What Does Burial Insurance Cover and Is It Enough?

If you don’t have dependents you don’t need insurance, right? While income replacement through life insurance may not be needed, there are still your final expenses to consider. When you pass, many of your debts, including your burial costs must be taken out of your estate. This means less for anyone you plan to leave your assets to. In this case, burial insurance can come in handy and prevent your property from going into the hands of creditors.


What is burial insurance? Also called final expense insurance, burial insurance is a type of whole life policy that is intended to pay for a burial, funeral and/or leftover debt costs. However, it is also usually a relatively small amount of around $5,000 to $25,000 paid out after death.


Is burial insurance right for you? The primary benefit of burial insurance is that nearly anyone can qualify because it doesn’t require a physical exam, but this leads to its greatest downside too: it’s expensive. Because of this, burial insurance usually only makes sense if you’re in poor health, do not qualify for other insurance and are concerned about there being enough assets to cover your final expenses.


What final expenses will still need to be paid? Another factor in considering burial insurance or any kind of life insurance is what your final expenses will be. Oftentimes, people underestimate what will be owed or don’t realize certain debts will still need to be paid.  A quick guide to what final expenses will need to be paid and by who:

  • Burial and Funeral Costs: As of 2017, the average cost of a funeral is between $7,000 and $10,000 dollars. This is a significant expense and it will need to be taken out of the estate and/or paid out of pocket by loved ones quickly. Having an insurance policy to pay this expense will save your loved ones from going into debt for your burial, going through the frustration of asking for donations or possibly risking your ashes being put in a common grave.
  • Mortgage: If someone is inheriting your home or there is a joint homeowner, your mortgage will be the responsibility of this person. A joint homeowner or whoever inherits the home can take on the payments or pay off the home from the estate. If you don’t think this person can manage this on their own, burial insurance may help though life insurance would be better if you qualify.
  • Home Equity Loans: if someone inherits your home, a lender could potentially force that person to pay off an equity loan immediately. However, many lenders may allow the new owner to simply take over payments. Either way, you may want to consider leaving an insurance policy or some other cash to whoever inherits your home in order to cover this.
  • Credit Cards: Credit card companies will be paid, but only so long as there is money in the estate. However, if there is a joint cardholder, they will be on the hook for the debt and, depending on where you live, your spouse could also be responsible.
  • Student Loans: The good news about student loans, like credit cards, is that if the estate runs out of money, lenders can’t go after much else. Additionally, in community property states, a spouse will still be responsible as will any co-signers on a private student loan.
  • Car Loan: This can be paid off from the estate or the payments can be taken over by whoever inherits the car. If payments aren’t made, the car will be repossessed.


Choosing the Right Insurance for You


While burial insurance has its place, it’s not for everyone. If you have significant final expenses and you’re in relatively good health, a whole or term life insurance policy is likely far more suited to your needs.


Need help choosing insurance? The knowledgeable and compassionate financial advisors at Arbor Creek Financial are here to make the decision easier. When you call, we’ll take you through a personalized assessment to determine what will give you and your loved ones peace of mind for the future. Contact us at 1-866- 462-6526 for quick service.