As the old joke goes, there are two certainties in life: death and taxes. Problem is, most people are more willing to talk about taxes than death (which is to say, not much at all).
And that's a problem because many Canadians can't afford to die.
This is where funeral and burial insurance plans can help you and your loved ones. Keep reading to find out what burial insurance is, what funeral insurance is, the difference between the two, and how to choose the right policy for you.
First, let's start with the essentials: what is burial insurance?
Basically, burial insurance is a type of insurance used to pay for final expenses after death. It plays to powerful emotional and practical needs for people who want to plan ahead.
Let's take a closer look.
Burial insurance is a specific type of life insurance policy used to pay for final expenses related to a funeral.
It's a cash policy, which means it accrues cash value over time. Premiums for this type of insurance don't change over time, and it can often be purchased for small amounts. As low as $5,000 or $10,000, in fact, which is considerably lower than many similar life insurance policies.
This also makes it convenient for would-be policyholders, especially because many burial insurance plans don't require a medical exam.
But you might be wondering: will the policy do me any good if the amount is so low?
It can, actually, based on what burial insurance can cover.
Burial insurance is pretty much exactly what the name implies: it covers costs related to burials or funerals.
The death benefits are low because the costs the policy is intended to cover aren't as comprehensive as a funeral insurance plan.
Although burial insurance is paid out to your beneficiaries upon your death, it's money earmarked for funeral expenses only. Your beneficiaries don't get a lump sum to do with as they please, and if there's money left over from the funeral, it won't go to your beneficiaries.
Essentially, you're pre-paying for the cost of your funeral before you die. This can be appealing for some, though, because some funeral expenses will be cheaper if you buy them now rather than 10 or 20 years in the future.
With that in mind, let's talk about funeral insurance.
Funeral and burial insurance are often used interchangeably, but when you get down to specifics, they're not quite the same thing.
While they're both a form of life insurance policy, burial insurance is much more limited than funeral insurance, which is usually part of death benefits under a larger life insurance policy.
This can come in one of two forms: whole life insurance and term life insurance.
Whole life insurance is a type of life insurance policy that covers the insured for their entire life.
It's one of the most common life insurance policies and pays out a death benefit to beneficiaries in exchange for level premium payments. You can build cash value with a whole life policy if you pay more than the scheduled premium, or if you reinvest dividends into the cash value.
Whole life policies are appealing to many because of the simple fact that no one knows when they're going to die. A whole life policy ensures that you'll be covered, even if you die 10 years later than you thought.
Like whole life insurance, term life insurance guarantees payment of a death benefit to a beneficiary.
The difference is that term life insurance only covers you during a specified term, such as 10 or 20 years. If the term of the policy expires before you die, you won't get any death benefit (or any other life insurance benefit) even if you paid your premiums on time and in full for the entire policy term.
If you're looking for funeral insurance, it's generally not recommended to get a term life policy, as there's a very real possibility that you'll spend years paying for a policy that expires before it can be useful. Even a 30-year policy won't help you if you die after the policy expires.
So, with that in mind, what does funeral insurance cover?
Since funeral insurance acts as part of a death benefit in a larger life insurance plan, it tends to be more comprehensive than burial insurance.
Specifically, funeral insurance can be used by your beneficiaries to pay for end-of-life costs like medical fees, bills due after your death, and legal fees in addition to funeral expenses.
This makes it an attractive option for people who are worried about the full cost of their end-of-life expenses, rather than just their funeral.
As you can see, burial insurance and funeral insurance cover many of the same costs with a few exceptions.
So how do those differences play out in real time?
One of the biggest differences between burial and funeral insurance is how your beneficiaries can use the death benefit money.
Both can be used to cover final expenses, but burial insurance can only be used to cover the costs associated with funerals. Funeral insurance can be broadly applied to other costs as your beneficiaries see fit.
Because of this, funeral insurance can be attractive if you're concerned about significant medical expenses at the end of your life, as the death benefit will help mitigate these expenses.
Your options will also vary depending on whether you get burial or funeral insurance.
If you look for funeral insurance, you can get whole life or term life insurance, with funeral insurance covered as part of the death benefit. While these plans usually require a medical exam, they often give you more coverage options.
Burial insurance policies are easier to get but give you fewer options for your trouble. While it does not expire, it only pays out when you die and can only be used for expenses directly connected to your funeral.
The last big difference between the two types of insurance is the question of cash value.
Depending on the specific policy you get, your policy may accumulate cash value. That's important because if your policy accumulates cash value, this usually means you have the ability to cash out the policy as you please.
Funeral insurance typically accumulates cash value. Due to the nature of burial insurance, these policies usually don't accumulate cash value, since the policy can only be paid out for a specific purpose upon your death.
Burial insurance has certain important benefits, as does funeral insurance.
So the real question here is what type of policy is right for you and your loved ones.
The biggest factor to consider is the costs you'll need to cover. Chances are, they're much higher than you think.
To understand how much coverage you need, you should have a general idea of what your funeral will cost. Here's a short list of factors that will influence cost:
All of these costs will vary based on where you live and the service provider you use.
One of the easiest ways to puzzle out the cost of your funeral is to consider whether you want a burial or a cremation.
If you want a burial, you'll have to consider a whole host of other factors like the casket, the vault or liner, the plot or mausoleum, the grave marker, etc. A "good turnout" for a traditional burial can start around $5,000 but can easily go up to $15,000.
Cremation simplifies the process a great deal. A simple, direct cremation can start around $600, while a cremation with additional disbursements (service, viewing, etc.) can go up to $4,500.
Keep in mind, however, that the starting price for a "low-cost cremation" depends a great deal on where you live. A simple cremation in Vancouver starts around $995, while in New Brunswick it starts at $$3,000 and in some areas of Quebec it starts as low as $587.
Once you have a general idea of what your funeral will cost, add on any additional medical expenses and bills that might come due after your death (add on more than you think you'll need, to be safe).
From there, you can determine how much coverage you need and what kind of policy will best serve your purposes.
You know about funeral insurance plans and you know about burial insurance plans.
So, the question remains: what policy is best for you and your family? We're here to help you figure it out.