Funeral and Burial Expense Insurance

Although we are uncomfortable thinking about death, especially our own death, planning our funeral expenses in advance is the kindest and most thoughtful action we can take for our loved ones. Most insurance carriers offer funeral and burial expense insurance as a type of basic life insurance.

Just as the name implies, the main purpose of burial insurance is to cover the funeral costs, final expenses, as well as pay off specific obligations or debts.  Other terms that are commonly used to describe burial insurance are funeral insurance, final expense insurance, pre-need insurance and end-of-life plan insurance.

Burial insurance is generally associated with a permanent type of insurance policy (versus term insurance), and the most common permanent policy used is called whole life insurance. Most whole life policies which are purchased to cover funeral expenses range from $5,000 to $25,000.

Although burial insurance is very similar to life insurance, the most common strategy is to own both types of insurance policies.  This way the funeral expenses can be separated from the life insurance proceeds, making your last wishes much more straightforward as to how you wanted the life insurance proceeds to help fund or replace.

The proceeds of a burial insurance policy are a fixed and guaranteed amount. Since these monies remain constant throughout the life of the policy, you always know exactly how much is going to be there in your loved ones time of need. So once you pay your premium, there’s no need to worry from then on, because both the premium price and the payoff amount are fixed for the life of the policy.

The cost of funerals and burials

The National Funeral Directors Association indicates the average cost of a funeral exceeds $6,700 not including medical and legal expenses. However, depending on the type of casket, headstone, and cemetery plot purchased, these expenses can be considerably higher.

According to the American Association of Retired Persons (AARP), funerals and burials are among the most expensive purchases that older Americans make. AARP estimates that the average cost for an adult funeral ranges from $5,000 to $10,000. About one-third of that goes to the cost of the casket, alone.

In addition, an in-ground burial can add another $2,400 to the total cost of final expenses.

Professional services that need to be paid for include:

  • Cemetery plot
  • Casket
  • Headstone
  • Funeral service
  • Visitation/Viewing
  • Minister
  • Hearse

Additional costs are often associated with the death of an individual:

  • Legal fees
  • Doctor bills
  • Pay off debts like mortgage, car, credit cards
  • Legal costs at death (probate, taxes, etc.)

Sources used:

http://www.nj.gov/oag/ca/brief/preneed.pdf

http://insurance.oregon.gov/publications/consumer/3932.pdf

http://pccfa.com/commonquestionsFH.php

 

 

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