Burial Insurance vs. Life Insurance

Life insurance pays a death benefit, so what is the difference between burial insurance and life insurance? We’ll explain to help you decide whether and when to buy either insurance. Recent statistics from the National Funeral Directors Association reveal the average cost of a funeral ranges from around $7,400 to nearly $8,800, plus cemetery costs for a burial plot and grave marker or crypt. Considering Social Security pays a very minimal $225 death benefit, you likely need to protect your family’s finances with burial insurance or life insurance – or both.

What Costs Do Burial Insurance and Life Insurance Pay?

Burial insurance pays for your funeral and related expenses. Most policies allow the beneficiary to use funds remaining after paying for your funeral and burial to cover costs incurred immediately before death, such as doctor bills.

Proceeds from life insurance may be used to pay funeral and burial costs at the discretion of the beneficiary listed on your policy, or the money can be used for anything else, like paying off debt, charitable gifting, or an inheritance. Life insurance is usually intended to defray costs your loved one would have difficulty paying without your income, such as a mortgage, college, medical and the cost of raising a family.

How Much Money Do Burial or Life Insurance Policies Pay Out?

Burial insurance has a lower face value than most life insurance because it’s designed to pay only for your final expenses. Burial insurance policies generally pay out $5,000 to $50,000. You could take out a small life insurance policy, but most recent statistics show the average life insurance policy value is around $160,000. Life insurance plans paying out less than $100,000 are unusual, and burial insurance premiums likely cost less.

Are There Different Types of Life Insurance or Burial Insurance?

There are many types of life insurance: term, whole, universal with variations within those classes. Term life is the most affordable, but with limits of 15 to 30 years of coverage, may lapse before you die. Whole and universal life insurance does not expire as long as you pay premiums, which go up dramatically unless you buy a level premium package. Whole and universal life may cost more than term insurance, but these have a savings or investment account attached which can pay the premiums when you’re older, or you can take cash out.

Burial insurance is a whole life insurance policy with restrictions on what the proceeds pay for, specifically your funeral, burial and related expenses. Designed to remain in force until you die, burial insurance will not expire unless you stop paying premiums. Some types of insurance are closely associated with burial insurance, like pre-need funeral insurance, used to prepay for your funeral at one funeral home and is not transferable to another.

What is the Waiting Period on Life or Burial Insurance?

Burial insurance has a waiting period that can last years so the policy can build value before paying out. If a life insurance policy has a waiting period, it’s usually one or two years, or perhaps 90 days if purchased through your employer’s group plan. If you die before the waiting period on your burial or life insurance, the policy usually refunds your paid premiums to the beneficiary.

When Can I Buy Burial Insurance or Life Insurance?

Anyone over the age 18 can buy life insurance, but most people don’t think about it until they marry or have a family, or their employer offers free life insurance within a benefits package. Burial insurance is primarily available to those age 50 and older.

Burial Insurance	Life Insurance
Specifically for funeral expenses and costs incurred directly before your funeral	No restrictions on the use of payout funds
Pays a lump sum almost immediately upon death	Pays a lump sum or monthly amounts, and legal matters can delay benefits
Beneficiary can be a funeral home to pay expenses directly	Beneficiary must be a trust, organization or at least one person
Coverage available up to $50,000	Coverage starts at $100,000 and goes up
Easy to find with no medical exam required	A medical exam is required unless purchased through an employer
May have a waiting period of up to three years or more	The waiting period is usually one year or less
Policy remains in effect until you die	Policy term may expire before you die

Which Costs Less: Life Insurance or Burial Insurance?

Both burial insurance and life insurance get more expensive as you age, and whether you smoke affects the cost of premiums. Except for group policies charging all covered individuals the same rate, men pay more than women for both burial and life insurance.

Life insurance is very inexpensive when you are under 40 years old or when you qualify for group coverage such as policies offered by many employers and some associations like college alumni and credit unions. It’s a good idea to buy some life insurance in addition to what your employer offers because when you leave your job, you also leave your life insurance.

Burial insurance can be less costly compared to life insurance when you are older. You can easily find a no-medical-exam-needed policy for another $20 per month. If you have chronic medical problems, this type of burial insurance can be a good deal considering the alternatives. You will have to fill out a health survey, but there is no physical examination and many burial policies will cover just about anyone.

Sample Rates: Life Insurance vs. Burial Insurance

Because burial insurance and life insurance do not cover identical expenses, comparing costs is like comparing apples to oranges. However, we found some rates from reputable companies so you can make a rough cost comparison. If you’re in good health and don’t smoke, you will find prices on the lower end of the scale. Smokers pay higher premiums and qualify for fewer life policies. However, we found if you quit smoking five years or longer before you apply for life or burial insurance, you can find a rate identical to those offered to nonsmokers. For life insurance, having high cholesterol or high blood pressure raises your premium, but this is unlikely an issue for burial insurance with no exam requirement.

Gender & Age	Annual Burial Insurance Rate No Medical Exam Required	Annual Term Insurance Rates 15-Year/$100,000
Female, 70	$774 – $2,230	$981 to $4,756
Male, 70	$1,065 – $2,959	$1,065 – $6,644
Female, 60	$612 – $912	$370 – $2,324
Male, 60	$792 – $1,152	$506 – $2,911

We used sample rates from our Best Burial Insurance Companies Guide for 70-year-olds in the chart above, and gathered rates from reputable insurance companies for the 60-year-old age group. Clearly, it pays to shop around for burial insurance.

To compare term insurance to burial insurance rates, we used quotes for a $100,000 policy with a 15-year term. Keep in mind this type of life insurance expires with no benefit if you do not die during the term. Rates for 70-year-old nonsmokers topped out at $1,776 for females and $2,556 for males. The high end of premiums listed in the chart is for smokers.

Should You Buy Burial Insurance or Life Insurance?

The answer to whether you should buy life insurance or burial insurance depends on several factors.

• Your age or having pre-existing medical conditions can make life insurance impossible for your budget, while burial insurance is likely affordable.

• If you want to maintain control over your funeral costs, buy burial insurance and make your choice of funeral home the beneficiary.

• If you have family members who are relying on your income, go with life insurance to get adequate financial protection.

• If you already have life insurance and you want to add to the payout to cover your funeral expenses, buy a burial insurance policy while you maintain your life insurance.

A final word of advice: whether you buy burial insurance or life insurance, beware of teaser rates. These rates are very modest over the first few years, then go up to a level your budget may not support. Read policy documents and ask questions before you pay your first premium, and ask about level premiums which never increase.