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Life Insurance vs Burial Insurance: Choosing the Right Coverage

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Life insurance and burial insurance are two types of insurance policies that can provide financial protection to your family when you die. While both policies offer similar benefits, there are significant differences between them, especially regarding the amount of money each can payout.

Life insurance pays out a lump sum of money referred to as a “death benefit” to your beneficiaries when you die. Depending on the size of the policy, your loved ones can use this money to maintain their same standards of living, pay off outstanding debts, and even pay funeral costs.

Burial insurance is also a type of life insurance policy specifically designed to cover your funeral and burial costs. That is because the death benefit is usually offered in smaller coverage amounts than you can get with a traditional life insurance policy.

Understanding the differences between these insurance policies is crucial in deciding which one is right for you and your family. In this article, we will explore the differences between traditional life insurance and burial insurance, the types of policies available, and how to choose the right policy based on your needs.

Keypoints of Life Insurance vs Burial Insurance

Basics of Life Insurance and Burial Insurance

A life insurance policy is a contractual agreement between an insurance provider and a policyholder. Before the contract can take place, an individual must undergo medical underwriting for the insurance provider to determine eligibility for a policy.

If approved, the insured will agree to pay scheduled premium payments to receive life insurance protection. In return, the insurance provider guarantees that they will pay a lump sum of money, called a death benefit, to the beneficiaries in the event of the policyholder’s death.

The primary purpose of a life insurance policy is to eliminate the financial risk that would be placed upon their family if there were to die suddenly. 

The amount of insurance coverage a policyholder can obtain depends on various factors, such as age, health, and lifestyle. Younger individuals who are healthier and have no pre-existing medical conditions generally have lower premiums and more coverage options, while older individuals with health complications may have limited coverage options or higher premiums.

Different types of life insurance policies cater to varying needs and financial circumstances. For instance, term life insurance provides coverage for a specific period of time, while permanent life insurance offers lifelong protection. In addition, policyholders can enhance their coverage by adding policy riders to their policies, which are additional benefits that can be included for an extra cost.

Basics of Burial Insurance

Burial insurance, also commonly known as final expense insurance, is a type of whole life insurance policy generally purchased to cover funeral, burial, and other small end-of-life expenses. It is designed to provide loved ones with financial assistance to cover these costs without dipping into their savings or assets.

They are also a contractual agreement requiring a premium in return for a death benefit. However, these plans offer a more lenient underwriting process and a much smaller amount of coverage than what you can get with a traditional life insurance policy.

Some of the key features of burial insurance include:

  • Simplified application process: Compared to traditional life insurance policies, burial insurance policies often have a simplified application process requiring less medical information or a medical examination.
  • Fixed premium payments: Burial insurance policies typically offer fixed premium payments that do not increase over time, providing a predictable and manageable expense for policyholders.
  • Guaranteed issue policies: For individuals who may not qualify for other types of life insurance due to health issues or age, guaranteed issue burial insurance policies offer coverage without medical exams or health questions.

Types of Traditional Life Insurance Policies

The two most common types of life insurance policies are term life and whole life insurance.

  • Term life insurance covers a set period, usually 10 to 30 years.
  • Whole life insurance provides coverage for the entire lifetime of the policyholder.

Term Life Insurance

Term life insurance offers flexibility in allowing policyholders to tailor the length of coverage to their specific needs and budget, making it a popular choice for those seeking an affordable and customizable life insurance option.

This type of life insurance provides temporary coverage for a specified period, typically 10, 20, or 30 years. The premiums will always remain the same price throughout the chosen contract length. In addition, the death benefit is paid to the designated beneficiary if the policyholder passes away during the contract.

However, if the policyholder outlives the term period, the coverage expires, and you or your beneficiaries do not receive anything. Additionally, many term insurance providers offer options for renewable and convertible policies, allowing policyholders to renew their coverage and convert it to a permanent life insurance policy but generally at a higher cost.

Overall, term life insurance is often best suited for those needing a large amount for a temporary period at the most affordable cost.

Whole Life Insurance

Unlike term life insurance, whole life insurance is permanent life insurance covering a policyholder’s entire life. Since the life insurance coverage is designed to last an entire lifetime, the death benefit is also guaranteed to payout, provided premiums are paid when due to keep the policy active.

With whole life insurance, you pay a fixed premium for the entire life of the contract. However, the premium is typically higher than term life insurance due to the cash value component, lifetime protection, and guaranteed death benefit. In addition, the cash value component of whole life insurance grows tax-deferred, meaning there are no taxes on the gains unless the funds are withdrawn from the cash value account.

