Burial Insurance vs. Life Insurance

The cost of death can often be substantial. Insurance policies can provide benefits and help pay for expenses associated with one’s passing and final disposition.

Some families opt for pre-planning a funeral-putting money in a trust to cover expenses and select options ahead of time, sometimes years before. This option locks in prices that may later be subject to inflation. Others look to burial insurance or life insurance policies to cover final expenses.

Two common options families choose to provide assistance are burial insurance and life insurance. Both these types of policies are available at any time in a person’s life and may be purchased directly by the individual to be covered, or by another family member. For more detailed information, consult an insurance professional.

What Is Burial Insurance?

Burial insurance, sometimes referred to as final expense or funeral insurance, can cover the cost of a funeral and burial. An insurance policy may also be used to pay other final expenses of the deceased. Burial insurance is a very specific type of life insurance earmarked for burial and funeral expenses.

Funeral homes may be licensed to sell burial insurance, depending on state laws. Traditionally, burial insurance is commonly sold through brokers and life insurance agents and can be structured in various ways.

What Does Burial Insurance Cover?

Burial insurance usually refers to a whole life insurance policy with a death benefit of approximately $5,000 to $25,000.

Those with burial insurance

  • May be able to buy a policy with no medical exam
  • Tend to find a simplified underwriting process
  • Have a choice of policy, with options covering a single individual or an entire family
  • May pay a consistent premium over the lifetime of the insurance policy; the value retains a cash value as it represents a permanent insurance
  • Often see reduced benefits and limits on the policy
  • Receive payment in a lump sum, available once beneficiaries provide proof of death (i.e. death certificate)

How Does Life Insurance Help with Funerals?

Life insurance policies include term life insurance and whole life insurance. Term life insurance is issued for a set time period, such as one year or ten years, with an expiration date, meanwhile whole life insurance remains in effect until the policy owner dies. Based on the specific life insurance plan, families may select the death benefit size and the way the benefit pays out.

Life insurance policies carry more flexibility for the insured, as well as beneficiaries (the recipient of the benefits, selected by the policyholder), but are also subject to more procedural requirements.

Life insurance

  • Typically involves rigorous underwriting and the completion of a health questionnaire or physical exam.
  • Allows a person to choose the death benefit size appropriate for their individual needs.
  • Claims must undergo an investigation and approval process, and beneficiaries may have to cover final disposition costs until insurance pays out on the policy.
  • Will pay out either a lump sum or monthly payments.

Comparing Life Insurance and Burial Insurance

Families traditionally encounter several key differences between life insurance and burial insurance

  • The screening and underwriting process
  • The allowances on the benefits
  • Timing and type of payments made to beneficiaries

There may be varying reasons families choose one or the other; consider the differences to see what might be best for your family’s situation.