A popular coverage to consider when after life planning is called burial insurance. But just what is it and does it make sense for you?
What is burial insurance, and do you really need it? Chances are, if you have a solid life insurance policy in place, burial insurance is already included, it's just not called that. The goal of burial insurance in general is to protect your family from unforeseeable expenses in the event of your death.
According to the FTC, an average funeral can exceed $10,000 these days, so burial insurance is definitely worth considering if you do not have ample amounts of spare cash on hand at any given time.
Burial insurance is a subsidized life insurance product, for all extents and purposes. The premiums can range, depending upon the provider and other underlying factors, but the premise is always same: low coverage life insurance that covers most or all of funeral related expenses.
Depending upon what company that you select for your coverage, the limits may vary. For example, on the lower premium end, you can find burial insurance that would cover $5,000 of your expenses. In contrast, on the upper tier, you can find some burial insurance that covers up to $50,000 of final expenses.
Do You Need A Medical Exam?
One perk about burial insurance is that it's not based upon your medical history. Most providers do not require a medical exam. The rates are generally more based upon your age, as opposed to what your health is. This is different than some life insurance policies, which Bankrate explains do require a medical exam if you want to get the lower premium and the best coverage.
Life Insurance vs. Burial Insurance
One thing to consider when seeking burial insurance is whether or not it makes sense versus taking out a life insurance policy that would offer more coverage at a similar cost.
Let's look at an example comparing the cost between a normal term life insurance policy and a burial insurance policy. Investopedia notes that burial insurance often costs about the same as a more progressive life insurance plan. For example, the same $250 per year that a 50-year-old male could spend on burial insurance with $10,000 in coverage could get him a life insurance policy that's worth $83,000.
When considering which option makes the most sense, there is one more thing to consider: you usually have the option to cash out a life insurance policy after it has vested over so many years, a common retirement vehicle.
Do make sure you consider all the pros and cons before taking out any insurance policy, and do seek professional guidance on the matter from experienced industry professionals.