Many folks wonder if a no exam burial life insurance product is the right choice, and we’ll help you. It’s an important decision, and there may be ways you can save on your insurance premiums with this type of life insurance policy.
What Is No Exam Burial Life Insurance?
There are several different types of life insurance you can purchase to provide varying degrees of coverage, security, and benefit to your loved ones in the event of your death. And as you may have learned from our pages about term insurance and permanent policies, it all depends on what you want to accomplish.
Some people are seeking life insurance as a fail safe to ensure children or a spouse won’t be left with an unexpected, burdensome expense such as college tuition or a pricey mortgage. Others are looking to combine this type of coverage with the opportunity to build a more significant inheritance for their kids, or to help their spouse maintain a certain standard of living long-term in the event of their death.
But what if you can’t afford the premiums for a policy with a huge payout? What if your loved ones are financially independent, and you just want to make sure costs associated with your death won’t be an additional burden? What if you’ve waited until your later years to consider life insurance, making policies with health-based premium levels cost-prohibitive? If this sounds like you, burial insurance might be the perfect fit.
What is burial insurance?
Burial insurance, also called funeral insurance or final expense life insurance, is exactly what you’d likely assume – an insurance policy which is designed specifically to cover funeral services and other costs related to your death. In addition to paying for the procession, service, burial plot, casket, and headstone, families often use burial insurance payouts to cover outstanding medical bills, unpaid credit card balances, and other debts a family member has left behind.
How does it work?
Burial insurance is a type of permanent life insurance, meaning it is not subject to expiration after a specific term of coverage. Generally, policies are available for purchase when the insured is between the ages of 50 and 80 (in rare cases, up to 85 or beyond) and as long as premiums are paid, most policies will cover the insured through the age of 100. Like other permanent policies, a burial insurance policy can accumulate tax-deferred cash value over time, which can be either withdrawn or borrowed against at the policy owner’s discretion.
Premiums may be annual, semi-annual, monthly, or even weekly, and – as with most life insurance plans – the younger the proposed insured, the lower the premiums will be. In other words, waiting until an individual is in his/her 80’s to consider burial insurance will result in higher premiums than if a policy were purchased sooner. Some plans might also offer policy owners the option of paying for the policy in a single, lump sum. In general, the larger the lump sums you’re willing to pay, the more money you can save on your premiums.
Additionally, with burial insurance the policy owner and the beneficiary may be the same person. It is not uncommon for spouses or children to initiate the process of applying for a plan or to ultimately own the policy. Just be aware a policy cannot be taken out on anyone without his/her consent. Most companies, in addition to requiring an e-signature or consent over the phone, will conduct a brief interview with the individual being insured to make sure they fully understand the nature of the policy.
Who can qualify?
Overall, the application requirements are simpler and the underwriting requirements less stringent than with other forms of life insurance. This tends to speed up approval and make it easier to qualify for an affordable plan. There is also a major difference in the application process for burial insurance makes it a very favorable option for certain people – medical examinations are not typically required.
The insurance company will require certain information – age, height, weight, gender, lifestyle, occupation, smoking habits, alcohol consumption, etc. The insured will also have to state he/she is not terminally ill or living in a nursing home to qualify for certain policies. But with the absence of a required medical screening, certain health issues which would make other forms of life insurance prohibitively expensive may not affect approval or premiums for a burial policy.
Level vs. Graded Benefit
Depending on your health and other habits, you may qualify for one of two types of burial insurance – level benefit or graded benefit.
With a level benefit policy, the full face value of the policy will be in effect as soon as you are approved and begin paying premiums. Understandably, companies require the proposed insured be in generally good health in order to qualify for a level benefit plan. Otherwise, a person with a serious health problem delay purchasing a policy, intentionally paying very few premiums for the full death benefit.
Some people with minor impairments or health issues are controlled by medications, etc. may still qualify for a level benefit plan, but approval is not guaranteed.
Graded benefit plans are Guaranteed Issue, which means you can’t be turned down when applying. These plans are approved with no medical questions asked.
With a graded benefit plan, there is a waiting period during which the full face value of the plan will not be in effect. For instance, the death benefit on some policies is only payable if the insured dies after premiums have been paid for 24 months. If the insured dies before this point, the company will only return paid premiums with modest interest.
Other graded benefit plans may gradually increase benefits until the full face value is permanently in effect. For example, the company might agree to pay 25% within the first year of the policy, 50% within the second, 75% within the third, and the full face value any time thereafter. With this type of policy, there would not be a full payout on the policy unless the insured were to die three full years after issuance.
While a level benefit plan is ideal, graded benefit plans are great for individuals who can’t qualify for other policies due to serious health issues or participation in high-risk activities. Premiums will be higher, but if you are likely to be rejected altogether for other types of life insurance, this could be your best option.
Is burial insurance right for you?
The truth? It depends.
If you’re interested in the convenience of a fast approval process with no medical screening, burial insurance might be for you.
Premiums can be surprisingly low, even compared to term policies with comparable death benefits. But the healthier you are, the more likely you are to get a better deal out of a fully underwritten term or whole life policy. Just remember, should you live beyond a policy’s term, renewal may send your premiums through the roof, whereas with a burial policy your premiums will remain level.
Some people even choose to supplement larger life insurance policy with modest burial policies, because the latter typically ensures a faster payout. This means your family will receive help covering immediate costs while the payout from other life insurance policies may still be tied up.
The most important thing when you’re shopping around is to compare policies from several different companies, because premiums on similar plans can vary dramatically from one company to another. While you’re checking out your options, ask the right questions about the cost of each plan and carefully compare these costs to other types of policies as well.
- How much will your premiums be?
- Will premiums remain level or increase over time?
- Can larger lump sums reduce your overall premiums?
- Will the full face value of the plan be in effect immediately, or will there be a waiting period? What would be payable in the event of death during the waiting period?
- How have third party agencies such as Standard & Poor’s, Moody’s, and Fitch rated the financial strength of the insurance company? (It’s important to check on these ratings before committing to any life insurance plan, because the availability of your benefits will be dependent upon the company’s long-term survival.)
Whether you decide on a final expense plan like one of these or a different type of life insurance policy, you and your loved ones are going to enjoy a great peace of mind knowing in the event of your death, no one will have to worry about the additional burden of unexpected expenses.