HomeAnswersBurial insurance vs life insurance, what is the difference?
Burial insurance vs life insurance, what is the difference?
Burial insurance is a kind of life insurance, so the difference is mainly size and purpose. Nevada's Division of Insurance calls funeral or burial insurance a form of life insurance that gives family members coverage for the costs of the insured's death, and Washington's insurance commissioner says death benefits for standard funeral insurance are often low, ranging from $5,000 to $25,000. That money goes to the beneficiary you chose, who can use it in any way, including the funeral, medical bills, legal costs or debts.
Regular life insurance is commonly term or whole life. The NAIC describes term life as coverage bought for a set period that pays if the insured dies during that term, and California's Department of Insurance says whole life is designed to cover your entire lifetime. Washington says funeral insurance usually lasts either a certain amount of time or your entire life. Compared with most life insurance plans, Washington lists easier qualifying, few or no health questions and often no medical exam, but also lower benefits, no discounts for good health and usually higher premiums. Florida's consumer guide describes graded death benefit policies that pay the full benefit for accidental death but a much smaller amount for other causes of death in the first few years, and it warns that with policies sold specifically for burial expenses you may end up paying more in premiums than the policy is worth.
A preneed funeral contract is a different arrangement, a contract to arrange and prepay your own funeral. The FTC says state laws govern these prepayments, protections vary widely from state to state, and some states require the funeral home or cemetery to put part of the money in a state-regulated trust or buy a life insurance policy assigned to the funeral home or cemetery. Washington says pre-need insurance, unlike standard funeral insurance, pays the funeral provider you choose rather than a beneficiary.
The sources behind this answer
- The NAIC describes term life insurance as a policy bought for a set period that pays the named beneficiaries if the insured dies during that term. NAIC Life Insurance consumer page
- The California Department of Insurance life insurance guide says whole life insurance is designed to provide coverage for your entire lifetime, unlike term insurance, which covers a specified time period. California Department of Insurance Life Insurance Guide
- The Nevada Division of Insurance says funeral or burial insurance is a form of life insurance that gives family members coverage for the costs associated with the insured's death. Nevada Division of Insurance, Funeral Insurance
- Washington's Office of the Insurance Commissioner says standard funeral insurance usually lasts either for a certain amount of time or for your entire life, and its death benefits are often low, ranging from $5,000 to $25,000. The page prints no date. Washington OIC, Funeral insurance
- Washington's insurance commissioner says standard funeral insurance death benefits go to the beneficiary you chose, who can use them in any way, including for the funeral, medical bills, legal costs or debt. Washington OIC, Funeral insurance
- Washington's insurance commissioner lists as pros of funeral-related insurance that it is easier to qualify for than most life insurance plans, with few or no health questions and often no medical exam. Washington OIC, Funeral insurance
- Washington's insurance commissioner lists as cons that funeral-related insurance offers lower benefits than most life insurance plans, has no discounts for good health, and usually has higher premiums than life insurance. Washington OIC, Funeral insurance
- Florida's Department of Financial Services life insurance consumer guide (revised February 2017) describes a graded death benefit policy as paying the full death benefit for accidental death but a much smaller amount for other causes of death in the first few years, after which it behaves like a standard whole life policy. Florida DFS, Life Insurance, a guide for consumers
- The same Florida consumer guide warns consumers to be wary of policies sold specifically as burial expense policies, because they may end up paying more in premiums than the policy is worth. Florida DFS, Life Insurance, a guide for consumers
- Washington's insurance commissioner says pre-need funeral insurance helps pay expected funeral costs and, unlike standard funeral insurance, pays the funeral provider you choose. Washington OIC, Funeral insurance
- The FTC says millions of Americans have entered contracts to arrange and prepay their funerals, and that the laws of individual states govern these prepayments. FTC, Planning Your Own Funeral
- The FTC says protections for prepaid funeral money vary widely by state, some state laws offer little or no effective protection, and some states require the funeral home or cemetery to put a percentage in a state-regulated trust or buy a life insurance policy with death benefits assigned to the funeral home or cemetery. FTC, Planning Your Own Funeral
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