Burial Insurance

Burial insurance policies are so individualized that there is almost nothing that you cannot include. The only way you can be limited is if you have a policy that is capped at a specific dollar amount. The largest player in the burial insurance market, Forethought Life Insurance Co., refuses to cover more than $25,000 worth of funeral expenses.

Below is a checklist of things you need to consider before you purchase burial insurance:

• You need to research your own state laws on preneed insurance.
• Before deciding on a burial insurance policy, make sure to discuss all of your options with your lawyer and your family to make sure that it lines up with your estate planning and will.
• Find out what percentage of the total plan value that you will actually received in benefits.
• Make sure to verify the license of everyone that you work with before signing a policy.
• Take advantage of “free look” laws that your state may have that allows you to review your policy before you are locked in.
• Make sure you get a written price list of available goods and services, as required by the Federal Trade Commission.
• Make sure you have a friend or family member with you to help you look through the paperwork.
• Never accept any documents that have been fully filled out and signed while you are not present.
• Just in case you move, make sure that your funeral arrangements can
  be moved to any funeral home.
• Ask if your particular state requires that you be able to cash out your burial benefits at any time.
• Your grave site should already be located by section, row, and plot number.
• The policy should specifically state the type of outer burial container that you have purchases. It will either be a grave liner or a vault. Also, as what it is made out of.
• The policy should also clearly state what kind of marker you purchased including size, material, and style. If you can, get a sketch,
• Find out what recourse you have if the cemetery runs out of cash and then defaults on your policy.
• Ask about what happens if your cemetery runs out of burial plots.
• Make sure you get at least one statement a year that details the status of you account.
• Find out what happens if you cancel your burial insurance. You maybe be reimbursed for products and services, but still be stuck with the burial plot.

Now that you have this information, use it to make sure you get the policy that is best for you.

It’s no secret that funeral costs are going up. According to the American Association of Retired Persons (AARP), funeral and burial expenses are actually one of the biggest purchases for Americas over the age of 65. In fact, the average cost of a funeral today can be anywhere from about $4,500-$5,500. One-third of that cost is just to cover the coffin! If you decide to have an in-ground burial then you can expect to pay another $2,400.

Since burial costs are still rising, even a $10,000 burial insurance policy purchased today may not pay the entire funeral bill when the time comes. In order to pay the price you may have to use funds from your major life insurance policy. Dean Lambert, the director of marketing for Homesteaders Life Co, says that this trend is becoming more frequent. “When that lump sum goes to the family, they will spend it on whatever they have to. They shouldn’t have to spend it all on the funeral, but that might be the case. If they are grieving, they may not make the most informed choices, perhaps spending more than they should”.

If you take a step back and look at the industry as a whole you will see why the preneed industry is not feeling the effects of the recession. Americans are getting older, the baby boomers are nearing the end of their lives and therefore there is a great demand for funeral related products and services. If you couple this with the fact that prices continue to increase for these goods and services, you can see how easy the industry has it. President of the Life Insurers Council, Bruce Dalzell, says, “More senior citizens have the money today for these expenses, and they are independent. They don’t want to leave this burden on their loved ones”.

An individual’s preferences play a huge role when determining coverage options. Burial insurance is very personal; there is no “one size fits all” option. Instead, you pick and choose the goods and services that you see fit. This leaves the choice up to you and not an insurance agent or funeral director. They are taken out of the decision making process and are just there to write up a policy that covers the things that you want.

Some of the common products and services available for purchase are:

• Grave marker
• Flowers
• The plot
• A casket or urn
• Embalming (not required by law unless there is a public viewing)
• Cremation
• Hearse and other burial vehicles
• Burial vault or grave liner
• Digging and filling the grave
  
  

In the next article in the series we will discuss a checklist that you need to go through before buying burial insurance.

Have you ever thought about what your funeral might be like? What sort of service would there be? Have you thought about the type of coffin that you would prefer?

While these questions may seem a bit morbid they are certainly not unreasonable. There are actually many reasons to preplan and even prepay your final arrangements before you absolutely need to. There is even a product called preened insurance, also known as burial and funeral insurance (which is basically low cost term life insurance) that is intended for the aforementioned purpose.

Burial insurance deviates from other kinds of insurance because it is a matter of “when” instead of a matter of “what if”. With this insurance, you can plan out all your final details and then pay for it in advance.

Kevin Gough of Conning & Co., an insurance research firm, says, “People aren’t buying this for the financial benefit, but rather to lock in and prearrange their funeral their way”. He later mentions, “Whether it’s a velvet-lined casket or a particular type of service, it guarantees they’ll have the funeral they want.”

When looking at burial insurance from its most fundamental level, it seems as though it is a no-brainer purchase. However, a string of funeral insurance scams across the nation (affecting thousands of policy holders) gives a loud warning that you must do your homework when buying burial insurance, maybe even more homework than when trying to decide on other types of insurance. There has been much controversy over elderly people allegedly being tricked into paying more in premiums than they will actually receive in claims (sounds like “Social Security”). In fact, states including Florida have tried to pass legislation that would ban this practice.

Funeral prearrangement is not a new concept. According to the National Funeral Directors Association (NFDA), more and more people over the last 30 years have decided to look into preplanning. Recent industry wide events have put the focus on prefunding of these ceremonies.

In the past, funerals were normally paid for via trusts (a set amount of money that is set aside to cover final expenses). Trusts are no hard to make, but you have to think about the tax liabilities if you are considering moving out of state. Alternatively, some people set up something called “final life expense” insurance. These are designed to have small coverage limits, around $10,000, and are specifically for covering burial costs.

In the next article in this series we will start off talking about rising funeral costs.