Burial Insurance for Parents: What It Costs and How to Set It Up

What burial insurance actually is

Burial insurance is a whole life policy with a small face amount, usually between $5,000 and $25,000. It does not expire at a set age, the premium does not increase, and the money is paid to the beneficiary in cash. The family decides how to use it: funeral home, repatriation of the body, unpaid medical bills, a plane ticket for a relative.

Because the amount is small, most carriers issue it without a medical exam. You answer health questions and the carrier checks prescription history. That is why it is often called simplified issue coverage.

What it costs by age

For $10,000 of coverage, non tobacco, average health, monthly premiums usually fall in these ranges: age 50 around $30 to $45, age 60 around $45 to $70, age 70 around $75 to $115, age 80 around $130 to $200. Women pay less than men at every age.

Two things move the number the most: age at application and tobacco use. Waiting two years to apply for a parent who is 68 can add hundreds of dollars a year for the rest of the policy's life. Price is locked at issue, not at claim.

Immediate benefit versus graded benefit

If your parent's health answers are clean enough, the policy pays the full amount from day one. That is level or immediate benefit coverage and it is what you want.

If health is harder, the carrier may only offer a graded or modified plan: death in the first two years returns the premiums paid plus interest instead of the face amount, unless the death is accidental. That is not a scam, it is how the risk gets priced, but you should know which one you are buying before you sign.

Who should own and pay for the policy

An adult child can buy coverage on a parent as long as the parent signs the application and there is insurable interest, which a child paying funeral costs clearly has. The child can be the owner and payer, which means the policy never lapses because a parent forgot a draft.

Name a person as beneficiary, not the estate. Money left to an estate can be delayed in probate for months, which defeats the point of a policy meant to pay a funeral home in a week.

Mistakes families make

Buying too much coverage at a premium the family cannot sustain. A lapsed policy pays nothing. It is better to insure $10,000 for thirty years than $25,000 for two.

Buying only on television price ads without checking the benefit type. Buying a pre need plan tied to one funeral home, which locks the family into that home and rarely travels.

Assuming a parent is uninsurable. Diabetes controlled with oral medication, high blood pressure and past cancer in remission are all commonly approved.