Most people aren't too concerned about how fancy the casket they are buried in is going to be when they die. They do worry about the cost of their funeral and the financial impact that it will have on their loved ones at a time when they are grieving over their loss. The average funeral tends to run about $8,000 as of the date of this publication. Burial insurance is meant to take care of that expense and remove a potential problem from your loved ones' minds. When you die, the death benefit of the insurance is either paid to your family or the funeral home to cover burial expenses.
There are four major advantages to burial insurance. The coverage will never be terminated. It is permanent insurance as long as you maintain the premiums. The premiums are fixed and will never increase as you age and get closer to actually needing the insurance. A burial insurance policy builds up cash value over time. Finally, no medical exam is required in order to qualify for the insurance.
Expenses to Consider
When deciding how much burial insurance you need, you should try and consider all of the possible expenses associated with the insured. What is the cost of the caskets, headstone, clergy, hearse, funeral service, viewing and burial plot? Might there be doctor bills or lawyers costs for a probate and taxes that need to be covered? Do you want to have the insurance pay off your debts, such as a mortgage, credit card or car? You need to make a best guess estimate at what these items will cost in the future and add them up to come up with a death benefit amount.
Despite the fact that burial insurance does not require a medical exam, some people have such severe health issues that they still can't qualify for the insurance. They can usually get a pre-need policy from a funeral director, though. The funeral director is named as the beneficiary on the insurance policy while you pay the premiums. In exchange, the funeral director agrees that your funeral will be taken care of for the amount of the policy's death benefit.
Do it Yourself
Another option is to simply self-insure for your funeral expenses. When you get a lump sum distribution from an IRA or 401k plan, you can purchase a long-term CD in an amount that would cover your funeral expenses, or you can sign a contract with a funeral director that sets the terms of your funeral service when you die in exchange for a lump sum payment now.
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