What Type of Insurance Covers Burials?

Burial insurance is the type of insurance that covers burials specifically, but other types of insurance and insurance-like products may also pay for final expenses. No one wishes to imagine what will happen when they die, but seniors also worry about how their families will pull together enough money for a funeral service and burial.

Because more than one type of insurance can potentially cover burial insurance, older adults find choosing a policy confusing and difficult. Fortunately, understanding the differences between types of insurance can make shopping simpler.

Pre-Need Funeral Insurance Is Not Insurance

Much of the confusion about what type of insurance covers burials is due to the fact that some funeral homes offer a service they call pre-need funeral insurance. This type of plan is not actually insurance. Instead, it allows people to plan their funerals in advance and pay for the arrangements themselves. Depending on the plan, the covered individual may make a single large payment upfront or multiple smaller ones over time.

Pre-need funeral programs allow seniors to lock in current prices for things like caskets, flowers, headstones and burial plots. Each plan’s payout is different.

Burial Insurance Provides Fast Payouts for Final Expenses

Burial insurance is a true insurance product. Many insurance companies sell this type of life insurance through licensed agents, call center sales representatives, online services and funeral homes. To purchase burial insurance, a person completes an application and requests a specific amount of coverage. Usually, companies cap the amount at $50,000, but seniors may be able to purchase policies for as little as $5,000 or $10,000. Sometimes, companies call burial insurance “funeral insurance” or “final expense insurance.”

Some burial insurance has guaranteed acceptance terms. This means the insurers don’t take age and health status into consideration and approve most applications. Other burial insurance policies require completion of a medical questionnaire. However, approval guidelines for burial insurance are usually lenient, providing coverage for seniors who can’t buy other types of insurance.

After an insurance company approves an application, a waiting period of 2 to 3 years usually begins. If the person dies during the period, the insurance company refunds all premiums paid. Once the waiting period ends, the insurance company pays the promised lump sum when the insured passes away. The money is usually available within a few days to a week.

Using Other Types of Insurance to Pay for Burials

Although burial insurance is the only insurance designed specifically for burials, seniors’ families may use the proceeds from other types of life insurance to cover final expenses. Term and permanent life insurance products pay out a lump sum upon death, and beneficiaries can use the proceeds however they wish.

This chart summarizes the main differences between pre-need funeral plans, burial insurance and other life insurance.