4 Tips to Choose a Burial Insurance Plan
While saving for retirement is essential, buying funeral insurance can also help. It covers the costs associated with a funeral, burial, and other end-of-life expenses. However, finding a suitable policy can be overwhelming. It requires understanding a few unique concepts and comparing several terms and conditions. Further, there are different policy types to choose from, which can be confusing. But following the right tips can help you select the best funeral insurance plan.
Estimate your final expenses
According to the National Funeral Directors Association, the median funeral and burial cost is $9,420. Apart from that, other expenses like pending hospital bills, legal fees, and credit card bills need to be taken care of when a person passes away. These are called “final expenses.” The question is, will your dependents have sufficient funds available for these? It is best to consult a financial advisor if you are unsure of leaving behind enough money. If you have sufficient funds, decide whether you want to save them for the funeral or buy insurance. Most people get insurance as they do not wish to deplete the savings they leave behind for their loved ones.
Choose a suitable type of funeral insurance
After deciding to get insurance, learn about the types of plans available. There are many options, but the primary ones are discussed below:
Preneed insurance
Also called prepaid burial insurance, you can purchase the policy from a funeral home by paying a lump sum or monthly installments. It is like a prepaid contract, where you finalize the arrangements with the chosen funeral home in advance. Then the payout goes directly to them to cover your end-of-life expenses when the time comes. There is no death benefit, which means dependents do not get any amount.
Final expense insurance
People buy this policy from an insurance company. It includes a death benefit, so the payout goes to the family or beneficiaries instead of a funeral home. However, they have to make all the arrangements themselves for the burial service. Besides funeral-related costs, beneficiaries can use the payout to repay debts and meet other final expenses. It is best to choose a final expense plan with no waiting period because it can sometimes take two years or longer before the benefits come into effect. Also, check if a health exam is required to qualify. While most providers have physical exams, some only ask questions regarding the policyholder’s health. However, they come with high premiums. Plans that have a level premium, or premiums that do not change for the entire policy tenure, are the best.
Decide the level of coverage
Funeral insurance plans cannot be offered at discounted rates as they are a highly regulated product. Providers decide the rate depending on the policy’s features, and they can vary from state to state. Hence, it is crucial to read the fine print carefully. If the quote exceeds your budget, rework and reduce certain policy features.
Choose from the best companies
The following are some of the best companies providing funeral plans:
Mutual of Omaha
They provide funeral insurance plans to seniors aged 45 years and older compared to other companies that offer coverage starting at 50 years. Mutual of Omaha claims to pay around 85 percent of the amount within a day, helping your loved ones meet funeral costs and other immediate expenses. The plans are available in all the states.
State Farm
State Farm offers up to $10,000 in their burial policy. It gains cash value over the years, which you can withdraw during your lifetime. Since it is a mutual policy, it also pays dividends. Further, premiums can be paid monthly or annually.
Transamerica
Transamerica is among the best for plans with no waiting period. Available in all states, the company provides instant coverage that takes care of all the expenses from the same day or as soon as the policy goes into effect. It also has one of the broadest age eligibility ranges, from 15 days to 85 years. The payout amount is between $1,000 and $50,000.
Foresters Financial
Foresters Financial is among the few companies offering free riders. For instance, their PlanRight Whole Life Insurance comes with a Family Health Benefit Rider and Common Carrier Accidental Death Benefit Rider. The policy’s coverage ranges between $5,000 and $35,000 for ages 50 to 85. It is available in all the states.
AARP
AARP has partnered with New York Life to provide various policies, including whole life and burial insurance. Their Guaranteed Acceptance Life Insurance is popular, with coverage ranging from $2,500 to $25,000, depending on the policyholder’s location and age. It is available in all states, and those between 50 and 80 can apply. AARP is known for fewer consumer complaints, making it a trustworthy option.
Apart from a funeral insurance plan, many people rely on the following alternatives to cover their final expenses:
Term life insurance
It offers protection for a set period and expires if not renewed on maturity. Also, the plan gets expensive with age. Try to see if it can be converted into a whole life policy for better, more reasonable coverage.
Simplified issue life insurance
It is for people who cannot qualify for traditional plans due to age or health restrictions. The policy has a short health questionnaire, and beneficiaries can use the amount received as a death benefit to cover funeral costs.
Guaranteed life insurance
Although expensive, this policy does not require any health qualifications and physical exams. Upon the insured’s passing, beneficiaries can use the money for anything, including hospice care and burial expenses.
