Burial insurance provides a smaller payout than whole life and is easier to qualify for. Burial insurance is a whole life policy, then, but a smaller and more simple version of it.
What Is Burial Insurance?
Often referred to as funeral or final expense, burial insurance provides a financial payout when the policyholder passes away. This payout ranges anywhere from $2,000 up to $50,000, depending on the provider’s offerings and your need for coverage. The most common payout, or death benefit, is around $25,000.
People most often use a burial policy to pay for their funeral. With costs more than $8,000, having a life insurance policy take care of those expenses for your loved ones is extremely helpful and reassuring.
Burial policies are permanent, meaning that you will have it until you (the policyholder) pass away. Once that happens, the chosen amount for the death benefit will be issued to your chosen beneficiaries.
What Is Whole Life Insurance?
Whole life policies are both a type of insurance you can purchase and a category of policies. On its own, a whole life policy is intended to be purchased by individuals under 50 years old, with premiums based on your age at signup and with the potential to increase over time. You can withdraw funds from this accumulated cash value while the policy is in effect if you so choose.
As long as you keep up with these monthly premiums, you will continue to be covered by the policy until you cancel it or pass away. This applies not only to whole life as its own purchasable policy but to the category it forms as well. These types of insurance policies are also considered to be whole life:
- Traditional: i.e., whole life as we have just described it.
- Limited Payment: Requires you to pay a larger sum of premiums upfront, then decrease over time.
- Single Premium: Pay all of your premiums up front rather than overtime.
- Modified Premium: Pay higher or lower premiums in the beginning, then decrease or increase after a certain amount of time has passed.
- Survivorship: The death benefit is not issued until the policyholder and joint policyholder (typically both spouses) have passed.
- Universal Life: A flexible premium that changes based on outside factors, but also by the policyholder as they see fit. Any additional money paid goes into the accumulated cash value.
- Variable Universal Life: Utilizes any additional cash value added with a typical universal life policy and invests it for a potential increase.
- Participating: If you are a participating member of an insurance company, you and other policyholders will benefit if the company experiences a surplus of earnings.
- Non-Participating: You’re still a member of an insurance company, but you will not receive funds from surpluses.
- Final Expense/Burial
The Similarities Between Burial and Whole Life
Because burial insurance is a subset of whole life, they share quite a few notable similarities:
- Permanence: Both of these policies are considered permanent as long as you keep up with your premiums. If you do not, both policies will be canceled after one or more warnings of late or missed payments.
- Payment Method: The way in which you pay for either a burial and whole life policy is the same, though the amounts will differ, often by quite a bit. Premiums are paid on a monthly basis and should not change throughout the duration of the plan unless otherwise stated by the insurance company or if you are purchasing a universal whole life policy.
- Payout Method: When the policyholder passes away, both burial and whole life insurance will pay the specified amount to designated beneficiaries. While the payout amount greatly differs between the two, this general protocol is followed in both policies.
- Potential Funeral Coverage: Both policies have the potential to cover your funeral expenses if you so choose. Whole life can be used to cover much more than just your funeral, but it may be included with your intended uses of the payout if you choose.
The Differences Between Burial and Whole Life
Now that you understand how burial insurance is a type of whole life policy, it’s important to highlight the main differences between each. Burial insurance is significantly smaller than whole life—with payouts up to $1 million, whole life is in it for the long haul. You purchase it young and pay an agreed-upon premium over time until the death benefit is issued.
While burial insurance follows the same general protocol, its cost and qualification process is vastly different. These are the primary, notable differences between the two:
- Payout Amount: Typical whole life policies have payouts between $100,000 and $500,000. Burial insurance, on the other hand, ranges most commonly between $2,000 and $30,000, but there’s a very reasonable explanation for this difference.
- Application Process: Whole life policies are significantly harder to qualify for and are essentially not an option for most seniors—most applicants are between 40 and 50 years old or younger. Your premiums are set based on your age, sex, and health. If you are older and in poor health, you will very likely not be qualified for your traditional whole life policy. Burial insurance, on the other hand, is one of the easiest possible life insurance policies to qualify for. You may answer very simple questions regarding your health or skip the health questionnaire entirely and still qualify. You can also be up to 85 years old and still apply, making it far more accessible than a whole life policy. This is why the payout is smaller for a burial policy than a whole life policy.
- Potential Uses: Because payouts are smaller for burial policies, its uses are more targeted. Most beneficiaries will use it to cover funeral expenses, which will cost up to $10,000 depending on chosen arrangements but can be used for other smaller final expenses as well. While whole life policies can certainly account for these costs, people purchase them for a variety of other uses as well.
We’ll Help You Understand Your Life Insurance Options
Knowing which insurance you need and qualify for takes qualified, highly-trained insurance agents and companies to get you the right coverage. We’re local in Florida and ready to help as soon as you call at 800-548-3249.
