Burial Insurance vs. Life Insurance

When trying to decide between burial insurance and life insurance, you should consider how much coverage you need and your overall health condition. On average, burial insurance’s death benefit doesn’t exceed $50,000. With life insurance policies, your death benefit coverage could be millions.

According to Lincoln Heritage, the average funeral costs between $7,000 and $12,000. Even with a smaller death benefit, burial insurance would still cover a funeral.

As for your health, most burial insurances don’t require a medical exam. This means, you can get coverage quickly. Life insurance typically requires a medical exam. If you’re found to be in poor health, then you may be at risk for costly premiums or even denied coverage.

Burial and life insurance both offer a death benefit with lifelong options. With each type of policy, the death benefit can be used towards funeral costs or any other necessary expenses. Examples of funeral costs include the viewing service, burial costs, cremation, medical bills, outstanding debt or any legal costs.

Burial and life insurance death benefits can both be paid out in a lump sum. A lump-sum payment is when the beneficiary receives the entire death benefit in one payment.

Many burial insurance policies and some life insurance policies have a cash value component. In most cases, you can access your cash value while you’re still alive.

Burial insurance offers a singular type of insurance with one purpose — to cover end-of-life expenses. This isn’t to say you can only use the death benefit from burial insurance on end-of-life expenses. You can choose what you want to spend the death benefit on. However, since the death benefit for burial insurance is typically small, most policies only offer enough to fund funeral costs.

With a life insurance policy, the death benefit amount is substantially larger, allowing your beneficiary to use the death benefit for more than just end-of-life expenses.

Life insurance offers two main types of insurance — term and permanent. Permanent life insurance policies offer a cash value component to build your wealth with lifelong coverage. Term policies offer limited coverage, typically up to 30 years, with affordable premiums.

There are also different age requirements for life and burial insurance. With a term life insurance policy from Mutual of Omaha, the issue age range is between 18 to 80 years old. But other types of life insurance policies require different age limits.

According to Progressive Casualty Insurance Company, typical qualifying ages for burial insurance is between 50 to 85 years old. The age restrictions could vary, depending on which insurance company you choose.

The average cost of burial insurance is $50 to $100 per month, according to Choice Mutual. Your age is the biggest factor in the price of burial insurance. The younger you are, the cheaper your premiums will be.

There is a wide range in life insurance policy costs. Premiums for permanent policies can cost hundreds, if not thousands of dollars a month. Term policies are more affordable. If you’re healthy and young, your premium for a term policy is typically under $50 a month.

As you can see in the table above, there is a large difference in the coverage amount for a similar premium cost. On average, burial insurance premiums are more costly than traditional life insurance, with a lower death benefit.

Life insurance typically requires a medical exam and has a waiting period. If you think you’d be denied due to a health condition or are likely to pass away in the next two years — traditional life insurance would not be a good option.

If you’re choosing burial insurance, make sure your death benefit will cover all your expenses. Currently, cremation is more affordable than a traditional funeral. On average, cremation costs between $4,000 to $7,000, according to Lincoln Heritage Funeral Advantage. In comparison, the average funeral can cost up to $12,000.

Remember that you should only consider burial insurance if you have a small amount of debt or mortgage to cover. If you want your death benefit to provide ample coverage for years to come, life insurance might be a better fit.

Your waiting period for life or burial insurance varies depending on what type you have.

According to American International Group (AIG), an average waiting period for life insurance is two years. If you pass away within the first two years that your policy is active, there could be difficulties in getting your entire death benefit.

With some life insurance policies, you may only have to wait a few weeks for the underwriting process to be completed. After you’ve been approved, you could have immediate coverage.

With burial insurance, there are two main types — simplified issue and guaranteed issue. Depending on which you choose, you could have anywhere from immediate coverage to a three-year waiting period.

If burial insurance doesn’t fit your needs, there are other options. A payable-on-death (POD) account, veterans’ benefits, or a term life insurance policy could cover burial costs instead.