,000 level benefit for a male and female non-smoker living in Florida.
As you can see from the chart above, the rates for men are higher than for women. This is because women typically live longer than men and the company is able to spread the cost of insurance over a longer period of time.
If you are Declined
If your coverage is declined for a level benefit policy, your insurance agent will recommend a graded benefit policy since it is issued without regard for health issues.
These rates are for a $10,000 level benefit for a male and female non-smoker living in Florida.
Notice that the rates for the graded benefit policy are higher than the level benefit policy. Also in this sample, the best rate for an 85-year-old applicant is provided by AIG since Gerber Life does not offer coverage for applicants older the 80 years-old.
How can I find an Expert to Help Me?
Terry Biddle is a licensed life insurance agent with Virginia Senior Benefits and Family Care. An agency that maintains access to the full spectrum of life insurance carriers in order to deliver the most benefits for the dollar spent. Terry uses a network of licensed agents across the US in order to deliver the most affordable final expense life insurance policies possible. With a diverse mix of carriers and access to agents available to complete face to face applications, the agency serves up the most affordable first-day life insurance policies for the trickiest medical conditions seniors may have. To get the most affordable solution for burial insurance for seniors, visit the LifePolicyShopper website for a free online quote.