A Beginner’s Guide to Burial Insurance

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Many senior citizens and their families do not know about burial insurance, but it could potentially be exactly what they need. If you had seen or heard the terms final expense insurance or funeral insurance, what you’re looking at is burial insurance.

Though used interchangeably, they all mean the same thing: a form of life insurance that purely covers funeral costs to ensure the bereaved are not financially burdened.

Unlike some life insurance policies, burial insurance plans never expire, never increase their monthly premiums, and never require a medical exam. Should a company ever say otherwise, they are flat out wrong.

If you have been rejected from life insurance, need more coverage, or have medical bills to pay off in addition to final expenses, burial insurance might be your answer.

In this article, we will go through how burial insurance works explicitly, what to look out for, and how to make sure you or your loved one gets the best policy for them.

Let’s Start by Describing the Process

When the insured loved one passes away the carrier cuts a tax-free check to the beneficiary to pay for final expenses. There are no restrictions or provisions for how the money is to be used.

Any proceeds left over after costs have been paid to stay with the beneficiary. In a way, a burial insurance plan can be a financial legacy.

Now, there are three main options in burial insurance:

  • Level Benefit
  • Graded
  • Guaranteed Issue

Note: There is another option called a modified plan. These plans are deemed by many reputable agencies to be utterly worthless. The three being described are what you should consider. Stay away from modified plans.

The policy you fall under depends on a variety of factors. Some companies’ policies may not be approved in every state and have stipulations about age and your level of health. Perhaps the most critical factor throughout the industry is the number and severity of health conditions.

Most companies have three categories of health ratings that will determine the policy itself and the cost: low, medium, or high. This rating is determined by a detailed series of mandated health questions called medical underwriting for the level of benefit and graded plans.

Don’t be alarmed; it is not an exam – more like a questionnaire where you answer honestly about any illnesses you have.

This is a process unique to final expense insurance. It will encompass a wide range of conditions so people with high-risk illnesses can still secure coverage.

 It includes diabetic neuropathy, cholesterol issues, home health care, Parkinson’s, depression, MS, high blood pressure, mini-strokes, all kinds of arthritis, sleep apnea, fibromyalgia, atrial fibrillation, asthma, cystic fibrosis, schizophrenia, blood clots, and much more.

Let’s go deeper in-depth about each category of burial insurance to determine where you may qualify. Level benefit plans equal to the low or “preferred” rating.

If your health is relatively good and you have no severe conditions, this is the plan you will most likely fall under. From day one, you will receive full benefits and coverage from the lowest cost because you are not labeled what the carrier would call a ‘great risk’.

Level benefit plans equal to the low or “preferred” rating. If your health is relatively good and you have no severe conditions, this is the plan you will most likely fall under.

From day one, you will receive full benefits and coverage from the lowest cost because you are not labeled what the carrier would call a ‘great risk’.

Graded plans are the ‘medium’ rating if the company does three ratings instead of two. This is the option you may be offered if you answer yes to some of the health questions in the graded section of the questionnaire.

There is a 24-month waiting period for full benefits, meanwhile, you will receive partial coverage that increases the following year.

Most companies will pay out around 30% if the insured passes away during the first year and 40-70% during the second. Prosperity and Lincoln Heritage are two companies that rate well in level benefit and graded plans.

Guarantee issue plans are a lifesaver for those with health risks or multiple conditions insurance companies deem the highest liability and refuse to consider.

Some companies specialize in these plans for this very reason. Essentially, if you can enter into a legal contract, you are going to be accepted.

These policies include, but are not limited to, people who have dialysis, Alzheimer’s, dementia, severe epilepsy, have had recent cancer treatment, or are in hospice care or a nursing facility.

Since there is no underwriting required, carriers do not know what risks they are taking on and therefore have to compensate with higher prices, and there will always be a two-year graded period.

Should the insured person pass away during this time frame, premiums are paid back in full plus 10%, so at least no matter what happens, you will be getting more out of the plan than you put in.

Accidental deaths, however, are covered from day one, which in some cases, like seizures or dementia, can, unfortunately, be very important. Once the two-year period has expired, you will receive full coverage and benefits. Some companies well known for these particular plans are Gerber Life Insurance, Sons of Norway and Great Western.

It is worth noting that, excluding the guarantee issue, companies will also take a look at your prescription history when determining your plan to validate the application’s answers during the medical underwriting portion of the application.

This will not require a printed-out list from your pharmacy or any extra phone calls/work on your part – with your consent; the company can electronically analyze your medications in a matter of minutes.

No Matter What You or Your Loved One’s Health Condition May Be, There Will Always be a Policy Available. Do Not Let a Company or Agent Tell You Otherwise.

A unique aspect of burial insurance is the broad range of face values you can purchase, so you don’t have to spend more than is necessary. Most companies range from about $2,000-$25,000, but some companies offer as little as $1,000.

If you want a cremation, generally from $2,000-$5,000 for everything to be covered – that is all you need to pay for. Therefore, do not feel pressured into paying for a more expensive policy than you know is necessary– the amount you want is sure to be available to you.

Now that we’ve discussed the variety of plans and what carriers require let’s move on to securing a policy.

Most companies in this industry will not allow you to call them and sign up directly – they will tell you to find an agent. This may seem strange, but it actually could work in your favor if you find the right person.

An agent’s job is essentially to do your shopping for you: after evaluating your health, they determine which companies work best for you and then find the cheapest policies to suit your needs. From there, you discuss which option to pursue.

Because burial insurance is such a niche industry with many stipulations regarding health conditions, it’s best to find an agent specializing in final expenses.

A ‘jack of all trades’ may not know all the specificities that go into finding a policy for someone who’s had a recent heart attack, for instance.

