Which is best for your family and individual situation?
When considering any insurance product, it’s crucial to understand its significance and related benefits. Burial and life insurance policies are highly relevant in alleviating financial burdens for your family members. However, they differ significantly in terms of coverage scopes. This guide will highlight the critical differences between the two to help you decide which one to purchase.
Insurance Payout Amount
Burial insurance payout amount is intended to cover anticipated funeral costs as per your wishes. Statistics show that average funeral costs in the UK are £3757 (in the US it’s between $7,000 and $10,000). However, life insurance cover aims at alleviating financial hardship for your loved ones as well as offer a comparable lifestyle in case something happens to you. Much higher payouts characterize life insurance compared to burial insurance. In both policies, you can choose the required benefit amount as per the insurance limits.
Life insurance cover has many types categorized as either whole, termly, or universal with multiple variations. The most affordable one among the three is term life insurance. However, it has a limitation of 15 to 30 years of insurance coverage, meaning it may elapse prior to your death. On the other hand, universal and whole life insurance doesn’t expire, provided you pay your premiums. These two are costly compared to term coverage, and have a savings account.
Burial insurance, however, covers whole life with limitations on payouts for your funeral and related expenses. It is designed to remain active until your death and doesn’t expire unless you cease paying your premiums. Similar covers to burial insurance include a pre-need funeral cover that helps prepay for your funeral expenses at a funeral home. This type is non-transferable to any another. Understanding this is crucial if you consider making funeral arrangements early.
Burial insurance has a more extended waiting period, and this means that its value increases before payout. A life insurance cover typically has one or 2-year waiting time. Your beneficiary will be refunded all premiums paid for life or burial insurance in case you die before the waiting period elapses.
Focus and Purpose of the Insurance Policy
Compared to life insurance, burial insurance has a pretty narrow focus. Its primary purpose is to cover your funeral expenses. These expenses may range from a few pounds to thousands of pounds. For this reason, it’s always crucial to plan early to avoid unprecedented challenges. Burial insurance may also help clear minor debts you owe when you die, including outstanding bills, credit card debts, or personal loans.
On the contrary, life insurance is broad in scope, and may partly be used to cover funeral expenses. As per its type, your cover may be intended to maintain the quality of your family’s life after you die. Additionally, it may aim at supporting your financial obligations in case you are terminally ill or when the unexpected occurs.
When differentiating burial and life insurance covers, both have premiums that are not deductible.
Burial and life insurance are crucial policies with unique characteristics and importance, as we have discussed above. Each one is different in terms of scope, coverage, and purpose. We hope this post has helped you to learn the difference between them as you prepare to purchase the one that suits your needs.