Burial Insurance vs. Life Insurance

The National Funeral Directors Association reports that the median cost of a funeral is around $7,848 with burial and $6971 with cremation. For many people, coming up with the money needed to handle a loved one's final expenses is a financial burden.

Both burial insurance and life insurance can provide money to cover the cost of a funeral, viewing and burial or cremation. Examining the features of burial insurance versus life insurance can help you decide which type of policy is right for your needs. 

Final Expense Insurance vs. Life Insurance

Both burial insurance and life insurance provide a benefit for your beneficiaries when you die, but they vary in many ways.

Definition

• Life insurance is a large category of insurance products that includes term life issued for a set time period and permanent or whole life, which remains in effect until you die. When shopping for life insurance, you have many options available to choose from.
  
  
• Burial insurance is a specific type of permanent insurance. Most insurance companies only offer one burial insurance plan.

Payout Schedule

• Life insurance often gives beneficiaries the option to receive a lump sum or monthly payments.
  
  
• Burial insurance usually pays in a lump sum only.

Payout Timeframe

• Life insurance claims must go through an investigation and approval process. Your beneficiaries will usually have to wait to receive the payout and may need to cover the cost of your burial out of pocket or finance the expense until they receive payment from the insurance company.
  
  
• Burial insurance is available as soon as your beneficiaries provide proof of death.

Death Benefit Size

• Life insurance gives you the flexibility to choose the death benefit size that is right for your needs. Depending on your age, ability to pay premiums and overall health, you could potentially get millions of dollars of life insurance.
  
  
• Burial insurance policies have much smaller benefits. With most insurers, the maximum death benefit is around $50,000.

Underwriting Requirements

• Life insurance usually involves a rigorous underwriting You will likely have to fill out a questionnaire about your health and lifestyle. Often, insurance companies require you to undergo a physical exam and to give permission for the underwriters to conduct a background check and review your medical records.
  
  
• Burial insurance usually doesn't require a medical exam. Normally, you only need to fill out a questionnaire. Because death benefits are smaller, the underwriting process is simpler and faster.

Length of Coverage

• Life insurance allows you to choose between term policies that expire and permanent policies that don't. If you opt for term insurance, you may have to undergo further underwriting each time you renew your policy. Your premiums may also increase with renewal.
  
  
• Burial insurance is usually a type of permanent insurance that remains in place until you die. Your premiums usually remain the same over the life of the policy.

Cash Value

• Life insurance policies that are permanent usually build up a cash value over time. Term policies do not.
  
  
• Burial insurance normally has a cash value because it's a form of permanent insurance.

How Are Burial Insurance and Life Insurance Related?

To understand how burial insurance relates to life insurance, consider shoes. If someone says shoe, you could be picturing many kinds of footwear from boots to high heels. Similarly, life insurance comes in many forms. A burial insurance policy is like a sneaker. It's one type of life insurance meant for a specific purpose.

Insurers may call burial insurance by other names such as final expense insurance or funeral insurance. No matter what it's called, burial insurance is a type of whole life insurance that pays a small death benefit.

When Is Final Expense Insurance Better Than Life Insurance?

You may want to opt for burial insurance if:

• Your beneficiaries only need a small death benefit to cover expenses.
• You only want a small amount of life insurance but want the benefits of a cash value.
• You have a health condition or a risky lifestyle that may make it difficult to get other types of life insurance.
• You want your loved ones to have quick access to money when you die.

Life insurance is a better option for:

• Replacing your income after you die
• Covering the cost of beneficiaries' expenses like college or a home
• Building up a cash value savings to supplement your retirement income

Can Life Insurance Be Used for Burial?

Yes, you can use the funds from a life insurance policy to cover the cost of burial. The money can be used to cover any type of expense the beneficiary chooses.

Does Social Security Pay for Burial Expenses?

Yes, Social Security will provide a small grant to help pay for burial expenses for qualified survivors. Normally, the survivor must be a spouse who was living with the Social Security enrollee at the time of death. In some cases, spouses living apart can still qualify for coverage. If the deceased person isn't married or their spouse passed away first, one of their children may be eligible for the grant.

As of 2023, the amount of the grant was $255. Typically, the grant is not enough to cover a person's final expenses on its own.