They could push the wrong plan on you when you qualify for better. It is also vital that the agency represents at least ten to fifteen different insurance companies to ensure various options and costs are being examined.

Most importantly, do your research before making any final choices or giving out personal information.

Look for good reviews from other customers to certify their credibility and trustworthiness. Levinson and Associates has a reputable reputation as an agency, as does Superior Mutual.

Under the guidance of your agent, you will submit your application to the selected company (another reason why you want an experienced agent working with you), typically done in one of three ways:

  • Voice
  • Email
  • Paper

Voice and email are the most common ways to apply, but the paper does happen occasionally.

Submitting through voice means everything is done over the phone, even signatory authorizations. No paperwork is involved, it usually only takes a couple of minutes, and a decision often happens right then and there.

Royal Neighbors of America, an excellent final expense company that takes on many high-risk patients, uses voice signature. Prosperity Life is another well- known carrier that uses vocal authorization for applications.

For email submissions, your agent collects all the information for you, and the company sends over an email to sign the whole thing in a couple of steps. Think of it as the tablets handed to you when seeing a new doctor so you can sign the appropriate disclosure and privacy agreements.

Once you sign, you will be prompted with the medical underwriting portion (unless it is a guarantee issue). Decisions are usually made within a week. Mutual of Omaha, a company known for its level benefit and graded policies, do instant approval via email.

Paper applications essentially mean snail mail. Again, your agent collects everything necessary, generates the papers for you, and then sends it to your address. All you have to do is sign them and return them to your agent, where they’ll take care of the rest. Decisions are made within five business days.

Everything seems pretty straightforward, right? You know what burial insurance means, the types of plans available, the policies you might qualify for, and how to snag a reputable agent to help you with the whole process.

So why does insurance have such a bad name? Why are insurance scams, particularly in the burial industry, so familiar?

Let’s walk through some of the more prevalent final expense deceptions and how you can easily spot them.

First of all, be aware of how companies (and agents) may market burial insurance to increase prices or set you with the wrong policy. As stated earlier, burial insurance could be presented to you as final expenses or funeral insurance. They’re the same.

Also, be on the lookout for companies trying to pass off term life insuranceas burial expenses. AARP and Global Life, for instance, are notorious for marketing in just such a way. The AARP burial plan can be marketed as a state-regulated life insurance policy, or in actuality, can be a term life insurance policy.

These plans carry vastly different meanings, which, if not thoroughly understood, can come at a great price and possibly leave you without coverage when you most need it.

Term life insurance has an expiration date, most commonly when you’re 80. These plans make sense if, say, a young family that is just starting and can’t afford the costlier payments that come with permanent policies but plan on being able to afford it later in their lives.

That way, should something happen to either one or both of them before a permanent plan is in place, the surviving members of the family are being looked after accordingly and don’t incur additional or remaining debt.

You want to start permanent plans as young as possible, because the younger you start, the cheaper the monthly premiums as long as you don’t cancel.

You could be 55 and still pay the same amount you did at 30. So though the lower prices might be appealing to you (mostly if it’s marketed as burial insurance), once you reach a certain age, it’s no longer worth it.

As evidenced in the name, term life insurance policies are not meant to be permanent – so using it as a way to cover final expenses just doesn’t work. If you’re sold one of these policies, say at 60, thinking it’s a burial plan, once you turn 80, not only will you be left without coverage, but you won’t get any money back.

The monthly premiums you were paying disappear into the insurance company’s pocket. Should you attempt to renew, the premiums would increase every five years. Because the plan isn’t permanent, the company wants to keep making money while they still can.

Either you’ll be paying up to 300% more, or you won’t be able to pay, and the coverage will lapse. Always read the literature, fine print and all, given to you by the agent and company to make sure you’re not purchasing the entirely wrong kind of life insurance policy.

Some websites and companies will offer seemingly incredible prices that are either scams or frauds. It’s best never to buy a no-questions-asked policy from TV advertisements: there is bound to be plenty of fine print you would never see, and yet still be under obligation to pay exorbitant rates compared to what the ad sells you.

This is pretty much the same way scam websites operate – they’ll offer immediate sign up with the lowest prices on the market – except they’re purely facades to steal your credit card/bank information, not in any way insurance.

Remember, any reputable company would work with your agent, not allow you to directly sign up and pay on a website or over the phone.

However, when you make your payments, always pay directly to the company, not your agent. If your agent asks for cash to be delivered to them or a check to be made in their name, find another agent as soon as possible. They most likely want to pocket the money for themselves or at least a large portion of it.

All of this information may be overwhelming and somewhat scary, but as long as you remember these key points:

  • Find an agent that specializes in burial insurance.
  • No trustworthy company will sign you up without an agent.
  • Always get a second opinion if the cost of a policy seems too high.
  • Read ALL the literature handed to you about plans.
  • No matter your circumstances or condition, you DO qualify for a policy.
  • Do your research before making any final decisions.

You have nothing to fear. If you’re in any way familiar with life insurance, final expenses should not be difficult to navigate, and if not, it is not hard to find resources or someone to help you.

This article is an excellent jumping-off point to expand your knowledge and continue the process.

No one wants to worry or be consumed with the financial costs that naturally occur when a loved one passes away. This is why burial insurance covers a wide range of face values and medical conditions/illnesses. It provides extra coverage for the funds to pay off remaining medical bills or debt, or need available cash for funeral expenses; burial insurance guarantees that those left behind will provide the best memorial they can and mourn without unnecessary stress or hardship.

About Al Kushner
Al Kushner
He is a recognized financial educator, best-selling author, speaker, underwriting specialist and the founder & CEO of Superior Mutual, an independent insurance agency. He has helped families and individuals preserve, protect, and pass on a legacy since 1986. His mission is helping hard working seniors keep more of what they have worked a lifetime to save.
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