About Burial Insurance

Burial insurance, also called funeral or preneed insurance, covers the anticipated cost of a funeral. Some policies include cash payouts for end-of-life medical bills and other expenses while other policies lay out the specifics for the actual funeral.

Function

Burial insurance covers the type of funeral service a person receives. Burial insurance policies are a way to avoid having family members pay for funeral expenses with taxed money, such as those in trusts or other accounts considered an inheritance. Burial insurance also allows the person who dies to choose what she would like at her funeral. Burial insurance ensures the family of a loved one will not need to debate the appropriate decisions.

Features

Burial insurance can be very simple and include a set dollar amount the family will receive upon a loved one's death. This insurance policy also can include choices the person has made, from the cemetery where the service will be to the type of casket liner the person would like. If one is willing to pay more money, he can make the choices for all aspects of his funeral.

Considerations

Some preneed insurance includes a locked-in rate. A person may deal with a specific funeral home and prepay for a casket, flowers and other services. With third-party burial insurance, however, the person may be buying a policy that covers only a certain dollar amount to go to the family for expenses. In other cases, burial insurance policies allow the purchaser to choose the funeral service but do not guarantee the price. Understanding the exact nature of the policy can help prevent problems for the family.

Misconceptions

Many people believe burial insurance guarantees a certain type of service and certain products, and that is not always the case. Some states heavily regulate the funeral insurance industry and put restrictions on what people may purchase. In other cases, the burial insurance includes only a preference for the funeral service but does not include locked-in rates. Using what are called "free look laws," which permit one to view a policy before purchasing, and going over the policy with an attorney, will help with any misunderstandings.

Benefits

Family disagreements are common after the death of a loved one, especially if the death occurs suddenly. Many people become obsessed with small details. Burial insurance coverage with predetermined funeral arrangements keeps this bickering to a minimum. Families also will not be saddled with covering the cost of a funeral, which can eat into many family budgets. For people with wishes they believe will not be honored, such as the desire for cremation, burial insurance puts these fears to rest.

Resources

• Tips for purchasing burial insurance