When I was 23 years old I met a guy while skiing who was only slightly older than I, who was in the insurance business. He broached the topic of life insurance to me and since I was recently out of the service and becoming vaguely aware that I was now into “adulthood,” I listened. It seemed like the right thing (the adult) thing to do.
I ended up buying a small ‘whole life’ policy because, again, it seemed like the right thing to do. I was working and had no one else to be responsible for other than myself. It was pointed out to me that I was young, which equated to a lower rate than if I waited a few years.
Note: This page was last updated on 20th of October 2016
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It was also pointed out to me that we do not know when we’ll be checking out of this life and the unexpected circumstance does sometimes arise. Being prepared for that occurrence can be comforting with the knowledge that our family doesn’t get tagged with our final expense.
So, then. Do you really need Burial Insurance? Do you need Life Insurance? If you’re seeking information on the topic, it’s a safe bet that you already feel a desire to display some consideration to your loved ones by ensuring there are funds available to take care of your final expenses when you die. In retrospect, I don’t think I needed anything more elaborate than simple burial cover –something I knew nothing about back then.
I wasn’t making much money in those days. For me, the funeral cover was my main interest. One attraction to a ‘whole life’ policy is from the aspect of a financial instrument. But that was not what attracted me. I simply didn’t know anything about different types of insurances. I was under the spell of a trained agent who dispensed facts and figures causing my eyes to glaze over and I made the purchase –as much out of a desire to exit the meeting as for the good logic of having a plan.
Where are you right now? | The danger of playing the ‘what if …?’ game.
One thing I tried to avoid when I was younger was being what I call ‘insurance broke.’ If you considered all the possible scenarios, as detailed by your friendly insurance professional, and purchased coverage for them all, you might not be able to afford a birthday present for your kid(s). We need to strike a balance between what is ‘most important’ and what would be ‘nice to have’ (if cost was not a factor).
It is most certainly a dangerous world we live in. People do suffer accidents and early demise. But the odds are in your favor. You need to have enough money to live your life and save for your future without spending too much money on coverage for circumstances that may not occur. For that reason, for some people, simple burial cover may be a good choice.
I was quite comfortable with knowing that if I ‘exited-stage left’ there would be enough money available to get me in the ground without sending my wife and kids to the poor-house.
As I got older and had more disposable income, I decided it would be prudent to purchase some ‘term’ life insurance. That way, if I met an early demise, my family would be in a position to pay off the mortgage and some other debts, if any, and generally be more financially secure in the absence of my earning potential. If you are young and unattached, perhaps just starting out on your own, you may not need to look so far ahead to arrangements for care of children or to cover a mortgage payment.
You may want only to cover your own death. You may, someday, have a desire to cover your children and your wife. That coverage can be added later, as a burial policy is quite affordable for most people, enabling you to do that.
Who do you trust? | Maybe burial insurance is what you need.
A family (or the family member in charge) is not restricted to how a life insurance policy proceeds are spent. In addition to burial expenses, the proceeds can be used to pay rent, to help with the family’s living expenses, pay down credit cards or other outstanding debt, or anything else you could think of, including large parties. Perhaps your beneficiary just is not –and, never has been, good with money. We all know somebody who could never handle money. It seems to pass through their hands like water through a sieve.
Sometimes there is a difference of opinion or difference in basic philosophy as regards money and finance. If, say, you had a life insurance policy that was enough to cover your burial in fine style, and, if there was a chance your children might allocate the proceeds toward something you might deem unwise (think new car and a large party to celebrate your passing), a burial policy provides the most control.
In that regard, it often comes down to the level of trust placed with that (or those) individual(s) who will have access to the insurance proceeds –whom you hope will be setting aside said funds to pay for a decent burial. Burial coverage differs from life insurance coverage, as proceeds are earmarked for burial related expenses only. For many people, the prospect of an elaborate funeral is something held near and dear.
When you can’t depend upon those left behind to honor your wishes for an elaborate homecoming, this might be the way to go.
Where do you get this Final Expense coverage?
There are certain distinctions that should you should be aware of between different types of coverage that you might be considering. The first is the difference between ‘term’ insurance and ‘whole life’ insurance. The former requires that you pay the premium for a predetermined number of years –say, until age 80. If you need insurance after that it must be renewed, if possible, or replaced.
‘Whole Life,’ as the name implies, is in force for your entire life span and is usually paid up after a certain number of years, after which no premium is due.
So –called final expense insurance providers are licensed by the authority having jurisdiction (in the U.S., at the state level). There are informal ‘friendly societies’ in some locations –depending upon location, sometimes called a Burial Society, Memorial Society or Funeral Consumers Alliance or Funeral Association. These not-for-profit organizations can provide (or arrange for) burial insurance. This ‘funeral cover’ is sometimes referred to as funeral bond, Seniors Life, Pre-need, or Pre-paid.
Arrangements are made by the funeral home (or parlor) which has on staff a licensed individual who can consult with you and design a policy that meets your needs. You can opt for whatever casket you like and weigh-in on all the arrangements –such as, the obituary, cemetery plot, tombstone, clergy, etc. When the time comes, your loved ones will not have to deal with those things, which will be much appreciated, as they will not be in a condition to be making rational decisions through their tears.
The funeral director will guide them through the process –all they will need to do is show up. Proceeds from formal insurers are paid to the designated beneficiary, who then takes care of making and paying for the burial arrangements. Proceeds from Informal insurers (the Societies) are paid to the designated funeral director –who is the beneficiary where allowed by law, and is the one who sets the arrangements in motion.
Any additional funds left over are sometimes turned over to the estate of the deceased, or, if allowed by law, retained by the funeral home. Another noteworthy item is that in most cases, no physical examination is required for term insurance, unlike ‘whole life’ policies. As such, it is sometimes possible to purchase burial insurance policy at an advanced age (for seniors) or even when not in the best of health.
In such cases, the benefits are ‘graded’ (reduced) if death occurs within the first two years, for example –whereas full benefits are paid after the set number of years has elapsed. It is important to note that this entire discussion is intended as an overview to familiarize the consumer with some of the characteristics of and options for purchasing burial coverage. The specifics are controlled by local laws.
There are, most certainly, variations found wherever in the world you happen to be –variations in the terms of insurance cover and variations in the terminology.
For the Baby Boomers (who are the new Senior Citizens)
For those who have neglected or, simply were not in a position to attend to such matters until they woke up one day and realized the person in the mirror is a senior citizen, there are arrangements that can be made even in advanced age. Pre-paid, or preneed burial insurance policies provide funds and make arrangements with a specific funeral home in advance. The policy proceeds are directed to the funeral home which makes all the arrangements in the end, as spelled out in the policy.
If there are any funds left over, the surplus goes to the estate or the named beneficiary (or, beneficiaries). This ‘whole life’ type of policy is sometimes directed toward folks who are purchasing in later years when rates are normally higher. It is a way to achieve end-of-life coverage at an affordable premium.
What’s my next move?
We suggest you get more familiar with the lingo before you do any shopping. You may want to start by looking over a few short articles found right here on this site:
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Burial Insurance: Some Perspective