The choices are overwhelming….and like most of us, wondering how to make the RIGHT choice.
You’re not alone…we talk to people with the same concerns every day.
Let’s discuss the most popular options, and how to make the correct choice when comparing between “Burial Insurance” vs. “Life Insurance”.
Quick Article Guide
- Burial Life Insurance
- Burial Policy Cost Estimates
- Best Policies for Seniors
- Burial Policy Quotes
- $50,000+ Policies
- When to buy Term Insurance
“Burial” or “Final Expense” Insurance is a form of whole life insurance. It’s good for your “whole life“.
The other popular type of insurance it “Term” life insurance. Term means time…you buy this type of insurance when you need it for a limited number of years.
Another easy way to look at is Term insurance is for IF you die. Whole life/Burial/Final Expense insurance is for WHEN you die.
Burial/Final Expense Insurance policies are designed to cover relatively smaller expenses at the time of someone’s death. These expenses typically include, but aren’t limited to, a person’s funeral expense, medical bills, and maybe a little extra to cover other items or help pay off debt so that burden isn’t left to your family.
Who Gets the Money?
To correct one misconception, the payment for these policies is made to the “beneficiary” named on the policy, not a funeral home or creditor. The beneficiary is typically a family member or someone with an “insurable interest”. “Insurable interest” generally means someone who will suffer a financial loss as the result of another person’s death.
Insurance companies get uneasy when someone without a logical insurable interest is named. That being said, you can often change the beneficiary to whoever you wish once your policy has been in effect for a year or so. Theoretically you may have outlived your logical heirs, and want to leave the money behind to someone to care for your 11 cats. It’s really your choice once your policy is in force.
Burial/Final Expense policies are typically purchased in the $5,000 to $25,000 range, though many companies offer up to $50,000.
As with all insurance, the cost is based on your age and health when you start.
Clients often tell us the cost is higher than they anticipated. We kind of have to give them a reality check. Either they have no idea what to expect, or have been misled by policies which give you a low “teaser rate” to begin, but then raise your rates as you age or cancel coverage at age 80.
You will not be offered these options by JRC Insurance Group. We don’t believe in them, and won’t sell our clients anything we wouldn’t recommend to a family member.
We believe “an affordable $10,000 policy beats an unaffordable $20,000 policy”.
Most people call us for these policies for themselves or family members after they’ve been disabled or retired. The predicament is they’ve missed the boat when life insurance was cheap, and buying when money is likely the tightest.
Think of this logically.
Let’s say you want to buy a $20,000 whole life policy for mom at age 65.
Average lifespan for a woman living in the US is to age 81.
If you were saving the money on your own, ignoring interest, you’d have 16 years to save $20,000…which breaks down to over $1500 per year, or $104 a month.
If you compare this cost to the chart below, and you’ll see that fixed rate/lifetime policies (the type recommended) aren’t that bad a value….as long as you keep them and don’t cancel. That’s when an insurance company “wins”.
|$10,000 Death Benefit||GOOD HEALTH||NO HEALTH QUESTIONS|
|Female, Age 65||41.01 monthly||55.46 monthly|
|Male, Age 65||55.76||68.29|
|Female, Age 70||53.24||68.75|
|Male, Age 70||73.70||87.91|
|Female, Age 75||72.41||90.29|
|Male, Age 75||99.53||124.63|
|Female, Age 80||98.43||152.17|
|Male, Age 80||132.65||220.92|
|$20,000 Death Benefit||GOOD HEALTH||NO HEALTH QUESTIONS|
|Female, Age 65||78.82 monthly||110.00 monthly|
|Male, Age 65||108.31||135.07|
|Female, Age 70||103.28||136.58|
|Male, Age 70||144.20||174.90|
|Female, Age 75||141.62||179.62|
|Male, Age 75||195.85||248.42|
|Female, Age 80||193.66||303.42|
|Male, Age 80||262.10||440.92|
You’ll notice two rate columns. One reflects the cost when applying in “GOOD HEALTH”, and one with “NO HEALTH QUESTIONS”. Neither requires a medical exam. Rates valid as of 12/10/14.
If you need help determining if you qualify for the “good health” policy, ask your JRC agent. There’s no cost or obligation for our services, and we like to think we’re nice, helpful people.
WHAT YOU NEED TO KNOW BEFORE BUYING:
Along with the higher premiums, the “no health question” policy has a 2-year “return of premium” waiting period before the full death benefit kicks in. In other words, in exchange for getting a “guaranteed issue” policy with no questions asked, there’s a 2-year period during which time. If you die during this time, your beneficiary receives all money paid in plus an additional 10%. Not a bad deal….you can’t lose money, unless you cancel the policy.
Yes, this is a recurring theme…don’t buy more than you can afford.
For more on burial expense policies, read our “Ultimate Guide for Burial and Final Expenses” article.
