Here at IBUSA, we’re often told that some seniors don’t need to purchase a burial life insurance policy because they don’t plan on getting buried. Instead, they have decided to be cremated, which is much less expensive.
Which is fine…
The only problem is that most of the time, these same individuals fail to realize just how expensive it can be to be cremated! In fact, the average cost of a cremation with a service in 2022 can vary significantly depending on where you live (Funeral Cost: What does a Cremation With Services Cost?)
We start debating what it actually costs to cremate someone with or without a service; let’s assume for argument sake that your family would like to be able to have a “proper ceremony” for you even though you don’t necessarily want one.
And further, that your family does wish to be able to grieve your passing with the dignity that a modest ceremony will provide.
The cost difference between being “economical” and being “respectful” isn’t all that much, particularly if you are looking to finance a cremation ceremony by purchasing a senior burial insurance policy.
This is because the cost difference between a $2,000 life insurance policy and a $5,000 life insurance policy usually isn’t all that significant, which is why we wanted to take the time and explain exactly what a cremation insurance policy is.
If it looks like one of these “types” of life insurance policies might be “right” for you, you’ll know all the questions you should ask in addition to what potential “pitfalls” one should avoid.
Questions that will be addressed in this article will include:
- What is a cremation life insurance policy for seniors?
- What are some of the advantages of purchasing a cremation life insurance policy?
- What are some of the disadvantages of purchasing a cremation life insurance policy?
- What are the four questions that I need to have answered before applying for coverage?
- How can I best ensure that I find the “right” cremations life insurance policy for me?
Let’s dive right in!
What is a cremation life insurance policy for seniors?
The first thing that we should probably clarify right away is that “technically” there isn’t such a thing as a “cremation life insurance policy”. Instead, this is a term that some folks will use to describe a small life insurance policy that the policyholder intends to use to finance one’s cremation.
Which means that…
When you begin shopping for a cremation life insurance policy, you’re probably going to be offered either a simplified issue term or whole life insurance policy or a guaranteed issue life insurance policy.
So, let’s take a moment and describe the differences between these two “types” of life insurance policies since these will generally be the “types” of life insurance policies one will be considering.
Simplified issue term or whole life insurance policies.
Simplified issue no exam life insurance, is a type of life insurance that does not require a medical exam as part of the application process. Instead, the insurer will ask you a series of health-related questions, and your answers will be used to determine your eligibility for coverage and the premium you will be charged.
These types of policies may be a good option for seniors or individuals with pre-existing medical conditions who want to get coverage quickly and without going through a medical exam.
It is worth noting that simplified issue term life insurance policies may have higher premiums and lower coverage limits compared to traditional term life insurance policies, as the insurer is taking on more risk by not requiring a medical exam.
Simplified issue life insurance policies can be offered as whole life insurance policies or term life insurance policies, so please be sure you know which “kind” you are being offered before applying for coverage.
Guaranteed Issue Life Insurance policies.
Guaranteed Issue Life Insurance policies, is a type of life insurance that is guaranteed to be issued to any applicant, regardless of their health status. It is typically offered to seniors or individuals with serious health problems who may not be able to qualify for other types of life insurance.
Guaranteed issue life insurance policies do not require an applicant to complete a medical exam or answer any health-related questions as part of the application process. Instead, the insurer will simply issue a policy to anyone who meets the minimum age requirements and permanently resides in a state where these types of life insurance policies are offered.
Guaranteed issue life insurance policies may have lower coverage limits and higher premiums compared to other types of life insurance, as the insurer is taking on more risk by issuing coverage to anyone who applies.
Guaranteed issue life insurance policies will aso contain a waiting period before the full death benefit is payable, which is referrred to as a graded death benefit.
During the graded death benefit period, the policy will only pay out a limited benefit or no benefit at all if the insured person dies from a “natural cause”.
Graded Death Benefit defined:
The graded death benefit is a clause written into all guaranteed issue life insurance polices that is intended to protect the insurer from the risk of paying out the full death benefit immediately in the event that the insured person dies during the policy’s waiting period.
Graded Death Benefits are a necessary element to all guaranteed issue life insurance policies because the insurer does not collect any medical information on an insured prior to insuring the client.
Without such a waiting period, the insurance company would be at risk of insuring someone that is seriously ill and potentially just days, hours or minutes from passing away.
Different insurers will have their own unique graded death benefit which will outlien the amount of time after the policy is issued during which the full death benefit is not payable. Once the waiting period has passed, the policy will begin paying out the full death benefit.
