Burial Insurance vs Whole Life Insurance: Which should you buy?

Insurance provides a safety net to prevent financial disaster for the policyholder. By paying monthly premiums, people can assure themselves of some security in a given sector. For example, auto insurance provides financial coverage for vehicle damage, personal injury, and liability. Likewise, health insurance covers health bills.

Life insurance, however, might be better-called death insurance. You, as the policyholder, don’t necessarily benefit from your policy; it’s for your loved ones who survive you. There are many types of life insurance, some that even provide benefits while you live. 

Whole life insurance and burial insurance are on opposite sides of the life insurance spectrum, so how can you know which one to invest in? Read on to discover which insurance best fits your needs.

Why do you need life insurance?

You may think, “Can’t I just save some money and will it to whomever I want and skip paying monthly premiums.” You can, but significant obstacles can take time to work through in the process of inheriting. But, if your loved one needs to pay a mortgage or finance your funeral immediately, estate money might not be available in time.

Life insurance is handy because it goes directly to your beneficiary in the event of your death without red tape. Burial insurance benefits a named person simply to help them cover death expenses.  

What are death expenses?

The immediate end-of-life expenses that are obvious are funeral and burial costs. Big funerals, cremation, and green burial all cost a significant amount of money. 

But have you ever thought about other end-of-life costs? The average person spends more on medical care in the last year of their life than the rest of their life combined. This medical cost adds up and is not always covered by health insurance and Medicare. Life insurance and burial insurance funds can cover these medical bills. 

Even a mortgage payment that is due after your death is a financial burden for your family. In addition, unpaid school loans, utilities, and maintenance are all bills that follow your loved ones after you pass.

What is whole life insurance?

Whole life insurance is insurance that follows a person for their entire life. The younger and healthier you are when you take out a whole life policy, the better your monthly premiums can be.

Most healthy young people opt for term life insurance. It is significantly cheaper monthly and covers you for the stage of life where you have the most financial responsibilities. But term life insurance is basically a membership versus an actual financial asset.

Whole life insurance is a policy that accrues cash value and even dividends. Whole life policies are usually for a substantial amount of money, over $100,000. This chunk of money gets disbursed to your beneficiary upon your death. This money is typically tax-free and immediately usable.

Because of the immediate nature of life insurance payout, current bills can be paid. These bills include financial burdens like a mortgage and a funeral. The remaining funds can be saved or used at the beneficiary’s discretion. 

Whole life policies are a good option for you if you have dependents who need care beyond your life. In the event of terminal illness, you can use your insurance policy while still living. This benefit, either included or added, is called accelerated death benefits (ADB).

How in-depth is health screening for whole life insurance?

The health screening for whole life insurance policies is in-depth. You get “rated” by your insurance provider for health and lifestyle risks. Remember, an insurance company will not make money if they don’t assess risks accurately, so they make it their business to know your health. 

If you are under 50, and in good health, will generally find a lower rate for whole life insurance. Conversely, The worse health you are in or the older you are, the harder and more expensive it is to take out a whole life policy. 

What is burial insurance?

Burial insurance is generally a smaller policy intended to cover end-of-life costs. You pay a high enough premium to earn this benefit. Insurance companies can target a unique demographic by offering smaller increments of payouts and less intensive health screening.

Funeral insurance, burial insurance, and final expense insurance are all the same. Burial insurance is a policy unique to people who are closer to death. But even these policies require you to contribute for a couple of years. If you die before that timeline, your beneficiary will usually only receive the amount you’ve already contributed.

Some funeral policies are specific to a funeral home and not transferable. For example, funeral companies often offer burial insurance specific to them. This works more like a membership, and your loved ones might not actually receive the funds but rather choose which features to put the money toward.

Is health screening required for burial insurance?

The health screening for burial insurance is minimal, if required at all. Think about it; it’s a small policy that only requires you to live a couple of years beyond the date of purchase. Whether or not you have impeccable health doesn’t factor largely into the purpose of these policies.

Your beneficiary is important because, despite its title, burial insurance does not limit the funds to funeral items. There are generally no restrictions on what your beneficiary can use the funds for unless it’s specific to a funeral home. Remember that your beneficiary directs these funds and can just pocket them, so choose wisely. 

Which insurance is right for you?

If you are young and in good health, a whole life policy offers guaranteed cash value with a lower monthly cost than burial insurance. Plus, the holder can accrue dividends that benefit during life.

If you find yourself passing middle age or have health risks that prevent taking out a whole life policy, burial insurance might be your best option. If whole life insurance is too expensive or impossible to find because of your lifestyle, you can still probably get burial insurance.

In either case, you can do your homework comparing quotes online and reviewing customer ratings. Then, speaking with an agent will help you negotiate premiums and savings. Often, life insurance companies do not advertise all their behind-the-scenes discounts, but an agent is equipped to fine-tune your policy. 

Any financial burden that accrues shortly before or after death is a death expense and can potentially sink your family. Any insurance is better than nothing when it comes to helping your loved ones deal with your death.

Maria Hanson writes and researches for the insurance comparison site, TopQuoteLifeInsurance.com. She is passionate about helping people understand their options when it comes to insurance and finding their best fit.