Getting a cancer diagnosis can be overwhelming for a variety of reasons. You have a long road of treatment ahead, and you need to make sure that your loved ones are taken care of, both while you’re getting treated and if the worst should happen.
For many cancer patients, life insurance can be out of the question. However, there are various forms of life insurance, so don’t assume that you can’t get any type of coverage.
In this article, we’ll discuss how burial insurance works and what you can do to obtain it, even with a cancer diagnosis. Don’t despair – you have options.
What is Burial Insurance?
Simply put, this kind of policy helps cover end-of-life expenses. Unfortunately, funeral and burial costs have risen substantially over the years, so your loved ones could be looking at a substantial investment when you’re gone.
When purchasing burial insurance, there are two primary types: standard and pre-need. With a standard plan, your beneficiaries will receive a set amount of money – typically between $5000 and $25,000.
Thankfully, this money is for any expenses, not just your funeral. So, if there are funds left over, your loved ones can use the cash for anything else they need.
For pre-need burial insurance, that means you will work with a funeral home to pay for specific expenses related to your burial, such as the coffin, memorial service, and grave plot. Because you’ll be working with the funeral home directly, the funds have to be spent according to your wishes.
In this case, the insurance company pays them directly, rather than paying your family members. Overall, there are advantages and disadvantages to both options. Let’s break them down for you.
Standard Burial Insurance
With this policy, you can make sure that your loved ones get enough money to cover virtually any end-of-life expenses. Again, if there are any funds left over afterward, your family gets to keep it and use it however they like.
One of the primary disadvantages of this policy, however, is that the amount of funds you can get is limited. As a cancer patient, you may be further restricted with your benefits, so you have to keep that in mind. For example, if the insurer will cap you off at $10,000 and your funeral costs exceed that, your family will have to cover the difference.
Another issue with standard burial insurance is that you don’t get to protect against the rising expenses associated with funerals. Right now, you may have sufficient coverage, but if the policy pays out in five or ten years (or more), your loved ones may not get enough money.
Pre-Need Burial Insurance
If you or your family have a particular funeral home that you want to use, then this kind of insurance may be ideal. You can work with the home to ensure that your memorial service is handled with care and paid for already. You can pick out everything from your casket to your plot, or a decorative urn if you decide to get cremated.
The main advantage of pre-need burial insurance is that you can often lock in the pricing with the funeral home. This way, you can be sure that your coverage amount will satisfy all of the costs associated with your funeral. However, if your policy offers more money than is necessary, the extra will go to the home, not your family.
Another disadvantage of pre-need burial insurance is that the company may go bankrupt or out of business. If that happens, you or your family will have to find a replacement option. In a worst-case scenario, the funeral home may close down after receiving your death benefit, meaning that your loved ones will have no recourse to reclaim it, nor to facilitate your memorial.
Getting Burial Insurance as a Cancer Patient
Typically speaking, most life insurance companies will deny coverage if you’ve been diagnosed with the disease within the last two years. All insurers have a 24-month “look back” period, so any cancer treatments or diagnoses will be counted against you. If you’ve contracted cancer more recently, you will have a much harder time trying to get a policy.
Fortunately, burial insurance works differently. Because these plans don’t offer as high of a death benefit, most insurance companies offer guaranteed acceptance policies. This means that you don’t have to submit to a medical exam, and a cancer diagnosis won’t prevent you from getting the coverage you and your family need.
That being said, there are numerous considerations you’ll have to make when comparing policies and insurers. Let’s break them down.
Two-Year Waiting Period
Once you get accepted for burial insurance, you may have to wait for two years before your loved ones can receive the death benefit. Usually, if you have had cancer or treatment within the last two years, you’ll have to wait. If your cancer is aggressive or your prognosis is shorter than two years, you may be paying for nothing.
If you are concerned about the waiting period, talk with your insurance agent about the return of premiums. In these cases, any money that you have contributed to the plan will be refunded to your beneficiaries. This way, your family can still get some money to help pay for end-of-life expenses.
On the other hand, if your diagnosis was more than two years ago, burial insurance plans can sometimes pay out immediately. Barring any specific clauses (i.e., risky behavior or suicide), your beneficiaries can receive the funds as soon as possible.
Modified Payment Plans
If you are worried that you’ll pass within the two years, then you can purchase a modified policy. These options work by paying out a portion of your death benefit, depending on how soon you pass on.
Typically, your beneficiaries will receive 30 percent within the first 12 months and 70 percent between 12 and 24 months. Once two years pass, your loved ones will get 100 percent of the death benefit.
