Page Reviewed / Updated – June 5, 2022

How burial insurance works is fairly straightforward. The simple answer is that it provides a person’s family money to pay for final expenses when a person passes away. When seniors begin to research burial insurance, confusion often ensues. They encounter terms they may not be familiar with and find it difficult to determine how burial insurance is different from life insurance.

Part of the reason for the confusion is that burial insurance is actually a specific type of life insurance. It works similarly to other types of policies, but there are also some differences outlined below that include quick lump sum payments and an easy application process. 

Burials and Cremations Are Expensive

The median prices for funerals and cremations in the United States are $7,848 and $6,971, respectively, according to the National Funeral Directors Association. If a person passes away suddenly, their family may not have access to enough money to pay for items, such as a casket and a burial plot or visitations and an urn. Burial insurance quickly pays a lump sum to cover these costs to give the insured and their family peace of mind.

How Burial Insurance Pays Final Expenses

With burial insurance, a person takes out a policy for a set amount. Most insurance companies limit applicants to policies of $50,000 or less. The insurance company promises to pay that amount out when the insured dies. In insurance terms, the payout is known as a death benefit.

The insured decides who receives the money, and many people choose their spouse or children. In some states, seniors can also make specific funeral homes or crematoriums for the recipients. No matter who the insured chooses to receive the payout, that person or entity is known as the beneficiary of the insurance policy. The policy typically remains in effect until the insured dies.

In exchange for insurance coverage, seniors pay a fee called a premium. Normally, insurance companies require monthly premium payments. If the insured stops paying the premiums, the insurance company will likely cancel the policy.

Most burial insurance policies have a waiting period for coverage. Often, the period is 2 to 3 years. If the insured dies before the waiting period ends, their beneficiary doesn’t receive the death benefit. If they die after the waiting period, the beneficiary notifies the insurance company of the death by filing a claim. The insurance company processes the claim quickly, and the beneficiary receives the death benefit as a lump sum, usually within a few days.

Applying for Burial Insurance

One of the advantages of burial insurance is that the application process is usually much simpler compared to other types of life insurance. Because burial insurance pays a smaller death benefit and is for a specific purpose, people who normally can’t get life insurance coverage may qualify. Many policies are guaranteed acceptance, meaning an applicant is unlikely to be turned down if they have a medical condition. Even policies that aren’t guaranteed acceptance don’t require a medical exam. Instead, the applicant just fills out a health questionnaire.