What's the Difference between Burial Insurance and Life Insurance? - Los Angeles Post-ExaminerLos Angeles Post-Examiner

What’s the Difference between Burial Insurance and Life Insurance?

Over half of all Americans, about 54%, own some form of life insurance. Almost 40% of Americans never bother to purchase life insurance at all.  They think it’s too expensive, don’t know how much they should acquire, and/or don’t know what kind to get for their needs.

To better assess whether you need life insurance or not, if it can fulfill your needs, and how much you may need, let’s better define it. Here is a basic breakdown of some common life insurance policies and their differences to burial insurance.

Life Insurance

A life insurance policy is a coverage contract between an insurance company and an applicant, or the policyholder. A life insurance policy issues coverage in an amount based on the personal data and health characteristics of the policyholder. The average policy is worth about $250,000. The policyholder pays a monthly premium to keep the policy in force. As long as the premium is paid the coverage lasts for a predetermined set of time or the lifetime of the policyholder, depending on the terms of the policy.

Upon the death of the policyholder, death benefits are paid out to beneficiaries. Beneficiaries could be relatives, spouses, friends, or anyone. A life insurance policy can gain cash value over time that can be leveraged against a loan. Some life insurance policies can be converted into self-benefitting supplement incomes. Or the cash value can be gifted as tuition for a beneficiary. The benefits a life insurance plan can offer varies according to the issuer and policy details.

Life insurance policies can be offered for limited terms or for a lifetime. Term life insurance offers coverage for a limited period of years. You can buy term life insurance for 5-year, 10-year, or 30-year terms. However, if you outlive the term of coverage, the policy is voided. Permanent life insurance entails a wide variety of life insurance products that offer coverage for a lifetime. Like whole life or universal life insurance, for example.

Final Expense Insurance

Final expense insurance or burial insurance is a very simplified version of life insurance. It lasts a lifetime, can accrue cash value, and pay death benefits. Yet, its main purpose is to be used to pay for the funeral expenses of the policyholder, and nothing else. Burial insurance is also a tool to spare the loved ones of the policyholder the burden of paying for their funeral. The named beneficiary is tasked with paying for the funeral expense. It generally works even if you have a preexisting condition. People often find final expense insurance for diabetics more affordable verses traditional life insurance. An average burial insurance policy ranges between $20,000 and $25,000.

The Differences

Your ability to obtain life insurance is dependent on a variety of factors. First, life insurance applications are processed according to human lifespan statistics concerning health, diet, lifestyle habits, and other data. Younger people tend to be healthier and will live decades to pay premiums. So, they pay cheaper premiums. Older people are statistically closer to death, may not pay premiums for long, and may cause an insurance company to pay death benefits sooner. The older you are, the more expensive the premium will be.

A life insurance application will ask if you smoke, are healthy, and if you engage in dangerous recreational activities. This will be followed by a phone or personal interview with an agent. Then you will undergo a medical physical. Your policy is customized to your personal and financial circumstances. There may be other requirements in the processing period as well, which can take weeks or months to finalize.

Burial insurance is easy to acquire. A policy could be approved over the phone. Burial insurance is a kind of coverage for a high-risk pool of applicants. Most applicants are middle aged, elderly, in infirmed health, physically unhealthy, poor, or unable to qualify for traditional health insurance. Anyone can apply for it, but it is mostly marketed to elderly people. Policies up to $25,000 are very affordable. However, the more expensive the policy, the more expensive the premium will be.

The Differences Are Relative to Your Needs

Acquiring life insurance can be an intimidating and anxiety inducing experience. The best way to look at it is as a policy of protection against the uncertainties of life.The difference between burial insurance and life insurance amounts to what you want out of each respectively.


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