Burial Insurance, Defined

How would you like to be buried?

Yes, we hope you weren’t looking for a light read for lunch because we’re about to talk about death—specifically funerals, getting buried, and how you’ll pay for it. Morbid? Maybe. But we know you care too much about your family to put this off.

Lots of agents push burial insurance as a way to cover final expenses, but is it worth it?

The short answer: No. Unless you’re planning to be embalmed and enshrined in your very own pyramid, steer clear.

But what exactly is burial insurance? Good question. We’re all for being informed about what’s out there—especially so you can avoid the stuff you don’t want. So let’s get digging!

What Is Burial Insurance?

Burial insurance is a kind of permanent life insurance designed to help loved ones pay for someone’s end-of-life expenses. The monthly premiums are advertised as low, and it doesn’t require a medical exam. If you’ve been listening to The Ramsey Show or read many of our articles, you already know what we think of permanent life insurance (it saps our will to live). And this sort’s no different.

It comes with a nearly irrelevant cash value account. We say “irrelevant” because it grows so slowly, but it does exist, which means some of your premiums are going in there (to die). As with all the other types of permanent life insurance, your cash value grows at a ridiculously small rate (we’re talking 2–3%) and goes to the insurance company if you haven’t pulled it out before you pass away.

Some other names for burial insurance you might run into are:

• Final expense insurance
• Final expense life insurance
• Funeral insurance
• Simplified issue whole life insurance
• Guaranteed issue whole life insurance

This stuff’s marketed as a smaller, relatively more affordable kind of life insurance that preys on older people with a kind of guilt trip about not burdening survivors with burial costs.

You can get approved more easily for burial insurance than you can for most policies. Typically, you don’t even need to have a medical exam—that’s a big deal if you have health issues! Plus, the 2024 average cost of a funeral with a viewing and a burial was $8,094, so a little help would go a long way!¹

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But while insurance companies make it sound enticing—and it does make sense to set aside money for end-of-life costs—final expense insurance isn’t usually the best option. Life insurance policies or savings are usually more than adequate. We’ll explain why later, but first let’s go over the different types of final expense insurance.

Types of Final Expense Insurance

There are only two types of final expense insurance: simplified and guaranteed. They vary slightly in how much coverage you can get, how much you’ll pay, and how much medical information you’ll need to provide. Let’s see what you need to know.

Simplified

The good news is you can get simplified issue life insurance simply by filling out a medical questionnaire (medical exams aren’t necessary). It’s usually for people who need life insurance right away, people who were denied traditional life insurance, or for those who don’t want to go through a medical exam.

The not-so-good news? While the premiums can appear affordable, when you compare what you paid with what you get, you’ve shelled out way more per dollar of coverage than traditional life insurance.

Guaranteed

Guaranteed final expense life insurance is easier to get than simplified—you can get it even if you have a serious health issue. And like simplified final expense insurance, there’s no medical exam and an even shorter medical questionnaire (or none at all).

Guarantees are nice, right? Just know you’ll pay higher premium costs and be restricted by a lower life insurance payout cap (usually $25,000). Insurance companies take on more risk with this type of policy, so they often make it up in several ways:

• Charging higher premiums
• Limiting the death benefit amount
• Requiring a longer waiting period

How Much Does Final Expense Insurance Cost?

The premium amount for final expense insurance is higher per dollar of coverage than what you’d pay for the same benefit amount with other types of life insurance.

For example, for a final expense life insurance benefit amount of $50,000 for a 70-year-old man, your monthly premium could be double or even triple the amount you’d pay for the same $50,000 term life insurance benefit amount for the same 70-year-old man.

Is final expense insurance part of a smart financial plan? No way! We just don’t think final expense insurance is a smart way to spend your money. Let’s go over the reasons why.

What Does Final Expense Insurance Cover?

In reality, the payout from a burial insurance policy is just cash and can be used for anything (one more reason to get a term life policy that pays out more for your dollar). But people who buy these policies intend for the payout to be used on their funeral and end-of-life expenses—and it’s good to know what those costs are.