Once you’re at the $50,000 death benefit bracket and above, you get into the market for Whole and Term Life insurance.
The amount and type of insurance is determined primarily by your purpose for coverage, and your income..to be blunt, you can’t be worth more dead than alive.
You may “need” $300,000 to pay off your mortgage, but if you’re disabled or have an income of less than $50,000 or other significant assets, you’ll have a tough time qualifying. And if you could, the cost of insurance in a high risk bracket probably isn’t worth the cost.
Assuming you’re in decent health and have income from working, pension, business or investments, you may have some pretty good options available. JRC Insurance Group specializes in helping the “over 50” age group, working with the companies with most competitive rates in the this bracket.
Need more than $50,000? Guaranteed Universal Life Insurance option may be best
Guaranteed Universal Life (GUL) insurance is another option that is somewhat of a hybrid between Whole Life and Term Life Insurance. Guaranteed Universal Life insurance is guaranteed to stay the same price, is available for $50,000 and above in coverage, and it can be locked in until the age of 90, 95, 100, or even 121. In practice it works like a whole life policy, but at a lower cost.
Guaranteed Universal Life insurance can be a great option for anyone applying between age 65-79 who is in good health and needs more than $50,000 of coverage for 10 or more years.
These policies are also ideal for anyone who expects to have debt into their 90’s, or who has a large estate and wants to funds readily available for tax obligations when they pass. We advise buying before age of 75, otherwise it is much harder to be approved. Guaranteed Universal Life insurance is popular with clients who have younger spouses and/or with a long term dependent or special needs children.
Like a term policy, Guaranteed Universal Life policies are for larger amounts of coverage, and they will usually require a free medical exam.
If you have a good-sized estate and need insurance for estate taxes/asset maximization, you’ll want to consider permanent options like a Whole Life or these Guaranteed Universal Life policies. Our “Life Insurance For Estate Planning” article is a good resource for this subject.
Term Insurance is the most popular form of traditional life insurance, due to its low cost and high death benefit, getting you the most bang for your buck. It’s pure insurance…you’re covered while paying for it, and when you cancel the policy or you reach the end of your “term”, you’re done. Term life insurance is the type endorsed by financial experts like Suze Orman and Dave Ramsey. As mentioned earlier in this article, it’s the type that pays “IF you die”…carried as a safety net, something like the fire insurance you carry on your home.
Term insurance usually requires a free medical exam and offers a wide range of coverage. A term policy is usually between $50,000 and $5,000,000 in coverage and can be guaranteed for 10, 15, 20, 25, or 30 years.
NOTE: JRC insurance Group works with some good insurance companies offering term life insurance with NO EXAM. You’ll pay a bit more, but the convenience and less rigorous medical review may be worth it.
A term policy is best designed for people applying before age 70 who have a need life insurance for a period of years…again, look at this insurance as a safety net if you die prematurely. Most commonly we see people buying term life who are worried about dying before paying off a home or other large debt, getting dependents through college, a divorce decree, or general “income replacement” helping a family maintain their standard of living for a few years.
Keep in mind there are minimum income requirements, outside of Social Security or other government assistance. Most companies require a minimum income of $20,000 to qualify for term life insurance.
Term Life Insurance is also ideal for businesses for buy/sell agreements or to insure the life of a Key Employee. To read more about insurance for business protection, click here.
Along with your income, eligibility for term life insurance is determined by your health. The most common term insurance policies are purchased by our customers with families who rely upon their income.
For example, a 30 year term works great alongside a 30 year mortgage because it insures that if the income earner or earners pass before the mortgage is satisfied, the house will be paid off and stay within the family.
Term insurance should be looked at as a vehicle to get you from point A to point B, so it is often used to ensure protection until retirement age or until the insured’s children are through college and self sufficient.
Term insurance is also ideal to secure a loan, replace income, and even to settle divorce decrees or court orders. Something you won’t likely use, but want as that safety net without overpaying.
INSIDER’S NOTE: A common misconception with term insurance is that once your term (the guaranteed price period of 10-30 years) is up, your insurance is canceled. This is not necessarily the case. We often recommend converting a percentage of your term policy into a Universal Life policy to cover final expenses and the cost of burial after your major debts have been satisfied. You can make this election without reproving your health. I’m in my mid-50’s and probably have dropped down for 4 risk classes, but my “conversion rate” is based on my original “Preferred Best” risk class. Pretty cool stepping back in time!
If your debts are already satisfied and you are shopping for insurance, you will want to consider whole life insurance for burial costs or final expenses. Again, these policies are best for someone approaching retirement or even someone who is already retired and wants to make sure the cost of their funeral is not left behind for their surviving family members. Anything you can afford to leave behind is a blessing…and your final gift.
Still have questions? We have answers! Call us today and we will find the best type of policy for you at the lowest price available, and do the shopping completely free of charge. We work directly with over 40 companies and have multiple years of experience to share. We want to earn your business…For Life.
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