Guaranteed issue life insurance policies may be a good option for seniors or individuals with serious health problems who are unable to qualify for other types of life insurance and want to have some coverage in place
What are some of the advantages of purchasing a cremation life insurance policy?
Some of the advantages of purchasing a cremation life insurance policy or a final expense insurance policy will include:
- Because most final expense insurance policies tend to be smaller life insurance policies (1,000 to 50,000), the monthly premium to purchase one tends to be more manageable, particularly for those on a fixed budget.
- These types of life insurance policies often compete directly with funeral payment plans, which generally limit your family’s options once you pass. Utilizing a cremation or final expense insurance policy instead will allow your family to receive the death benefit proceeds from your policy directly and spend the money how they see fit.
Peace of mind:
- By purchasing a small burial life insurance policy with a fixed premium for the rest of your life, you can rest assured that when you do die, your family won’t be burdened by any unexpected costs.
So, now that we understand a few of the ADVANTAGES of owning a cremation life insurance policy let’s now take a look at what some of the DISADVANTAGES of owning one of these “types” of life insurance policies can be.
What are some of the disadvantages of purchasing a cremation life insurance policy?
Most of the “disadvantages” of owning a final expense or cremation life insurance policy will center around cost, perceived value, and complexity. This may seem a bit “odd” seeing how these types of life insurance policies are typically small, affordable, and relatively easy to qualify for, so let’s take a moment and discuss some of these DISADVANTAGES in greater detail.
Dollar for dollar.
Now we don’t want to suggest that final expense policies are super expensive; it’s just that “dollar for dollar” these types of life insurance policies will tend to cost more than other more “traditional” types of life insurance policies. As a result, some people may not see the value of owning one.
When considering purchasing a final expense insurance policy, many folks will find themselves asking whether it’s worth paying a certain amount each month for such a small death benefit, particularly if an individual is only looking for $2,000 to $5,000 in coverage.
This is why these “types” of life insurance policies may not appeal to everyone and why people who have the means and the ability to save this amount of money quickly will often opt for this option over purchasing a final expense life insurance policy.
The only problem is…
Many folks aren’t able to do this, and even those who can often fail to do so! This brings us to the last disadvantage these “types” of life insurance policies have, which is…
Now, one would be forgiven for not considering a cremation policy or final expense insurance policy too complex, but the problem is there are a lot of companies competing for this business, and as a result, consumers are going to have a lot of options, and some of those options aren’t always going to offer you the “best” solution for what you are looking for!
For this reason…
We always suggest that anyone looking to purchase a small cremation or burial life insurance policy ask themselves these four simple questions and make sure that they have the answers to these questions before they ever consider applying for or buying any final expense policy.
4 Questions to Ask Before Choosing Cremation Life Insurance
#1. What type of final expense insurance policy am I being offered?
Is it a simplified issue life insurance policy that will ask me health-related medical questions to qualify for? Or is it a guaranteed issue life insurance policy that will contain a graded death benefit, limiting when my policy will begin covering me for natural causes of death?
#2. How long will my policy stay in force?
Am I being offered a term life insurance policy that can end before I die? Or am I being offered a whole life insurance policy that will stay in force as long as I continue to make my payments on time?
In our opinion, you always want to make sure that your cremation policy is a whole life insurance policy because the last thing you want to do is pay for years and years only to have it expire before you actually receive any benefit owing it.
#3. How much money will my beneficiaries receive when I die?
And is there any way this amount of money will change throughout the life insurance policies? You want to make sure that the death benefit of the policy you are considering will remain “level” or the same throughout the policy’s life.
#4. How much will my policy cost? And will that price ever change throughout the life of the insurance policy?
In our opinion, it’s important to avoid any policy that may increase over time. This is because some policies may seem like quite a bargain if purchased today only to discover that five or ten years from now the price increase attached to them may make them unaffordable right when you need them!
For this reason…
Almost always recommend that folks purchase a life insurance policy that will have a level payment that they believe they will be able to afford throughout the life of the policy.
How can I best ensure that I find the “right” cremations life insurance policy for me?
In our opinion, here at IBUSA, there are two things that one must do to increase their chances of being able to qualify the “best” possible cremation life insurance policy.
First, you’re going to want to make sure that you “shop” your options, and second, you’re going to want to make sure that you work with a life insurance agent who will take the time to explain exactly your options are.
You’re probably just going to end up buying the first thing that “seems reasonable,” never really knowing whether or not you’re getting a good deal. Fortunately, we here at IBUSA focus a large amount of our time helping folks just like yourself, so if you do decide to give us a call, you’re sure to get the help you deserve.