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Burial Insurance
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Life Insurance
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Pays for burial or cremation and other final expenses
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Can pay for final expenses as well as debts and other costs
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Paid in a lump sum
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May be paid in a lump sum or monthly or annual payments
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Usually for $50,000 or less
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Pays wide-ranging death benefits, from $100,000 to over $1 million
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Money can sometimes go directly to a funeral home
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Money usually can’t go directly to a funeral home
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Coverage generally lasts until death
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Some types have an expiration date
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Waiting periods for payout of 2 to 3 years or more are common
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Waiting period for payout is usually a year or less
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Doesn’t require a medical exam
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Generally requires a medical exam
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Looser approval requirements
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Stricter approval requirements
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How Are Life Insurance and Burial Insurance Different?
The truth is that burial insurance and life insurance aren’t completely different. Burial insurance is just one type of life insurance policy called permanent life insurance. It simply has special features and rules that make it different from other life insurance products.
Death Benefit Size
Burial insurance generally pays a smaller death benefit than other types of life insurance. Most companies cap the amount an applicant can get at $50,000. A person can obtain life insurance that pays much more. Some policies even offer death benefits over $1 million.
Wait Time for Payouts
Burial insurance pays out very quickly to cover final expenses. Once the insurance company receives proof of death, the money usually becomes available within a few days. Often, insurance companies take longer to process claims for other types of life insurance. They may conduct investigations, and legal challenges might mean beneficiaries have a lengthy wait.
Who Can Receive the Payout
As previously stated, the insured can make a funeral home or crematorium the beneficiary of a burial insurance policy in some states but not for a life insurance policy. Normally, only one or more people, a charitable organization or a trust can be the beneficiary of a life insurance policy.
How Easy It Is To Get Coverage
Because the death benefits for burial insurance are usually small, the rules regarding who qualifies are more lenient. In some cases, the insurance company won’t ask for medical information. Other times, only a short questionnaire is necessary. Having a chronic health condition doesn’t automatically trigger a denial. In fact, some policies offer guaranteed acceptance, meaning an applicant generally can get coverage regardless of their health status.
Life insurance has stricter guidelines. Many policies require applicants to undergo a medical exam as a part of the application process. Health conditions may make someone ineligible for coverage or result in a higher monthly premium. Guaranteed acceptance life insurance is available; however, premiums tend to be much higher for these policies.
How Long Coverage Lasts
Burial insurance and some other types of life insurance products like whole life and universal life usually last until the insured dies. Term life insurance policies are different. They last for only a set period and then expire. Some policies are renewable but with higher premiums for the new terms.
Waiting Period for Death Benefit Payouts
Burial insurance often has a waiting period. If the insured dies before the waiting period ends, their beneficiaries won’t receive a death benefit. Waiting periods are usually 2 to 3 years and can be longer in some cases. With other types of life insurance, the waiting period is generally shorter. Most policies will pay out death benefits on policies in as little as a few months to a year.
Premium Costs
For people under 40, life insurance premiums are likely to be inexpensive, especially for term policies. As people age, burial life insurance may be more affordable. For example, with a chronic health condition like diabetes, guaranteed issue burial insurance may cost less than other types of life insurance. The best way to determine which type is more affordable is to obtain quotes for both burial insurance and life insurance plans and compare costs.
How To Know if Life Insurance or Burial Insurance Is Right for You
Insurance isn’t one size fits all. Which type is right for someone depends on their age, health, goals and overall financial picture.
Who Should Consider Life Insurance?
Life insurance may be the best option for those who:
- Are under the age of 40 and in good health
- Want to provide money for their families to live on for years to come
- Wish to pay for their children’s future expenses
- Have significant debt
- Don’t want to wait more than a year for insurance to take effect
When shopping for life insurance, getting quotes from more than one company is highly beneficial as rates vary.
Who Should Consider Burial Insurance?
Burial insurance may be the best option for those who:
- Are over the age of 40 and only need a small amount of coverage
- Suffer from a health condition that makes it difficult to get conventional insurance
- Have little to no debt
- Already have savings or investments to leave to their beneficiaries
- Want their families to have quick access to money after they die
- Wish to avoid a medical exam
- Prefer a faster, easier application process
Learn more about insurance options by reviewing the best burial insurance plans.