Here are final expenses that you’ll need cash to cover:

• Your funeral, including services, flowers, and staff
• A casket, embalming, and sometimes makeup and hair styling, or cremation
• Transportation to the funeral home and a hearse to the burial site
• Burial costs like a plot, interment and headstone
• Any medical or legal bills and any outstanding debt like credit card debt

Is Final Expense Insurance a Good Idea?

Buyer beware here—final expense insurance is a classic emotional purchase. And insurance companies know this.

Understanding that end-of-life is a sensitive subject and that most people want to do right by their families, some insurance companies will try to sell you final expense insurance by talking up its lower premiums compared to other kinds of policies.

While it may be true that final expense premiums are low, there’s a good reason for that—because per dollar spent, you’re getting less coverage. For example, your premium might be only $10/month. Fine. But the payout is only $25,000! Not much bang for those bucks! All told, you’re paying a lot more—dollar for dollar—for less coverage than other types of life insurance.

Here's a table that clarifies the pros and cons of final expense life insurance that we’ve discussed.

As you can see from the Cons column, there are valid reasons to be wary of final expense life insurance. The most obvious one is huge—you’re basically just paying an insurance company to set aside money for you to help your loved ones pay for your end-of-life expenses. Don’t do this!

You’re much better off keeping your money in a savings account or buying a term life insurance policy.

Example of Final Expense Insurance

Meet Gary. He’s waving at you from his front porch at 5 a.m., because when you get old your body hates you and won’t let you sleep. It also starts to have health problems like chronic liver disease, which is why Gary decided to buy a $25,000 guaranteed final expense insurance policy yesterday. Without having to answer any medical questions, Gary was issued a policy with a two-year waiting period for $350 a month.  

Problem is, Gary dies 18 months later. Bye-bye Gary, and bye-bye $25,000 insurance payout. All Gary’s family sees is a refund on the $6,300 in premiums because the waiting period isn’t up. This is the worst-case scenario.

But it didn’t have to end that way! Imagine if Gary cleans up his diet, takes some pills and lives six more years. And now he’s right there sipping coffee on his porch again. Hey, Gary! This time he’s made it through the waiting period so his family gets the $25,000. But wait a sec—how much did Gary pay in premiums over the last 72 months? He paid $25,200. Oh boogers. His family didn’t really get anything but a refund on those premiums. So Gary’s family would only benefit in real dollars if Gary died within the narrow window of about three years. Unless Gary has the lifecycle of a cicada, that doesn’t seem like a good idea.

Okay, let’s resurrect Gary one more time (chill out, Lazarus—Gary’s only an example) and this time he invests the $350 a month in mutual funds inside a tax-advantaged retirement account. Over the next six years, he could earn about $10,000 in interest and end up with $35,000 for his end-of-life expenses. Way to go Gary! Third time’s the charm.

What Is the Best Kind of Life Insurance?

Picking the right life insurance can be confusing, right? There are so many types to choose from! And it’s so important to pick the right one.

So, which one is best? Pretty much always, the answer to that question is term life insurance. For the vast majority, it’s cheaper and better.

Term life insurance is much less costly than final expense life insurance. If you die during the terms (that you set) of your term insurance policy, your beneficiaries will receive the full amount of the term insurance payout, including money to cover your end-of-life expenses.

And it’s usually still the most affordable option even when you’re older! Christine R. found that out when she decided to see how much switching her term life policy to Zander Insurance would cost—14 years after she got her first policy.

“I got a notification today that my application process is completed, and my annual premium is $35 less with $150k more coverage!” she said in the Ramsey Baby Steps Community Facebook group.

But sometimes—for one reason or another (like health problems)—term life insurance just doesn’t work for some folks. That’s when we recommend working with an independent insurance agent to find the next best option for your needs and budget.

Talk With a Pro About Insurance That Works for You

To sum it up, final expense insurance is just a marketing phrase for a small permanent life insurance policy that comes with small premiums and a piddly payout. Don’t fall for it.

Instead, talk to RamseyTrusted partner Zander Insurance. They’re insurance experts who can explain the benefits of term life insurance versus burial insurance so you can make an informed decision about setting aside money for your end-of-life expenses.