A policyholder can also borrow against the cash value without undergoing a credit check or paying taxes on the loan. However, it is important to note that borrowing against the cash value reduces the death benefit. This is because if the policyholder passes away with a loan outstanding, the loan amount will be deducted from the death benefit.

Overall, whole life insurance offers a permanent and reliable form of life insurance, with the added benefit of accumulating cash value over time.

Types of Burial Insurance Policies

Burial insurance policies come in different forms, each with unique features and benefits. However, nearly all burial insurance plans are a form of whole life insurance. That means when you purchase a burial insurance plan, you will receive permanent coverage, a fixed premium, cash value, and a guaranteed death benefit.

The three most common types of burial insurance policies are:

  • Simplified Issue
  • Guaranteed Issue
  • Pre-Need Insurance

Simplified Issue

The most common burial policy is a simplified issue whole life insurance. These plans offer a straightforward option for individuals seeking a streamlined application process with quick approval.

This type of burial insurance policy requires minimal medical underwriting and accepts applicants based on a few health-related questions. No medical exam is required, and it can be an attractive option for those concerned about their health status or pre-existing medical conditions that may disqualify them from traditional life insurance policies.

The simplified issue burial insurance policy offers a range of benefits, including a simplified application process, quicker underwriting decisions, and lower premiums than most traditional life insurance policies. These policies usually have lower death benefit amounts, often $50,000 or less.

Guaranteed Issue

The guaranteed issue policy is another option for those seeking burial insurance coverage, offering guaranteed acceptance for applicants without any medical underwriting requirements or health questions.

This means an individual can secure a burial insurance policy without worrying about their health status or pre-existing conditions. However, these policies often have higher premiums and lower coverage amounts than those requiring medical underwriting. Generally, the maximum amount of coverage you can get with a guaranteed issue policy is typically $25,000 or less.

Guaranteed issue burial insurance policies are typically marketed toward older adults or seniors with pre-existing health conditions who may not qualify for traditional life insurance policies. While they can be helpful for those seeking coverage, it is important to carefully review the policy terms to understand how the death benefit payout works fully.

For example, with most guaranteed acceptance life insurance plans, the death benefit is not payable during the first two policy years if you pass away due to a health-related cause.

Suppose death occurs during the first two years. In that case, the insurance provider will likely offer you beneficiary a refund of all the premium payments paid with interest as that is the trade-off for accepting all applicants regardless of their health. However, after the second policy year, the full value of the policy is payable to your beneficiary.

Pre-Need Insurance

Pre-need insurance is a unique type of burial insurance that pays out directly to the funeral home, ensuring that your funeral arrangements are taken care of according to your preferences.

This type of insurance allows you to plan and pay for your funeral or cremation service beforehand, based on your personal preferences, minimizing the financial strain on your family and guaranteeing that your final wishes are honored.

Pre-need insurance policies are usually associated with a particular funeral provider. They can be acquired through prepayment techniques, such as life insurance, funeral insurance, funeral trusts, and bank-held trusts or savings accounts.

Choosing Between Life Insurance vs Burial Insurance

Deciding between traditional life insurance and burial insurance ultimately depends on your financial needs, personal circumstances, and goals. Factors such as age, health status, and the intended purpose of the insurance should be considered when making your decision.

For instance, a burial insurance policy may be the best option if you’re looking for a straightforward solution to cover funeral costs. A traditional life insurance policy may be more suitable if you want to provide more comprehensive financial coverage for your loved ones, such as providing a replacement of your income to your loved ones.

Financial Needs and Goals

When choosing between traditional life insurance and burial insurance, it’s essential to consider your financial needs and goals. A traditional life insurance policy can help provide greater financial coverage for your loved ones in the event of your passing, offering security and peace of mind.

In contrast, burial insurance is designed to cover funeral expenses, medical bills, or minor debts, alleviating the financial burden on your family during a difficult time. By assessing your financial obligations, assets, and personal preferences, you can determine the most suitable type of insurance for your needs.

Age and Health Status

Your age and health status are crucial factors to consider when choosing between life insurance and burial insurance. Generally, life insurance premiums are more affordable for younger and healthier individuals, while burial insurance premiums are more consistent and primarily influenced by age and health.

For instance, burial insurance may be better suited for individuals aged 50 to 85 who are concerned about how their family would finance a funeral. Assessing your current health and age will help you determine which type of policy is the most appropriate for your needs.

Combining Life Insurance and Burial Insurance

In some cases, combining life insurance and burial insurance can provide comprehensive coverage for your family’s financial needs. This approach can offer a death benefit to pay for funeral costs and other final expenses while providing additional financial support for your loved ones.

