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Burial Insurance, is it worth it?

To understand whether or not a burial life insurance policy is “worth it”, one must first understand that for an insurance company to remain in business, they must first collect more money than they payout.

So…

When critics of these “types” of life insurance policies state that most folks pay more for their insurance than they ever receive, it’s important to note that this same criticism could be applied to just about all forms of insurance for most people.

“After all, that is how insurance works!”

You see…

If an insurance company found themselves payingpolicy holders more than they were collecting in premiums, it wouldn’t take long for them to go out of business…

“Now would it?”

For this reason, we never like to use this as an argument for why someone shouldn’t purchase a burial life insurance policy because if we did, we would  be forced to apply this same logic to why someone shouldn’t purchase:

  • Auto insurance,
  • Health insurance,
  • Fire insurance,
  • Etc…

Which are all obviously very important “types” of insurance coverage to have.

But just because…

We don’t like to use “this argument” for why someone might not want to purchase a burial life insurance policy, it doesn’t mean that there aren’t other valid reasons why a burial life insurance policy might not be right for you.

For this reason…

We wanted to take a moment and discuss whether or not a burial life insurance policy is worth buying.  And try to present both sides of the argument so that you would have a better idea of whether or not a burial life insurance policy is right for you.

Questions we’ll address in this article will include:

  • What is a burial life insurance policy?
  • Who shouldn’t purchase a burial life insurance policy?
  • Who should purchase a burial life insurance policy?
  • What are some of the pros and cons of a burial life insurance policy?

So, without further ado, let’s dive right in!

What is a burial life insurance policy?

Technically speaking, there isn’t such a thing as “burial life insurance”.  Instead, this is just a term used to describe a small life insurance policy that is usually limited to around $50,000 or less.  These types of life insurance policies are also commonly referred to as Final Expense Insurance as well.

Now…

Within this “category” of coverage, you will find two different “types” of insurance policies that one can apply for.  The first will generally be referred to as a Simplified Issue Life Insurance Policy that will require you to answer a few “health-related” questions to qualify for coverage.

These types of life insurance policies…

Will “tend” to be a little less expensive than the second “type” of burial life insurance policies, which we will discuss shortly.  However, before we discuss this other “type” of insurance, we do want to point out individuals looking to purchase a Simplified Issue Burial Life Insurance Policy (think no medical exam life insurance) need to be care that the one they are purchasing will:

  • Remain the same throughout the entire policy.
  • And last one’s entire life.

This means that your policy will need to be a fixed payment whole life insurance policy that can only end if you choose to stop making payments to the insurance company.

You’ll also…

Want to be careful applying for one of these “types” of life insurance policies if you have been previously diagnosed with a serious pre-existing medical condition such as cancer or heat disease.

The second type…

Of burial, life insurance policy is one that won’t require you to answer any “health-related” questions, and will typically stay the same for as long as you live.  These life insurance policies are generally referred to as Guaranteed Issue Whole Life Insurance Policies and contain a clause built into them called a GRADED DEATH BENEFIT.

Graded Death Benefit Defined:

Graded Death Benefits are “clauses” written into most (if not all) guaranteed issue life insurance policies which state that a guaranteed issue life insurance policy won’t begin to cover an individual from “natural causes” of death until a certain waiting period has elapsed.

This “waiting period” will usually last 2 to 3 years and is designed to prevent someone who is seriously ill from purchasing these types of policies and then collecting a death benefit just a few days, or months later.

And while…

This may seem extremely unfair; it’s important to remember that a guaranteed issue life insurance policy isn’t going to require you to take a medical exam or answer any health-related questions.  So, a graded death benefit is the only thing that allows an insurance company to be able to offer one of these “types” of life insurance policies.

This brings us to the next topic, which is…

Who shouldn’t purchase a burial life insurance policy?

OK, so now that we have the basic understanding of what a “burial life insurance policy” is, and we’re clear on the fact most folks who purchase any “type” of insurance won’t receive more from their policy than they will pay into it (this is especially true for the 1000’s of people who decide to purchase a life insurance policy, only to cancel it months or years down the line).  We now want to take a moment and discuss who shouldn’t purchase a burial life insurance policy.

It’s fair to say that…

Anyone who can finance their burial from savings should seriously consider not purchasing a burial life insurance policy.  The reason for this is that if you have the means to pay for your own burial and/or final expenses, buying a burial life insurance policy may not make any sense for you.

Instead…

You could decide to use the money that you would have to pay each month on your burial life insurance policy and:

  • Put it in the bank,
  • Buy some stocks or bonds with it,
  • Start a saving fund for your children or grandchildren,
  • Etc, etc…

In a situation like yours, it’s all going to come down to the numbers.  Meaning that what you’ll want to do is take the annual premium it would cost to purchase your life insurance policy and multiple that by the number of years you would expect yourself to live and see if it’s a good idea to purchase it.

Who should purchase a burial life insurance policy?

So, if it makes sense for the person who can potentially finance their own burial NOT to purchase a burial life insurance policy, it stands to reason that someone who CAN’T finance their own burial SHOULD buy a burial life insurance policy.

In cases like these…

We like to look at three different statistics and see if it makes sense for a client to purchase a burial life insurance policy.

The first statistic is that…

“The average burial in the United States is going to cost somewhere around 7 to 12 thousand dollars.”

The second statistic is that…

“Nearly 6 out of 10 Americans don’t have $500 set aside in their savings account”.

And the last statistic we like to look at is…

“The average monthly cell phone bill is $40-60 a month”.

So…

If you’re someone that didn’t know getting buried could be so expensive, and you don’t have thousands of dollars set aside in your savings account, and you’ve already figured out how to budget $40-60 a month to pay for a cell phone, chances are purchasing a burial life insurance policy might be a good idea for you.

Because…

Even if you ultimately end up paying more for your insurance than you would have had you just saved this money on your own, saving money and keeping money saved is a lot more difficult than simply coming up with a small monthly payment each and every month.

If it wasn’t, more than 4 out of 10 would have more than $500 in their savings account!

This of course…

Assumes one thing which is that you…

“Don’t want to burden your family with the cost it would take to be able to provide you with a proper burial”.

This leads us to the final topic that we wanted to discuss with you today which is…

What are some of the pros and cons of a burial life insurance policy?

When you think about it, burial life insurance is just like every other type of “optional” insurance product out there.  Insurance products such as renter’s insurance, fire insurance (if you don’t have a mortgage on your home), earthquake insurance, long term care insurance, etc, etc…

They’re all nice to have…

But at the end of the day, it’s going to come down to:

“What’s this going to cost me, and what is the overall benefit that I would receive if I did?”.

After all, if burial life insurance policies were free, wouldn’t we all like to have one?

Which is why…

When we break down the true pros and cons of owning one, the only real “CON” of owning a burial life insurance policy is that depending on how long you live and keep your policy in place, it is possible that you could pay more for your insurance than your beneficiaries would receive.

The flip side of this argument is…

That you die before you pay more in premiums than the payout of our policy.  That and all the while, you receive the “piece of mind” that comes with knowing that when you do pass, you’re loved one’s aren’t going to be burned with the financial cost of burying you.

The good news is…

Here at IBUSA, we work with many of the top burial life insurance companies and will be able to quickly provide you with numerous quotes for you to review so that you can determine for yourself whether or not it makes any sense for you to purchase a final expense policy for you and your family.

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