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Burial Insurance

What is Burial Insurance?

Burial insurance is life insurance purchased with the sole purpose of covering funeral and burial/cremation expenses. As such, these policies usually come with a much smaller death benefit — usually somewhere between $5,000 and $25,000 — than other life insurance policies. The smaller death benefit makes them relatively cheap.

Burial insurance basics

Technically, there’s no insurance product called burial insurance. Instead, people buy insurance to cover the cost of their burial by purchasing a life insurance policy with a small death benefit. The death benefit is the amount certain people that the insured chooses will receive at the time of their death. Those people are called the beneficiaries.

Most life insurance policies come with a death benefit of $500,000 or more. But because funeral and burial expenses ring in well below a half-million dollars, burial insurance deviates from the norm. If the purpose of the life insurance policy is just to cover funeral costs and a burial, a policy that only pays out a small percentage of that amount will be sufficient. That’s because the National Funeral Directors’ Association (NFDA) says that the average funeral with a viewing and a burial costs roughly $7,600.

Finding burial insurance

To buy burial insurance, individuals simply need to find a policy with a small death benefit. They can choose either term life insurance, which comes with specifications like the premiums that will expire after a set number of years (i.e., the term), or permanent life insurance, which will last their lifetime. The latter costs more, but in general, burial insurance is much cheaper than other life insurance policies because of its relatively small payout.

Using a burial insurance benefit

When you pass away, your beneficiaries get the death benefit from your policy as a lump sum. At that point, they can use that money however you want. That means it can cover your funeral expenses, but it can also go to any other pressing financial concerns. In fact, they can use the money for your funeral and burial and pocket anything that’s left over.

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