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Burial Insurance for Parents: What You Need to Know

on 10 Oct, 2018

No one wants to think about a parent’s death. But, we all die at some point. It’s wise to be proactive about the cost of a funeral and burial. One way to do so is to consider burial insurance for your parents. It’s a smart option for covering the cost of a proper funeral and burial.

Have you heard the terms burial insurance, final expense insurance, and funeral insurance? They sound confusing, don’t they? Don’t worry. All three terms mean the same thing. They are all life insurance.

Burial insurance is a specific type of life insurance. It’s earmarked to pay for end of life expenses. It guarantees a death benefit to beneficiaries in exchange for regular premium payments. It’s like whole life insurance in that respect.

The payout covers funeral costs so relatives don’t incur the expense. Any money left after funeral expenses stays with the beneficiaries.

Keep reading to learn the details. Let’s find out if burial life insurance is right for your situation.

How Does Burial Insurance for Parents Work?

Here’s what you need to know about how a burial insurance plan operates:

  1. Premiums are the same for the life of the insured. The amount can’t increase.
  2. Guaranteed death benefit amounts. They won’t change.
  3. The policy won’t expire due to ageing.

Once a burial insurance policy is in place, it doesn’t change. When the insured dies, the insurance company pays the death benefit. The policy beneficiaries receive a tax-free check direct from the insurance company.

Like any life insurance policy, the idea is to cover costs after someone dies. The size of the policy vs. the type of funeral determines the payout. The payout may support dependents if money remains after expenses.

If you worry because your parents don’t have insurance, you can take out a burial insurance policy.

First, there are three vital points you must consider.

  • Your parents must give you permission. An insurance company won’t let you take out a policy without their knowledge.
  • You need to supply medical documents.
  • You must show there is a need to insure.

Are you wondering how much burial insurance will cost? Keep reading.

Burial Insurance Costs in Canada

The price varies based on personal preferences and the insured person’s health.

The type of funeral you want effects the amount of burial insurance you’ll need. The price of a funeral depends on the services, burial, and grave marker.

The average Canadian funeral cost $7,400 in 2015. But, there are many factors that can change the total amount. Below are some options that increase or decrease the cost of a funeral and insurance.

Cremation in Canada ranges from $600 to $3,000. The price you pay depends on the province. Toronto ($1,400) is more expensive than Quebec ($600).

Add a more elaborate cremation ceremony in a chapel with flowers and a viewing, and the price rises. Add burial in a special vault or urn and the total can reach $4,500.

A minimal funeral with a basic casket, transportation, and cemetery charges costs $3,000-$5,000. Add a reception and the cost rises to $5,000-$6,000.

A funeral with a visitation, flowers, cemetery charges, transportation, and a reception costs about $9,000.

If your parent wants a high-end funeral expect it to cost close to $15,000. That includes two visitation days, flowers, transportation, and police help. It also covers a high-end casket, cemetery charges, and a reception.

A recent survey showed about 70% of Canadians choose cremation for funerals. In Ontario, funeral establishments must offer a low-cost service called direct disposition. Minimal services are body transfer, placement in a casket, and delivery to the cemetery or crematorium.

Direct disposition isn’t required across the country. So, you have to plan according to where you live when buying burial insurance in Canada.

Next, let’s look at why you may want to buy burial insurance for your parents.

When is Burial Insurance a Good Idea?

What’s a smart reason to buy burial insurance for your parents? Well, several ideas come to mind right away. The life insurance policy pays funeral costs, of course. It could also cover their estate taxes. Or, the policy could help support dependents. Let’s take a closer look at dependents and estate taxes.

Dependents

Do you have younger siblings? How about a special needs sibling who requires specialized care? If your parents have dependents, life insurance can ease financial burdens. This expense otherwise could fall to an older sibling.

Estate taxes

If your parents are wealthy you might believe you don’t need life insurance for them. But have you thought about estate taxes?

After your parents die, there is an estate tax. If the estate includes a business you may have to divide or sell it to cover taxes. If you buy an insurance policy for your parents the beneficiaries can use some of it to cover estate taxes. Your family could keep precious assets.

When is Funeral Insurance a Bad Idea?

If your parents are older, the insurance company will charge higher premiums. This is because there isn’t as much time for the insurance company to collect premiums.

Another consideration is your parents could live longer than expected. You’ll need to pay those higher premiums the whole time.

You can’t simply decide you want a payout when your parent dies. You must prove to the insurance company that there is an insurable need. If you don’t have a good reason, you won’t get insurance. If your parents have prepaid funeral arrangements or extensive assets, they won’t qualify.

How Buying the Insurance Affects Parents

We’ve discussed how burial insurance helps survivors with funeral expenses. How does it work for your parents?

First of all, expect an awkward conversation. It won’t be an easy topic to discuss. If you decide burial insurance is the right decision, talk to your parents. Remember, you need their permission to take out life insurance for them.

Once you and your parents agree, contact an insurance agent. The agent researches your options and helps you choose the right policy. The insurance agent also submits any information and medical documents needed for approval.

Pick a Policy That’s a Good Fit for Your Parents

The reason for the insurance, plus the type of policy, determine the coverage. Pick an insurance policy that covers your specific costs. The expenses may include funeral costs, surviving parent support, dependents, and estate taxes.

Any policy can be a good fit if you make a careful choice. Below is an overview of different types of life insurance.

Term Life Insurance

This is the most basic type of insurance. The cost of the insurance rises with age, poor health, and other influencing factors.

Whole Life Policy

Whole life insurance is both a savings account and an insurance policy. The premiums are higher than term life, but they do not increase over time.

Variable Life Insurance

This is an investment and an insurance policy. Its value increases and decreases based on the market.

Second-to-Die Policy

This two-person policy works well if you want to insure both parents. It works best if one parent is in poor health. The healthier parent reduces the cost. The policy pays out when the second parent dies. This policy works well if you’re concerned about paying estate taxes. Estate taxes are due when the second parent dies.

Indexed Universal Life Insurance

This is also a hybrid investment and insurance policy. It’s tied to the stock market, but at less risk than a variable policy. It only invests the yearly interest from the policy, not the full amount of the policy.

Universal Life

A Universal Life insurance policy offers savings and insurance. It has more flexibility and responsibility for results than whole life policies.

Life Insurance Annuity

This policy converts a lump sum payout into equal payments. It works like an income for the beneficiary. The death benefit divides into equal payments over a certain number of months or years.

What is the Cost of Insurance For Parents?

The policy type and coverage, along with your parents’ health determines the price. If both parents are in poor health, expect higher costs. There’s a chance you could pay more in premiums than the payout. That’s why it’s important to examine every angle before buying life insurance.

Always Get a Burial Insurance Quote

Always talk with an insurance agent before buying burial insurance for parents. Consider an independent insurance agent who isn’t bound to one company. They find the best deal for your parents by searching many insurance companies. Always get the policy quote in writing.

Want more insurance info?

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