However, combining these policies may result in higher premiums and may not be the most cost-effective option for everyone. When deciding, it’s crucial to weigh the advantages and potential drawbacks of combined coverage.

Advantages of Combined Coverage

Combining life insurance and burial insurance coverage can provide a comprehensive solution to the financial needs of an individual’s dependents in case of sudden death.

Life insurance offers a death benefit to the policyholder’s beneficiaries, which can be used for any purpose, including end-of-life expenses. On the other hand, burial insurance is specifically designed to cover funeral and burial costs, ensuring that the policyholders’ loved ones are not burdened with the financial responsibilities of a funeral.

The advantages of combining coverage include the convenience of having a single policy that covers both life and end-of-life expenses, a more comprehensive benefit amount, and potentially lower premiums. In addition, by combining the policies, the policyholder can ensure that their dependents receive a lump sum payment that can be used for any purpose, including funeral expenses.

Additionally, since the policyholder is purchasing two types of insurance coverage from the same company, they may receive a discount on their premiums, resulting in financial savings. Overall, combining life insurance and burial insurance coverage can provide a comprehensive solution to end-of-life expenses, ensuring that the policyholder’s loved ones are financially secure in the event of their sudden death.

Disadvantages of Combining Coverage

One disadvantage is that combining coverage may result in higher premiums. Life insurance policies typically have a higher coverage amount and a longer term than burial insurance policies.

When the two policies are combined, the coverage amount and term may increase, resulting in higher premiums. Additionally, some life insurance policies may require a medical exam, potentially resulting in higher premiums or the policy being denied altogether.

Another disadvantage of combining coverage is that it may limit the flexibility of the policyholder. Combining life insurance and burial insurance policies may result in a policy that is too inflexible to meet the policyholder’s changing needs.

For example, if the policyholder’s financial situation changes and they need more coverage, they may not be able to increase coverage on a combined policy. Additionally, if the policyholder decides to cancel their policy, they may lose coverage for both life insurance and burial expenses rather than just one or the other.

Therefore, it is important to carefully consider the potential drawbacks of combining coverage before making a decision.

Estimating Insurance Coverage Needs

Estimating your insurance coverage needs is essential in choosing the right policy for you. This process involves calculating your life insurance needs and assessing your burial insurance needs, considering various factors and expenses.

By understanding your financial needs and goals, you can ensure that you select the most appropriate insurance policy, providing peace of mind and financial security for your loved ones.

Calculating Life Insurance Needs

To calculate your life insurance needs, you can start by multiplying your annual income by 10, although some experts suggest an even higher multiple if you are in your younger years. Alternatively, you can use a life insurance calculator or take into account your financial obligations and subtract liquid assets.

Additionally, you may wish to consider the human life value approach or capital needs analysis, which take into account factors such as your income, expenses, and financial obligations. By evaluating these methods, you can determine the appropriate amount of life insurance coverage for your specific needs.

Assessing Burial Insurance Needs

When assessing your burial insurance needs, it’s important to consider the associated costs of a funeral, burial plot, and other related expenses. Additionally, think about the amount of money your family may need to cover any debts or other expenses that may arise after your passing.

By taking these factors into account, you can determine the necessary level of coverage for your burial insurance policy, ensuring that your final expenses are covered and your family is financially secure.

Alternatives to Burial Insurance

What are the available options apart from life insurance that could potentially provide financial protection to individuals and their loved ones in the event of unforeseen circumstances? Life insurance is not the only solution for individuals looking to secure their family’s future. There are several alternatives that can offer financial protection in case of unexpected events.

Firstly, disability insurance can be a good option for those who are concerned about their income in case they become disabled and are unable to work. This insurance provides a monthly income to the insured person in case of a disability that hampers their work. It can help the individual and their family maintain their lifestyle and cope with the additional expenses that come with disability.

Secondly, critical illness insurance can be an option for those who are looking for coverage in case of a serious illness. This insurance provides a lump sum payment to the insured person in case they are diagnosed with a critical illness that is covered by their policy. It can help cover the costs of treatment, lost income, and other expenses that come with a critical illness.

Thirdly, long-term care insurance can be beneficial for individuals who are concerned about the costs of long-term care in their old age. This insurance provides coverage for expenses related to long-term care, such as nursing home care, home health care, and assisted living facilities. It can help reduce the burden on family members and ensure that the insured person receives the care they need.

Fourthly, personal accident insurance can be an option for those who are concerned about accidents that may result in injury or death. This insurance provides a lump sum payment to the insured person or their beneficiaries in case of an accident resulting in injury or death. It can help cover the costs of medical treatment, lost income, and other expenses that come with an accident.

