Burial Insurance vs. Life Insurance: What's the Difference?

Short answer: When people compare burial insurance vs. life insurance, they’re comparing a type of life insurance with the broader category it belongs to. Burial insurance (also called final expense insurance) is usually a small whole life policy, sized to cover a funeral and final bills, that typically uses a few health questions instead of a medical exam. “Life insurance” also includes term policies and larger whole life policies, which usually cover bigger needs like income or a mortgage.

Is burial insurance the same as life insurance?

Yes, burial insurance is life insurance. When you die, the insurance company pays a death benefit to the beneficiary you name. What makes it “burial” insurance is its size and purpose.

The New York State Department of Financial Services (DFS) describes small policies like this as coverage “for a small face amount, typically purchased to pay the burial expenses of the insured.” Burial insurance, final expense insurance and funeral insurance are generally different names for the same kind of policy. For the full basics, see what final expense insurance is and how it works. A prepaid funeral contract bought from a funeral home is a different product, covered below.

What is the difference between life insurance and burial insurance?

The differences come down to how long coverage lasts, how much it pays, and how you qualify.

How long it lasts. Term life covers a set period. DFS says that with term, “if you live beyond the term period you had selected, no benefit is payable.” Burial insurance is usually whole life, which the Texas Department of Insurance (TDI) says “stays in effect for your entire life unless you cash the policy in or stop paying premiums.”

How much it pays. Term and traditional whole life policies are often bought in larger amounts to replace income or pay off a mortgage. Burial policies are smaller. In New York, for example, DFS says senior life plans have a “maximum issue amount of coverage” of $25,000. Limits vary by insurance company and state.

How you qualify. Larger policies often involve full underwriting. TDI says this “often includes passing a medical exam and answering questions about your health, job, and habits.” Most final expense policies need no medical exam. Instead, they use either:

• Simplified issue: a short list of health questions, and the answers decide whether you qualify and for which type of policy.
• Guaranteed issue (or guaranteed acceptance): no health questions, but usually a waiting period before the full benefit is paid for natural-cause deaths.

The trade-off is cost. The National Association of Insurance Commissioners (NAIC) says that “usually a policy that doesn’t require detailed health information will cost more and provide less coverage.” DFS adds that small policies like this often carry “a higher premium per $1,000 of coverage than larger size policies.”

Burial insurance vs. life insurance: a side-by-side comparison

How do waiting periods work on burial insurance?

Some burial policies don’t pay the full benefit right away. DFS says senior life plans, “sometimes referred to as graded death benefit plans,” may pay “only for a return of premium or minimum graded benefits” if death occurs during a specified period, “generally the first two or three policy years.”

Level-benefit policies, for applicants who qualify through health questions, typically pay in full from day one. Guaranteed-issue policies usually have a waiting period. Rules vary by insurance company and state. Our guide to burial insurance with no waiting period explains how to tell which kind you’re being offered.

Can my family use burial insurance for anything besides the funeral?

Usually, yes. With most final expense policies, the benefit goes to the person you name as beneficiary, not to a funeral home. TDI explains that the insurance company “will make payments after your death to the person you name in your policy.” Your beneficiary can use the money for the funeral, medical bills, debts or anything else.

That’s a key way burial insurance differs from a funeral home arrangement. The Alaska Division of Insurance notes that licensed agents who work for funeral homes “commonly sell these policies in the form of a whole life insurance policy,” and says that if there’s no price guarantee, the insured “should insist on naming their own beneficiary” instead of naming the funeral home.

How is burial insurance different from a prepaid funeral plan?

A prepaid or preneed funeral contract is an agreement to arrange your funeral with a specific provider and pay some or all of it ahead of time. The Federal Trade Commission (FTC) says that “laws of individual states govern the prepayment of funeral goods and services,” and that “protections vary widely from state to state.”

TDI describes prepaid funeral insurance this way: “Prepaid funeral insurance pays your funeral expenses.” It lists an advantage (“it locks in funeral costs at current prices”) and drawbacks, including that “funeral insurance can be expensive compared to other types of life insurance” and that “the amount you pay in premiums might end up being more than what the policy pays when you die.” TDI also says “a regular life insurance policy or savings might be a better way to pay for a funeral.”

Before you prepay, the FTC suggests asking questions such as:

1. What exactly are you paying for: merchandise only, or services too?
2. What happens to the money you’ve prepaid?
3. “Can you cancel the contract and get a full refund if you change your mind?”
4. What happens if you move or die away from home? The FTC notes that some plans “can be transferred, but often at an added cost.”
5. “Are you protected if the firm you dealt with goes out of business?”

Which one fits you?

• Burial or final expense insurance often fits people who want lifelong coverage sized to a funeral and final bills, want to skip a medical exam, and want their family to decide how the money is spent. Alaska’s insurance division says a burial policy may make sense if you have no life insurance, can’t get term life, or have limited savings to cover funeral expenses and debts.
• Term life insurance often fits a larger need with an end date, such as a mortgage or a spouse’s income. Term may end before you die, so it’s less suited to a need that lasts for life.
• Larger traditional whole life often fits someone who can qualify through full underwriting and wants permanent coverage above final-expense amounts.
• A prepaid funeral contract may fit someone who wants specific arrangements with one provider and understands their state’s protections.

A life insurance policy you already own that lasts for life may already cover your funeral. Either way, the NAIC advises: “Before you buy a life insurance policy, be sure you can pay the premiums.” It also says “it’s important to tell the truth on the application.”

Our guide to how much a funeral costs can help you pick an amount. A licensed agent can compare burial insurance options from several insurance companies for your age, health and state. Here’s how calling RestAssured works.

RestAssured is a brand of All Phone Leads, Inc. RestAssured is not an insurance company or an insurance agency and isn’t affiliated with any government agency. RestAssured connects callers with independently licensed insurance agents.

Frequently asked questions

Is burial insurance the same as life insurance?

Yes, burial insurance is a type of life insurance. It’s usually a small whole life policy that pays a cash benefit to your beneficiary when you die, sized to cover a funeral and final bills.

What is the difference between life insurance and burial insurance?

Burial insurance is a smaller, simpler kind of life insurance. Compared with a typical term or traditional whole life policy, it usually has a lower coverage amount, uses a few health questions instead of a medical exam, and lasts for life.

Is burial insurance the same as final expense insurance?

Generally, yes. Burial insurance, final expense insurance and funeral insurance are usually different names for the same kind of small whole life policy. A prepaid funeral contract with a funeral home is a different product.

Does burial insurance have to be used for the funeral?

Not usually. With most burial or final expense policies, the benefit is paid to the beneficiary you name, who can use it for the funeral or anything else. If a funeral home is named as beneficiary, the money goes to the funeral home.

Can regular life insurance pay for funeral expenses?

Yes. Any life insurance benefit paid to your beneficiary can be used for a funeral. The Texas Department of Insurance says a regular life insurance policy or savings might be a better way to pay for a funeral than prepaid funeral insurance.

Sources

• Life insurance guide, Texas Department of Insurance
• Types of life insurance policies, New York State Department of Financial Services
• Life Insurance Buyer's Guide, National Association of Insurance Commissioners
• Burial insurance, Alaska Division of Insurance
• Planning your own funeral, Federal Trade Commission

This article is for general education. Policy features, prices and eligibility vary by insurance company and state; your agent will explain the specific terms of any policy before you apply.