As you approach the end of life, you want to ensure your affairs are in order. Part of this is deciding how to best pay expenses that are incurred when you pass away.
One solution gaining popularity is burial insurance. Believe it or not, you can get this type of policy even if you're 80 years or older. Here's what you should know.
Burial insurance is a type of life insurance designed to help pay funeral costs and related end-of-life expenses such as medical bills when the insured passes away. It is also sometimes referred to as final expense life insurance or funeral insurance.
Unlike traditional life insurance, which is designed to take care of the long-term needs of family members after you're gone, burial insurance is a life insurance plan that takes care of short-term expenses directly related to your final disposition.
Life insurance policies do not specifically cover funeral goods or services and may not cover the entire cost of your funeral at the time of your death. The beneficiary of a life insurance policy may use the proceeds for any purpose, unless otherwise directed.
Because the scope of the payout is much narrower, the size of the policies that are issued is much smaller. You don't need $500,000 of life insurance coverage to cover burial expenses that will be a fraction of that. Most final expense insurance policies cap out at $25,000.
The benefit of a smaller-sized policy is that it is typically easier to get a policy like this if you're a senior, including if you're 80 or older.
Like traditional life insurance policies, you decide who the beneficiary is when you're issued a policy. Make sure it's someone you trust because that person will have a moral obligation to pay your funeral and related expenses after you're gone. If there are any leftover proceeds after expenses are paid, those proceeds will go to a secondary beneficiary which can be a family member, friend, or the deceased person's estate.
One of the benefits of buying a burial insurance policy is that it often spurs a discussion with loved ones about end-of-life and funeral wishes. Families often discuss a final resting place, the type of service they want, a casket or cremation, and other related details. That results in greater peace of mind and makes it easier to move forward when expectations are clear.
The exact coverage will vary by policy, but in most cases burial insurance covers the cemetery plot, casket or urn, headstone, cremation services, funeral home services, memorial services, and a funeral procession and hearse. Some policies also cover outstanding medical and legal bills and unique last wishes such as spreading ashes at sea or burial in a distant location.
Burial insurance is available when you're 80 or older, although fewer companies tend to issue policies to beneficiaries at this age. You may have to work with an agent to find a provider who will work with you.
Company rates and policies differ from state to state, so check with an insurance professional for advice in your state.
Providers base premium costs on several factors in addition to age. These include gender, whether you're in good health or have pre-existing health conditions, the amount of coverage you want, and your state of residence.
You can get a policy that will be in force immediately. To do so, you'll need to answer health questions and work with an agent. You won't be able to buy a policy directly with an insurer. Also, you won't have to take a health exam.
If you do not want to answer questions about your health, you can buy a guaranteed issue plan, but you'll be subjected to a two to three-year waiting period for the policy to kick in.
For senior citizens who are 80 or older, monthly premium payments will run anywhere from $90 to $150 for $10,000 to $20,000 of coverage. The minimum you can buy at this age is a $2,000 policy in most instances.
If you know you're going to have a lot of burial expenses, it may be possible to buy more than one policy and combine them to reach the coverage amount you want. Keep in mind, this won't be a cheap way to go, but it is one option.
Different Types of Burial Insurance Policies
Life insurance companies offer different types of burial insurance plans. These include:
The average cost of a funeral is now around $10,000 but can quickly rise above that amount with additional services. The best way to keep your insurance costs as low as possible is to tightly manage your expenses. There are several things you can do.
Get a copy of a funeral provider's General Price List. By law, funeral providers must give you an itemized list of what various services cost before you make any decisions.
Cremation is a less expensive option than a traditional funeral. Spreading ashes instead of interment is also another way to save money.
If your family is so inclined, consider buying a pre-existing family plot that will allow for a final resting place for several family members.
You can also look at other sources of funds to pay for a funeral. Consider using a Social Security death benefit or a Military death benefit if you're a veteran. Medicare Medical Savings Accounts may have funds you can tap, and in some states, Medicaid benefits may help with funeral expenses as well.
Another possibility is to donate a deceased person's body to a local university or medical school for research purposes.
DISCLAIMER: Medi-Solutions Insurance Agency, LLC is not affiliated or endorsed with the Social Security Administration or the Federal Medicare Program. Information is for educational purposes only and should not be construed as an offer of insurance, advice, or recommendation. The information provided is not intended as tax, financial, investment, or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
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