Burial life insurance can have a cash value. However, seniors need to understand that policies that build a cash value over time may not offer the same benefits as other life insurance products.
Unfortunately, insurance policies are complicated documents. Older adults may struggle to fully understand the terms, apply for a policy and later find out they can’t access cash the way they hoped. Knowing how cash value works with life insurance, and burial insurance specifically, allows people to make better-informed buying decisions.
Most Permanent Life Insurance Policies Have a Cash Value
Permanent life insurance is a type of life insurance that remains in effect until the insured dies or reaches an advanced age like 100 or 105 years. With nearly all permanent life insurance policies, a portion of the premium payments funds a cash account. As a result, the life insurance policy grows in value over time.
Depending on the type of policy, seniors may be able to use the cash value of the account while they’re still alive. They may have the ability to borrow against the cash value or withdraw a portion of it. If they choose to surrender their permanent life insurance policy, older adults may get the cash value minus a fee.
Burial Life Insurance Cash Value Is Limited
Burial life insurance is generally a permanent life insurance product. As a result, most policies technically build a cash value. However, the actual cash value is usually very modest. The cash value of all types of life insurance depends partially on the premiums paid and the face value of the insurance. With burial insurance:
- Face amounts are usually $50,000 or less.
- Policies may be as small as $5,000 or $10,000.
- Premiums are very inexpensive.
- Most people who purchase are seniors.
Due to these factors, the cash value of a burial insurance policy grows slowly. It’s unlikely the value will ever become large enough that an older adult could borrow against it or use it to pay for living expenses. Burial insurance policies may offer cash surrender options, but the payouts for these will be significantly less than the face amount.
Alternative to Burial Insurance
Seniors who want the benefits of a significant cash value may prefer other kinds of permanent life insurance. This table compares the features of various types of policies.
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Burial Insurance
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Whole Life
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Universal Life
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Variable Life
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Typically sold for amounts of $50,000 or less
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Typically sold for amounts of $100,000 or more
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Typically sold for amounts of $100,000 or more
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Typically sold for amounts of $100,000 or more
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Fixed death benefit
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Fixed death benefit
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Adjustable death benefit
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Adjustable death benefit
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Doesn’t usually require a medical exam
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Requires a medical exam
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Requires a medical exam
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Requires a medical exam
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Small guaranteed cash value
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Larger guaranteed cash value
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May have guaranteed cash value, depending on the policy type
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Builds cash value, but amount isn’t usually guaranteed
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Fixed premiums; may cost more than whole life
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Fixed premiums; usually most affordable permanent insurance
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Adjustable premiums
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May have adjustable premiums
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Low interest rate on cash value
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Low interest rate on cash value
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Some policies invest money in securities to potentially pay higher interest
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Cash values invested in securities to potentially pay higher interest
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Learn more about paying for final expenses by checking out the best burial insurance plans.
