Sunday, August 14, 2011

More on Burial Insurance

About 40% of today's working people do not have life insurance beyond what they have with their employers. Employers of any size usually provide group life insurance as a benefit because it is ridiculously cheap for them, and they can deduct the cost from their taxes.

Most also forget to tell people that if it is group term, it disappears when they leave the job or retire. However, by the time you reach retirement age, the cost of having your own insurance will be much more expensive; you may think there is no way you can afford it on social security or out of your retirement, and that your heirs will simply have to bear that burden.

You have probably been to funerals and have heard people talking about Mrs. "Smith" who didn't have a penny of life insurance, and thus the family had to decide how to pay the bill. An easy and inexpensive way to avoid leaving your family with a bad memory is to purchase "pre-needs" insurance. This is a type of whole life insurance policy that you purchase from a funeral director. He is the beneficiary on the policy, but you pay the premium. You receive a contract stating that your funeral will be taken care of for the face value of the policy. You do want to make sure the policy is transferable in case you move to another city or state.

A second option that people sometimes use when receiving a retirement distribution of a 401K or IRA plan is to take a lump sum and simply "prepay" a funeral. In this case, you make all the arrangements with a specific funeral home, choosing your casket, the number of cars you want, the type of service, and so forth. The funeral director gives you a contract, but actually invests your money himself. His hope is that you will live long enough for him to make a profit on your money.

Probably the most preferred burial insurance (aka: Senior Life) option is simply to purchase a small whole life policy of your own that will be enough to pay final expenses. Then you choose the beneficiary yourself. Many companies have "easy issue" policies that generally have no medical exam requirement and are quite affordable.

Some people have severe health issues that prevent them from getting even an easy issue policy. In such cases, you can usually still get a pre-needs policy from the funeral director, although it will probably be cheaper to get a "Graded Benefit" policy. A graded benefit policy is simply a whole life policy that pays a limited benefit—usually your premium plus interest—during the first two years. It has no underwriting at all as the company has very little risk. It is more expensive than a regular life insurance policy, but is still an option for meeting the need.

For more information, contact us at Funeral Dignity Life.

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