Typically, when looking for life insurance, you’re comparing policies and rates for yourself. However, while you do want to provide for your loved ones when the worst happens, you may also want to get coverage for those closest to you.
As we get older, we need to start thinking about the health and well-being of our parents. They cared for us when we were kids, and now we have to do the same as they enter retirement and their golden years.
One obstacle, though, that can make obtaining a policy a challenge is the age of your parents. If they are already over 60 or 70, it will be tough to get favorable rates and a substantial death benefit. To alleviate that problem, it may be better to get burial insurance instead.
So, with that in mind, we want to outline the steps necessary for getting burial insurance for parents. This process can be complicated for some, but waiting will only make it worse. Now is the right time to compare plans and find the right solution for you and your parents.
What is Burial Insurance?
There are actually a few names for this kind of coverage. It can also be called end-of-life insurance or final expense insurance. As the name suggests, the primary purpose of this policy is to help pay for those costs associated with death. Funerals, burials, memorial services – each one can cost thousands of dollars on its own, meaning that you have to be prepared.
Here are some crucial things to understand about burial insurance before shopping for a policy.
Limited Death Benefit
While some insurance companies will vary, the vast majority of them will cap burial insurance at $25,000. So, if you’re hoping to get a higher death benefit for your parents, you will need to see if term or whole life insurance is possible.
Compared to other forms of coverage, you’ll be paying substantial monthly premiums with burial insurance. One of the benefits, however, is that these payments usually stop once you reach the full benefit amount. Even better, since you’ve already fully paid into the plan, you never have to worry about losing it or getting denied.
As we’ll cover later on, you will want to talk with your insurance agent to see how premiums are affected by things like age and health. However, burial insurance has a guaranteed acceptance option, meaning that anyone can get approved.
So, if your parents are much older (i.e., 80 or higher), this plan may be the best (or only) option. Again, you’ll have to pay more upfront, so if you can reduce your premiums, it’s worth checking out alternatives.
Flexible or Restricted Access to Funds
Typically speaking, burial insurance works like any other form of life insurance. If you get the full death benefit of $25,000, you can spend it however you like. Although the intention is to cover final expenses, the money doesn’t have to go to those things. For example, if any funds are left over after the fact, the beneficiary gets to keep it.
Alternatively, you can name a funeral home as the beneficiary instead. The reason to do it this way is to ensure that the funds are spent on your parent’s burial and funeral. One of the benefits of doing this is that you can lock in rates with the funeral home. If you’re worried about prices going up too high later on, this option may be ideal.
The downside of naming a funeral home in the policy, however, is that you have no recourse if the business closes. So, before making a final decision, be sure to do your research first to determine the best course of action.
How to Get Burial Insurance for Your Parents
Because you’re taking a policy out on someone else, you have to go through a few extra steps to finalize everything. Here are the steps to take to get burial insurance for your parents.
As you can imagine, one issue that most insurance companies face is fraud. Life insurance is designed to provide financial security and peace of mind for those affected by someone’s death. So, what these companies want to avoid is anyone “profiting” off the death of another person.
Insurable interest means that you (the policyholder) will face a financial loss if the insured (your parents) pass away. Fortunately, because you are related to your parents, that automatically fulfills this requirement. Realistically, you will be financially responsible for paying your parents’ final expenses, so the insurance company won’t ask for further proof.
Now, if you were getting a policy on someone else’s parents (i.e., a spouse), then you will have to provide some documentation proving insurable interest. For the sake of expediency and efficiency, it may be better for your spouse to be the policyholder. However, it will depend on your specific situation.
Although burial insurance is guaranteed and doesn’t require a medical exam, most insurers will want access to the insured’s medical history. Typically, the purpose of this step is to assess the amount of risk.
For example, if one of your parents has a terminal illness, the insurance company will charge higher premiums. Or, if your parents have a history of medical problems, that can raise the rates as well.
Because you are not the insured, you have to talk to your parents about allowing access to their medical records. The only time you don’t have to worry about this is if you have health care power of attorney. Under HIPAA laws, you won’t need to consult your parents before submitting their records in that specific situation.
Also, if you get guaranteed acceptance burial insurance, consent is not required either. However, because you’ll be paying much more in premiums, it’s better to choose a lower-cost option first if possible. Another issue with guaranteed acceptance plans is that there is typically a two-year waiting period before the insurance company will pay the death benefit.
Other Considerations for Getting Burial Insurance for Parents
Overall, the process of obtaining a life insurance policy is relatively easy. However, since we’re discussing the death of a loved one, there are many other variables and factors to consider. Be sure to go over these things with your parents before shopping around for a policy.
Do Your Parents Have Life Insurance Already?
For many people, talking about death and life insurance is difficult. That means that your parents may already have policies and have never mentioned it. If that is the case, there’s no reason to buy another plan, particularly if the death benefit is substantial enough to cover final expenses.
One other aspect of this, however, is whether your parents have individual or shared coverage. With individual plans, once one spouse dies, the other receives the full death benefit. In that case, your surviving parent can use those funds to cover any final expenses.
Alternatively, if your parents have a joint plan, then the money won’t get paid out until both of them die. In that situation, it may be ideal to have burial insurance in place so that you and your remaining parent don’t have to pay out of pocket.
How Much Coverage Do You Need?
While it’s tempting to max out the death benefit for burial insurance, it’s not worth paying higher premiums if you don’t need the money. Now is the time to talk to your parents about how they want their funeral and burial to happen.
For example, cremation costs are usually around $1,000 to $5,000, while a coffin burial can run upwards of $10,000 to $15,000. If your parents want to be cremated, you don’t have to buy as much coverage. Also, if there is no interest in an extravagant memorial service, that’s another expense you won’t need to cover.
During your discussion, it may help to price out each service and option. Also, keep in mind if one parent wants cremation while the other wants to be buried. In some instances, it may be necessary to get two policies – one for each parent.
Are Your Parents Healthy? How Old Are They?
No matter what kind of life insurance you buy, age and health are significant factors. Realistically, the sooner you get coverage, the less you’ll have to pay in premiums. For example, buying insurance when your parents are 65 will be much cheaper than waiting until they’re 75.
Overall, if your parents are in decent health and don’t have a history of chronic illness, you should be able to get favorable rates. Also, keep in mind that waiting until your parents are 80 or older can limit your options. In most cases, 85 is the cutoff point for any insurance beyond guaranteed acceptance, so keep that in mind.
Contact NextGen Life Insurance Today
Coming to terms with the death of your parents can be overwhelming, but it will only be harder if you’re not ready. Let us help you compare plans and rates so that you get the best coverage at the right price.
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