Although you don’t have to go through a medical exam for burial insurance, you will need to answer some questions about your condition. While each insurance company is different, the most common questions you’ll be asked include:
- When were you diagnosed?
- What kind of treatment are you undergoing?
- What medications are you taking?
- Are you in remission?
- When was your last cancer treatment?
Overall, the insurance company wants to verify your level of risk. If you were just diagnosed, for example, it’s much more challenging to know how things will play out in the coming months and years. You may beat the diagnosis and go into remission, or your cancer could spread and become more of a danger.
Fortunately, because of the two-year lookback rule, if your cancer treatment ended more than two years ago, you shouldn’t be affected by it at all. This means you won’t have to pay any penalties or higher premiums because you’re less of a risk.
Ideally, you will beat cancer and go into remission. If that does happen, you also want to make sure that you’re not overpaying for your life insurance. For example, if your burial policy only pays out $15,000, you don’t want to give the insurer more than that. Otherwise, what are you paying for exactly?
Thankfully, most insurance companies will stop requesting premiums once you’ve paid the full amount of the death benefit. In that case, your coverage is guaranteed for life, even if you don’t have any other forms of life insurance active.
Because end-of-life expenses are going to occur no matter what, having this guaranteed coverage can provide extra peace of mind. This way, you’ll never have to worry about leaving your loved ones in a financial bind when you’re gone.
As you probably know, not all cancer cells are alike. While most forms of cancer will make it challenging to obtain life insurance, two varieties will not pose an issue for you. These cancers are:
- Basal Cell Carcinoma
- Squamous Cell Carcinoma
If you have either one of these illnesses, you can buy life insurance without any penalties or premium hikes.
What If I Already Have Life Insurance?
Fortunately, all life insurance companies cover cancer, so if you had a plan before getting diagnosed, you don’t have to worry about getting kicked off. However, keep in mind if you have term life insurance and it’s close to running out, renewing the policy will be much more challenging if you’re still undergoing cancer treatment.
Renewals usually require an updated medical exam, so you’ll likely have to pay higher premiums if you’re not denied altogether.
Paying for Cancer Treatment With Life Insurance
Getting the illness is already overwhelming, but the costs associated with treatment can be prohibitive. In some cases, cancer patients may prefer to use their life insurance policies to help pay for hospital stays, medications, and other expenses. Here are three situations where you can get money while you’re still alive.
Cash Value Whole Life Insurance
If you have a permanent insurance policy, then it will build cash value over your life. The longer you’ve paid premiums, the more money you can take out before you die.
If you’ve built up significant value in your plan, you can borrow against it. Either with a life insurance loan, or by surrendering the accrued amount altogether.
With a loan, you can pay the money back. This means that your beneficiaries will still receive the full death benefit. Fortunately, because the policy is the collateral for the loan, you don’t have to worry about a credit check or waiting period.
However, if you don’t pay it back, your death benefit will be reduced by the amount you borrowed. In some cases, your policy may also lapse if interest fees outgrow the remaining balance.
When surrendering your life insurance’s cash value, you are essentially canceling the death benefit. You will have to pay surrender fees. But, you don’t have to worry about interest rates or putting the money back.
If you have substantial cash value and your loved ones will be okay once you’re gone, surrendering the policy is likely the best choice.
Life Insurance Settlement
In this situation, you are selling your policy to someone else, who will collect the death benefit once you’re gone. For example, if your plan will pay out $100,000 when you die, you can settle it for a portion of that amount.
The person taking over your policy will continue to pay the premiums until you pass. Usually, this option requires whole life insurance. But, if you are terminally ill, you may be able to find a buyer for a term policy as well.
In most cases, the money you can get with a life insurance settlement is the death benefit minus the amount of premiums the other party has to pay. You receive less money the longer the doctor expects you to live. This option is only best when you have a short-term prognosis (i.e., two years or less).
Living Benefits Riders
Most insurance companies allow you to add various options and riders to your plan. If you have “living benefits” in your insurance, then you can usually receive money to pay for things like cancer treatment.
You will have to talk with your agent to determine how much you can get and what qualifications you have to meet. Also, if you don’t have this rider in place before getting diagnosed, you’ll likely be unable to add it after the fact.
Contact NextGen Life Insurance Today
If you’re ready to plan for the next step after a cancer diagnosis, let us help. We’ll compare plans and rates so that you can get the right coverage for you and your loved ones. Financial stability can provide peace of mind, which can go a long way during this trying time. Contact us today to find out more.