Lastly, savings and investments can also be a way to secure financial protection for the future. Building a savings account, investing in stocks or real estate, or building a retirement fund can provide financial security in case of unforeseen events.

While life insurance is an essential component of financial planning, it is not the only option available. Individuals should consider their unique needs and circumstances and explore all available options to ensure they have the right coverage to protect their financial future.


This article has explored the differences between life insurance and burial insurance, and has provided a comprehensive overview of the types of policies available for both. It is important to carefully consider the unique needs and financial circumstances of an individual or family when choosing between these two options.

While both types of insurance can provide necessary financial support in the event of a loved one’s passing, burial insurance is specifically designed to cover the costs associated with funeral and burial expenses.

One possible objection to purchasing burial insurance is that it may be seen as a morbid or uncomfortable topic to discuss. However, it is important to remember that death is an inevitable part of life, and planning for it can bring peace of mind to both the individual and their loved ones.

Additionally, by purchasing burial insurance, individuals can ensure that their final wishes are respected and that their loved ones are not burdened with unexpected expenses during a difficult time.

In the end, taking the time to consider the benefits of both life insurance and burial insurance can help individuals make informed decisions and ensure that their loved ones are well taken care of in the event of their passing.

Frequently Asked Questions

How does the payout from a life insurance policy differ from the payout from a burial insurance policy?

The payout from a life insurance policy differs from the payout from a burial insurance policy in terms of coverage and purpose. A life insurance policy pays out a death benefit to the policyholder’s beneficiaries, which can be used for any purpose, including funeral expenses and financial security for loved ones.

On the other hand, burial insurance offers smaller death benefits to cover funeral costs and other end-of-life expenses, such as caskets, headstones, burial plots, funeral home services, and related expenses. As a result, it is generally less expensive and easier to obtain than traditional life insurance.

When choosing a life insurance policy, you should compare not only premiums but also the features and benefits offered by different providers to choose the type of policy that best suits your needs and budget.

What is better life insurance or burial insurance?

Traditional life and burial insurance can provide important financial protection for families. Life insurance will provide a larger death benefit and can replace some or all of a deceased’s income. In contrast, burial insurance is more specifically tailored to cover funeral and other end-of-life expenses.

Can life insurance be used for burial?

Yes, a traditional life insurance policy can be used for burial costs. It provides a lump sum payment to the beneficiary upon the policyholder’s death. This money can be used to cover funeral expenses or other financial needs of the deceased person’s survivors.

Therefore, life insurance provides an important way for families to pay for end-of-life costs without straining their own finances.

Does burial insurance have to cover funeral expenses?

There are no rules on how your beneficiary chooses to use the death benefit of a life insurance policy once the funds have been received from the life insurance provider.

How does the cost of burial insurance compare to the cost of traditional life insurance?

The cost of burial insurance is generally lower than that of traditional life insurance. Burial insurance is designed to cover funeral and burial costs, and therefore offers a set amount of money instead of an infinite death benefit.

It is also generally easier to obtain, with simplified and guaranteed issue options available for those who may not qualify for traditional coverage. However, it is important to ensure that the policy’s death benefit is enough to cover final expenses.

In contrast, traditional life insurance may offer a higher death benefit, but also involves more underwriting and may have higher premiums. Ultimately, the choice between burial insurance and traditional life insurance depends on individual needs and budget, and it is recommended to consult with a licensed life insurance agent, broker, or financial advisor to determine the best option.

Are there any tax implications associated with receiving a payout from a burial insurance policy?

The death benefit a beneficiary receives from a life insurance policy is typically not taxable. However, if the death benefit has earned any interest while waiting for the claim to be processed, the interest earned may be subject to taxes.

Additionally, if the policyholder had used the policy as collateral for a loan, the payout may be reduced by the amount owed.

It is important to consult with a licensed financial advisor or tax professional to understand the potential tax implications of receiving a burial insurance payout and to ensure that all necessary steps are taken to minimize any tax burden.

Picture of Jeffrey Manola - Life Insurance Expert
Jeffrey Manola - Life Insurance Expert

Jeffrey Manola is the founder of No Medical Exam Quotes, an online insurance agency that strongly focuses on helping people shop for the perfect life insurance policy. He is a licensed life insurance expert and content creator for the website.

Before becoming a life insurance agent, he served in the United States Marine Corps, transitioning from serving his country to helping families find affordable life insurance coverage beginning in 2009. Since starting a career as a licensed life insurance agent, Jeffrey has helped thousands of families with their life insurance needs.

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