If you are responsible for their final expenses and funeral costs, you will likely need to consider buying burial insurance for your parents. Discussing this may be a touchy subject, but burial insurance will protect you and your siblings financially at a time when you have your own expenses to deal with. The most recent numbers from the National Funeral Directors Association show the average funeral in the U.S. costs just under $8,800. Add in cemetery fees and a headstone, and a total of $10,000 is a reasonable estimate.
What is Burial Insurance?
Burial insurance covers the cost of a funeral and related expenses. As confusing as this sounds, burial insurance is a type of life insurance, but there are many differences between burial insurance and life insurance. Burial insurance must be used for funeral and cemetery costs. Depending on the policy, once the payout covers funeral and burial costs, remaining proceeds can pay hospital bills and other expenses incurred immediately before a parent’s death.
Why Buy Burial Insurance for Parents?
Many people are retiring with inadequate funds to pay necessary living expenses. Transamerica Center for Retirement Studies reports nearly half of all U.S. workers are guessing to determine how much to save for retirement and only 61 percent are confident they have sufficient funds to live on before they die. Even if your parents have well-funded retirement savings, if they go into a nursing home, those funds could be wiped out. The average cost of a nursing home in 2016 was $82,000 a year, three times the annual income of most seniors.
Your parents may have a life insurance policy purchased years ago with the intent of covering their final expenses. Unfortunately, very few people consider the effect of inflation and rising medical costs and die without enough life insurance to cover a funeral and outstanding debt like medical bills. It’s likely that any life insurance elderly parents have is either whole or universal life and not a term policy. If your parents go into a nursing home, any insurance other than term is liquidated before Medicaid covers the cost of their care. Buying a term policy at their age is far more expensive compared to burial insurance, and your parents could easily outlive term insurance if they can qualify for it at all.
Covering the cost of your parent’s funerals may fall on your shoulders, and buying burial insurance for your parents significantly eases that financial burden. Even if they have life insurance, purchasing burial insurance for your parents could make good financial sense.
Buying Burial Insurance for Your Parents
Getting a burial insurance policy is fairly straightforward and easy. First, read our Best Burial Insurance Companies Guide to narrow your choices and to learn how to determine how much insurance to buy. Look for a level premium policy with a rate that does not increase over time.
When you apply for the burial insurance, you need to let the insurance company know you have an insurable interest, which means you will suffer financial loss without the protection. Since you are a close relative, establishing insurable interest won’t be a problem. All that’s required is noting that you will pay funeral and burial expenses.
While burial insurance requires no physical exam, the insurance company will provide you with the appropriate HIPAA form to access your parents’ health records. The policy gets finalized, and you receive the documentation. Read the plan over and speak to the insurance representative if you have questions. Make the first premium payment, and the insurance will remain in effect as long as you continue to pay for it.
Tips for Talking to Your Parents About Burial Insurance
You may be hoping you can buy burial insurance for your parents without discussing it with them, but your parents have to give the insurance company consent to inspect medical records unless you are their legal guardian, so you’ll likely need to have that conversation. Your parents may be very open to discussing their final expenses and your buying burial insurance on their behalf. However, it’s best to have a plan for this talk in case one or both parents are not comfortable with the subject. Here is some advice for approaching this discussion, adapted from Catherine Hodder’s book, Estate Planning for the Sandwich Generation: How to Help Your Parents and Protect Your Kids (Buy on Amazon).
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Plan to speak to your parents about burial insurance over time. As disturbing as facing your parents’ death is for you, it may be more difficult for them. They may have to digest the information you give them in steps over time, and there will be moments when it makes sense to talk about their funerals and times to avoid the topic.
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Be sensitive to your parents’ feelings. Consider the emotions you would have if your children approached you about buying burial insurance. Even if your folks are comfortable with planning for their death, they may be resistant to allowing you to pay for the insurance even if they can’t.
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Ask for sibling’s help or keep them informed. If you have brothers or sisters, include them in your plans. Ask your siblings about pitching in to cover the monthly or annual burial insurance premium and having the conversation with your parents. Even if you pay for and discuss the insurance with your parents on your own, let siblings know what is going on to avoid family conflicts.
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No pressure or judgment. You will probably need to hold back on what you have to say from time to time as you introduce your parents to burial insurance. Listening to their concerns without refuting them may seem like a roadblock to buying the insurance, but this will get them comfortable with the idea sooner.