Burial Insurance vs Funeral Life Insurance: What's the Difference?

Posted on November 9, 2018

There is one day of your life that you never want to think about. You can't plan for it because you never know when it will arrive. You can't pick when it would be convenient for you. Yet it is a day that eventually comes for every person on the planet.

This day is, of course, the day of your death.

The good news for you is that you'll no longer have a care in the world. The bad news for your loved ones is that you're gone and have left them grieving.

Plus, with the cost of the average funeral being $6,000-$8,000, it can put quite a financial strain on them during a difficult time.

That's where burial insurance and funeral life insurance come in. You can plan for and alleviate that strain during your lifetime as one final gift to your family once you're gone.

But which type of insurance should you choose? Let's look at the differences.

What Is Burial Insurance?

First of all, let's look at what each type covers. Though the plans are similar there are some fundamental differences that will make one more suitable for you than the other.

Burial insurance is intended to cover your funeral expenses. The payout for this type of insurance is on the low end. You can typically find plans between $5,000-$25,000.

When you die, the lump sum is released to your named beneficiary. Your beneficiary is then free to use the money for other expenses.

If there is any money left over from the funeral expenses they can use it to pay off any other outstanding balances. For example, any hospital bills or outstanding debts you may leave behind.

What Is Funeral Life Insurance?

Funeral life insurance is essentially the same thing but works a little differently. Instead of being paid out to your beneficiary it is paid out to an assignee, which is usually the funeral home.

The funeral home then uses the money to pay for any costs related to your burial and funeral. This process is far more streamlined and means a lot fewer headaches for your loved ones to deal with during a difficult time.

It's kind of like paying for your own funeral while you're still alive. Once you pay the policy in full it's there for the rest of your life and will be paid out whenever you die. To some extent, this type of insurance can protect you against inflation.

One plus to this type of policy is that you get to plan out your own funeral. Your family won't have to guess what you would have liked to have for your funeral. It will be all there laid out for them.

Wait. Isn't This What Life Insurance Is For?

You may be wondering how this is different from simply buying a traditional whole or term life insurance policy. Aren't funeral expenses part of what life insurance is for?

As with nearly everything in life, every person's situation is different. Thus, it's useful to have options.

Burial and funeral life insurance typically have lower payouts than life insurance policies. Life insurance policies are designed to handle a whole host of expenses if you die. This could include lost income, your kid's college expenses, paying off your mortgage or other debts as well as burial expenses.

As you can imagine, this can add up quickly. In fact, it's not uncommon to see life insurance policies for hundreds of thousands or even more than a million dollars.

Because of this, if you are older, in poor health, or have certain diseases it can be difficult to qualify for a good life insurance policy. You can find policies that don't require a medical exam, but your premium may be a bit steep.

The Benefits of Burial and Funeral Life Insurance

This is where burial or funeral life insurance policies come in handy. Your age and health don't matter as much and most policies don't require medical exams anyway.

The reason for this is the fact that the benefit is much smaller. It is also restricted to paying for your final expenses. Your beneficiary can't use it to pay for college, for example.

In reality, you may pay a similar premium for this type of insurance as you would for a term life insurance policy. So why would you pick this kind? Well, it's better than nothing if you find that you can't qualify for a full life insurance policy.

Which Type Is Right For You?

Once you've determined that you'll need a burial or funeral life insurance policy, how do you choose which one?

Again, it is dependent on your particular needs. If you want to have more control over your final farewell, a funeral life insurance policy is a better fit. You can plan out your own funeral and have everything the way you want it to be. It also makes things easier on your family after you're gone.

Some people may find that a little morbid. Maybe you don't want to think about your own funeral. Or maybe your life situation is volatile. For example, it would be very inconvenient if you set things up with a funeral home and then moved two states away before you die.

Time To Buy

We hope that this guide to burial and funeral life insurance has helped clarify things for you. Though it's not a pleasant thought, you never know when your day will come. Your family will appreciate if you don't put off making this decision.

Are you ready to get a quote on these types of insurance? Use our handy tool to quickly and easily compare rates from the leading companies across Canada.

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