Policy Types

Types of Life Insurance for Funeral Costs

This article discusses the basics of burial insurance and preneed funeral insurance, both designed to cover the cost of your funeral or cremation expenses, but there are differences.

Is Burial Insurance Different from Preneed Funeral Insurance?

Two common types of funeral expense life insurance policies are burial insurance and preneed funeral insurance.* Having either one of these types of funeral expense life insurance policies can allow you to plan ahead for the costs associated with your funeral/final expenses. However, there are key differences between the two. Before deciding on one or the other, here are the basics of how each one works.

Burial insurance

Burial insurance is a type of funeral expense life insurance policy designed to cover the cost of your funeral or cremation expenses when you die. Because many people don’t realize that funerals can cost upwards of several thousand dollars, they don’t often think about planning ahead. This type of situation can sometimes lead to a financial hardship on families or loved ones who must cover the costs.

Burial insurance policies can vary between life insurance companies, so you may find it offered in the form of a term policy or whole life policy. Generally speaking, the death benefits for burial insurance are low, ranging anywhere between $5,000 up to $25,000 (although some insurers may offer higher limits).

After you die, burial life insurance pays the death benefit of your policy directly to your beneficiary who can use the money in any manner. For example, if you have a $15,000 burial insurance policy and funeral expenses came in at $10,000, your beneficiary might choose to use the additional funds to pay for other final expenses such as outstanding medical bills, legal costs, or any other outstanding debts you may owe.

Preneed funeral insurance

Not unlike burial insurance, preneed funeral insurance is designed to set aside funds for your funeral, before the need arises. It is another type of insurance policy that aims to protect your loved ones from shouldering the financial burden after you die. It covers the costs of predetermined expenses such as standard funeral home services, funeral merchandise, church and burial services. In some instances, this type of policy can protect against inflation and the rising cost of funeral expenses by locking into today’s prices for services and merchandise.

It, too, can be offered as either a term life policy or type of permanent policy. However, instead of paying the benefits of your policy to your beneficiary when you die, the money goes directly to the funeral service provider of your choosing. At the time of your death, preneed life insurance proceeds are often made payable immediately to an assignee (typically the funeral home) to cover costs with little (if any) delay. Once your policy is paid in full, it remains in effect for your entire life.

For more information on final expense life insurance, visit the Protective Learning Center.

*Note: There are other options to pay for funeral expenses, but this article’s focus is on burial insurance and preneed funeral insurance).

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit www.protective.com.

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