As the years go by, it makes sense for insurance to be on your mind. You catch yourself tuning in when insurance advertisements interrupt your shows or newsfeed. There are so many different kinds of insurance out there, and it can be overwhelming, but insurance is a necessary thing to figure out as you get older.
Everyone will pass eventually. You want to be sure that your loved ones will be cared for when this happens. With so many options available to you, there is a lot to consider. You want to select an insurance policy that will not only have your back but the backs of your family.
If you have been looking over your options, two insurance policies that you have likely heard of are burial insurance and life insurance. Which one is better for you and your needs? Let’s find out!
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What is life insurance?
Life insurance exists to help those you leave behind after you pass. Regular expenses can become hard to deal with when loved ones, who once helped pay bills and stay on top of payments, die. Life insurance allows you to plan ahead and ensure there will be enough money left behind to take care of your family and pay off any debts.
When you decide it is time to get life insurance, there are a few things you have to get through before you have a policy. To qualify for some life insurance policies, you will likely need a medical exam performed. The better your medical record, the better the rate tends to be.
All health conditions, both past, and current, must be named for the policy to remain binding. The same goes for any high-risk activities the applicant is involved in regularly.
A contract is created between the policy owner and the insurer. A premium might be paid upfront, or these will be paid regularly throughout the life of the policy owner. After the policy owner dies, loved ones will be paid based on these premiums.
There are many unique options when it comes to life insurance. It depends on the company you go through and the needs you have. Some cost more than others and provide a range of coverage.
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There are many types of life insurance policies to choose from.
These types fall under permanent life insurance or term life insurance. Permanent life insurance options do not expire, while term life insurance options last for a specific length of time.
- Term life insurance– Term life insurance policies expire after a declared number of years. This number can range from one to 30 years. With a term life insurance policy, you select one based on your needs. These policies tend to be cheaper than other options. If you live past the specified time frame, it will expire without payout. There is also a range of term life insurance policies.
- Decreasing term life insurance– With a decreasing term, as years go by the coverage involved in this policy decreases. The rate at which it decreases will vary depending on what you select.
- Convertible term life insurance– This policy allows converting the term policy into a permanent insurance option if desired.
- Renewable term life insurance– This policy needs to be renewed each year with premiums increasing on an annual basis. Each year policyholders are provided with a quote for their coverage.
- Permanent life insurance– These policies differ from term life insurance policies because they last forever. They tend to include a cash value aspect as well. That means you can either borrow against your policy while you are alive or withdraw accordingly.
Beyond these umbrella terms, there are many more life insurance options. Let’s look into a few of them.
- Whole life insurance– These policies are also called traditional life insurance. This insurance tends to last until you pass, given you keep up with your premiums. This policy builds cash value over time.
- Universal life insurance–
- Guaranteed universal life insurance does not tend to have cash value. If it does, this value will be low. With this insurance option, you can select the age you want these benefits guaranteed. If you fail to make a payment, you risk losing the policy and may be left with nothing.
- Indexed universal life insurance is connected to the stock market. They carry cash value that increases as the years go by. You can earn interest based on how the stock market is doing. This interest also depends on the formula your insurer has set up in your policy. More effort is necessary for those who carry these policies.
- Variable life insurance– According to the U.S. Securities and Exchange Commission, this policy pays a certain amount to your listed beneficiaries after death. It has cash value as well which depends on fees, expenses, the premiums you pay, and the performance of investments provided in this policy.
That’s not even all of them! Other options include simplified issue life insurance, guaranteed issues life insurance, group life insurance, and more. There are so many life insurance policies, and it is vital to understand each one so that you make the right decision for yourself and your family.
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What is burial insurance?
Simply put, burial insurance is a type of life insurance. Burial insurance is also referred to as funeral insurance or final expense insurance by some insurance companies. Burial insurance is a low coverage option. It exists to cover expenses at the end of life. It will not take care of your loved ones in the long term but instead cover things like funeral expenses, medical bills, and other debts that have not been taken care of before death.
The benefits attached to this type of insurance are not as vast as the ones you would find within life insurance. If you decide to get burial insurance, the cost will depend on factors such as your health and age.
If you have never had to plan a funeral, you are not alone. Many people do not plan or realize how many costs will come up at the end of their life. Paying for things like a memorial service, burial plot, or an urn can add up. Burial insurance takes this stress away from those you love. Knowing that all of these expenses are taken care of should take a load off.
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How are burial insurance and life insurance different?
Life insurance is broad and can include a large variety of coverage options. Burial insurance is just one of them. Depending on the life insurance policy a person selects, they can leave their family with a large sum of money to take care of them.
Burial insurance covers expenses at the end of your life but will not take care of your loved ones in the long term. This insurance is there to cover the cost of a funeral and other related expenses. According to the National Funeral Directors Association, in 2021, the average cost of a funeral was around $7,848. That number includes the viewing and burial but does not include every cost. That’s quite a bit to leave your family with if you don’t plan properly.
With burial insurance, your beneficiary can choose to spend any remaining money on other expenses such as credit card debt and medical bills. However, there isn’t anywhere near as much money available to them as they would have if you chose one of the many life insurance policies available to you.
Burial insurance typically covers up to $50,000. Life insurance usually starts much higher than that and can reach millions.
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Which insurance option should I choose?
Before you select an insurance option, do some more research and call around. Some companies offer better insurance plans than others. If you do not fully assess your options, you risk not leaving your family with enough money to deal with your passing.
It is worth noting that a life insurance policy is only as sturdy as the company you go through. Some people get their insurance through their employer. If they decide to leave their job, their life insurance coverage would likely disappear. If you qualify for an affordable life insurance policy outside of your workplace, it is worth considering. This policy would be yours no matter what happens with your job.
The insurance option you select will depend on your unique situation. If you have loved ones that you want to continue to take care of after you pass, life insurance is probably a better bet. If you think they can handle themselves long term but want to avoid leaving them to deal with the cost of a funeral on their own, burial insurance might be a better fit for you. Some people even decide to get both.
An insurance agent or company can go over your options and help you decide the best one to fit your needs. They can help you understand all aspects of the wide range of life insurance coverage options available to you.