If you’ve considered your funeral and other end-of-life expenses, you may assume you’ll have enough money saved or that your family can count on a life insurance payout. After all, you’ve been socking away cash and making your policy payments like clockwork for years.
Unfortunately, with the rising costs of long-term health care, prescription drugs, hospital stays and more, many people deplete their resources faster than they expected. And life insurance doesn't pay out until weeks after a funeral takes place. With the average funeral costing upward of $9,000, loved ones often face a financial burden during a time of intense grief.
Burial insurance can help ease that burden. Also known as funeral insurance or final expense insurance, burial insurance sets aside funds for funeral expenses as well as medical expenses and other costs.
Burial insurance makes it possible for family members to pay for end-of-life expenses without having to worry about where the money will come from.
Though family members will still need to make choices about final arrangements, they will at least know that they have the funds to inform those choices.
In this article you will learn about the different types of insurance that cover end-of-life expenses:
What is burial insurance?
When you plan and prepay for your funeral (that is, purchase pre-need insurance) you outline your wishes. You meet with a funeral planning professional and walk through every detail, choosing a traditional burial or cremation, a chapel service or an outdoor celebration, type of casket or urn, flowers, and more. You can get as specific as you'd like.
Burial insurance, on the other hand, doesn’t include a plan. Not everyone wants to plan their own funeral, and for those people, burial insurance is a way to fund a funeral, cremation or memorial without having to envision the event.
It differs from other kinds of life insurance policies in several ways:
- You can purchase a policy without a medical exam.
- The death benefit ranges $5,000-$25,000, which is lower than a typical life insurance policy.
- The benefit is usually paid out faster than that of a typical life insurance policy.
Burial insurance pays a beneficiary directly. He or she then uses the money for your funeral, cremation or cemetery expenses, typically on funeral home services, cremation services, transportation, a casket or urn, a grave marker, etc.
The beneficiary can also use the money to pay for post-funeral expenses, such as a gathering of friends and family, travel to scatter ashes in a special place, or cremation keepsakes, as well as medical or legal expenses, credit card debt, or house and car loans.
Burial insurance isn't the only way to pay for a loved one’s final expenses, and it does not ensure that money is available to pay the funeral at the time of the service. Funeral homes rarely allow payment plans, and though burial insurance pays more quickly than other life insurance, it will not pay out in time to pay a funeral home bill. A family would need to pay the bill another way and wait for one of these plans to pay out and then reimburse themselves.
Read more about burial insurance.
What is pre-need funeral insurance?
Similar to burial insurance, pre-need funeral insurance sets aside funds for funeral, cremation or cemetery services and ensures your loved ones won’t have to shoulder the immediate financial burden of your end-of-life expenses. However, it differs in three important ways.
First, when you purchase pre-need funeral insurance, you sit down with a planning professional and outline your wishes for your funeral or cremation. You choose the products and services and can be as detailed as you'd like about location, food, flowers, music and more. When you plan ahead and purchase pre-need funeral insurance, you have the assurance of knowing that your wishes will be carried out exactly as you envision.
What's more, when you purchase pre-need funeral insurance from a Dignity Memorial® provider, you have flexibility.If you plan a celebration with us, but for any reason in the future want to update your plan with new arrangements, we let you do that. If you move more than 75 miles away from where you live now, you can transfer every detail of your plan to another location within our network.
Second, pre-need funeral insurance allows you to lock in today’s prices on most items. The National Funeral Directors Association shows that average funeral prices rose 97% from 1989 to 2017. Pre-need funeral insurance protects you against rising costs and inflation.
Get your free pricing guide
Our Guide to Understanding Funeral & Cremation Costs helps you decode the sometimes confusing costs of final arrangements.
Third, a pre-need funeral insurance policy pays out directly to the funeral home you choose, instead of to your beneficiary. That means your family doesn't have to pay the funeral home upfront for the services you have outlined and then wait for the policy to pay out.
Many family members find great comfort in not having to make decisions for their loved ones and express gratitude about being able to grieve and start the healing process without having to worry about money at a difficult and emotional time.
“I was so very grateful my mother had made all the plans in advance. Including prepaying for plots and urns. It gave me such peace of mind knowing we were following her wishes.—Cameron Goan, Monroe, WA
What is final expense life insurance?
The terms “burial insurance” and “final expense insurance” are often used interchangeably to refer to an insurance policy designed to be used for funeral and other end-of-life expenses. Unlike pre-need insurance, final expense insurance does not lock in current prices, and it does not ensure that funds are available at the time they are needed.
Unlike a traditional life insurance policy, which requires a medical exam to inform the cost of your policy, a final expense insurance policy doesn’t require a medical exam.
Once a final expense insurance policy is in effect, as long as premiums are kept up to date, it remains in effect until your death.
Compare burial insurance with pre-need insurance
|Final expense insurance (aka burial insurance or funeral insurance)||Pre-need insurance|
|Policy amount||Typically $5,000-$25,000||Typically $5,000-$25,000|
|Product/service prices locked in||No||Yes|
|Death benefit paid to||Your beneficiary||The funeral home of your choice|
|Death benefit used for||Whatever your beneficiary chooses, typically funeral arrangements and medical bills||Goods and services you purchased ahead of time from your funeral home|
|Requirements to qualify for a policy||Health questions, but no medical exam||Health questions, but no medical exam|
|Payout in time to cover funeral expenses||No||Yes|
|Who makes arrangements||Your beneficiary chooses type of funeral service, casket or urn, etc.||You prearrange with the funeral home all the details for your funeral or cremation; loved ones do not have to plan anything; your wishes are carried out according to your prearranged plan.|
Purchase insurance through a Dignity Memorial provider
The choice between burial insurance and pre-need insurance is largely a personal one, and most families make the decision after discussing it together. The important thing to remember is that both allow you to put money aside for final expenses so your loved ones aren’t faced with a financial burden at the time of your death—but only pre-need insurance ensures a payout in time to cover funeral expenses.
A Dignity Memorial planning professional can explain your options and walk you through your choices, in person or with an online, no-contact appointment. Dignity Memorial also provides unique benefits you won't find elsewhere. With our 100% Dignity Service Guarantee you have our promise that we will do everything to see that you—and your family—are satisfied.
Plan a beautiful, personal remembrance
Each life is like no other. Particular passions, milestone moments and legacies created weave together to tell a story that is completely unique. The Insider’s Guide to Funeral & Cremation Planning will walk you through inspirational ideas and the simple steps to planning an unforgettable memorial of a loved one’s life—or your own when you plan in advance. Get started today.