What Is Cremation Insurance?

Cremation insurance is a form of life insurance designed to cover specific final expenses.

With the cost of traditional funerals on the rise, many families turn to cremation to save money and simplify funeral planning.

Finding the right cremation insurance policy can help reduce the financial burden on your loved ones. 

In this guide, we’ll break down the ins and outs of cremation insurance and give you advice on getting the most affordable coverage.

Why Is Cremation Insurance Important?

Many policyholders opt for a cremation insurance policy for peace of mind.

While death is a part of life, it is reassuring to know your loved ones will not inherit the financial burden associated with final planning after your passing.

And the average cremation is significantly more affordable than a traditional burial.

People can expect to pay anywhere from around $600 to $1,000 for a cremation service,  while the average funeral runs upwards of $9,000.

Cremation insurance allows for coverage of these expenses, which can make saying goodbye easier on your loved ones.

How Does Cremation Insurance Work?

Cremation insurance is a form of simplified whole life insurance. People purchase a small amount of protection which can accrue cash value each year.

When the policyholder passes away, the death benefit is awarded to the beneficiaries.

And purchasing a cremation insurance policy is simple.

First, you work with a funeral director to determine the cost of the cremation and other associated expenses, which will be used as the outline for the policy.

Qualifying for the policy is similarly straightforward.

There are no medical exams, coverage doesn’t decrease in value, premiums don’t go up, and policies remain in place until death.

And the death benefit is immediate, so beneficiaries receive money when they need it to cover the costs related to the funeral.

Perhaps most importantly, cremation insurance coverage allows you to be in control of your final arrangements and overall expenses.

What Types of Cremation Insurance Are Available?

Cremation insurance goes by other names, including burial, funeral, final expense, and end-of-life insurance.

These plans are roughly synonymous, though overall costs will vary depending on the arrangements and method of burial.

For the sake of simplicity, here is a breakdown of the two most common types of cremation insurance.

Direct Cremation

If you are looking for the most cost-effective option, look no further than a cremation policy.

The basic cremation service only costs a few hundred dollars and includes the transfer, cremation, and interment of the body.

Cremations with a viewing option cost slightly more.

Traditional Funeral

The other option is cremation with a traditional funeral service.

As mentioned, it’s estimated this option costs an average of $6,000 on up to $9,000.

Traditional funerals are more complex and expensive because there are more moving parts.

When you work with a funeral director, you must consider everything from embalming and preparing the body to the hearse and other transportation.

With a traditional burial, the highest fees will be the funeral home’s service fee and the casket.

You also need to plan and pay for the burial location and headstone for the grave.

The plot of land typically costs about $2,000 to $5,000, while a headstone typically ranges from $1,000 to $5,000 depending on whether it is upright or flat.

These costs might be higher if you live in a metropolitan area, such as San Francisco or New York.

How Are Premiums Determined?

The premiums for cremation insurance depend on a wide range of factors, including lifestyle, age, and gender, to name a few.

Insurance companies are in the business of evaluating risk.

The more chances people take, the more likely they are to sustain an injury or perish.

So people who smoke, have poor driving records, abuse drugs, or hold hazardous occupations, like linemen or lumberjacks, incur higher premiums.

Costs may even fluctuate according to the state you call home.

Even though your passion for skydiving may be an exhilarating hobby, it is worth mulling over its impact on your insurance.

A clean and healthy lifestyle will do wonders for your insurance premiums, not to mention your overall quality of life.

How Much Will Cremation Insurance Cost?

Below is a sample quote for a $5,000 cremation policy which highlights how age impacts premiums.

• If you are a 50-year-old woman, you can expect to pay around $14 per month.
• Your monthly premium could jump to around $18 at age 60 and $28 at age 70.

As a male, you can expect to pay a few dollars more for coverage.

Men are at a disadvantage when it comes to prices as research suggests men statistically die younger than women.

American women live five years longer than American men, on average.

What Happens If There Is Leftover Money?

With cash value accumulation and conservative financial planning, there could still be a surplus of funds after the funeral or cremation has been paid for.

If this is the case, the remaining balance could be placed directly into your beneficiaries’ hands.

Here are a few common ways beneficiaries use funds from final expense policies, outside of planning and paying for a funeral:

• Pay off debt
• Pay off medical bills
• Pay for private schooling, college tuition, or a scholarship fund
• Pay estate taxes
• Reinvest the money in life insurance
• Allocate to other financial causes like annuities or a 401(k)
• Donate to a charitable organization or humanitarian causes

How Do You Get The Best Deal?

With an understanding of how cremation insurance works, you can confidently shop for a policy.

Here are a few pointers for finding the right provider.

1. Shop Around

Comparison shopping for insurance policies is one of the single most useful things you can do.

Taking the time to analyze your options reveals the strengths and weaknesses of each company and policy.

You can quickly pare down your options to fit your preferences.

Whatever you do, never assume one company is the cheapest or the best without careful research.

Many companies advertise with catchy slogans suggesting they offer the lowest premiums, but whether or not that’s the case is heavily contingent on specific niches or states.

Only believe the final figure you see on the written quote.

2. Know What You Want

A clear vision of what you want can make all the difference when it comes to cremation insurance.

Doing some research beforehand can provide a clear guideline for estimating the costs of cremation.

Having an estimated budget can be a great starting point forgetting the coverage you need.

Knowing what you want also makes you less vulnerable to unnecessary add-ons.

For instance, an insurance provider might try to persuade you to add features to the cremation, such as flowers or memorial pamphlets.

There is nothing inherently wrong with offering these features, but the costs can accumulate rapidly.

3. Understand Your Alternatives

As mentioned above, remember there are alternatives to a traditional funeral.

Here are some other ways to lower burial costs:

• Keep the casket simple: If you opt for a standard funeral, select a casket within your budget. You don’t necessarily need elaborate wood carvings or silk lining.
• Provide your own urn: Most urns cost anywhere from a few hundred dollars to $1,000. Shopping in advance can slash those prices dramatically. Cremation boxes and wooden urns cost between $50 and $150, for example. You can also opt for an eco-friendly urn at a low cost.
• Location, Location, Location: Holding a service at a church, synagogue, or mosque can be an effective way to save money. You may also consider holding the wake or visiting hours at your home.
• Skip the Embalming: You can ignore this option if you want a direct cremation. Otherwise, you should know the median cost of embalming is around $700, but you can opt to forego it.

4. Ask About Bundling

Bundling can be an efficient option if you are looking at other policies.

Insurers want to represent you in as many different plans as possible, so they are often willing to provide discounts when you purchase multiple lines of insurance from them.

But bundling is only worth your investment if you actually need the other policies, too.

5. Work with an Independent Agent

When you’re shopping for life insurance, it helps to get an objective view.

An independent agent’s primary concern is getting the best policy for you. They do not have loyalty to one product or brand.

And independent agents are experts in their field, so they can walk you through the jargon and conditions of specific policies.

Agents also circumvent specific barriers associated with typical cremation insurance policies.

For instance, insurance providers often require a two-year waiting period before the policyholder is eligible for the death benefit.

An agent worth their salt will be able to find you a policy with no waiting period. Plus, you don’t have to worry about getting upsold on other insurance products.

6. Check Out Reviews

Customer reviews play a crucial role in the insurance shopping process.

According to Zendesk,

88% of buyers’ decisions are influenced by reviews.

The best place to start when it comes to tell-it-like-it-is reviews would be a financial advisor, broker, or independent agent.

Take the time to check out reviews on websites, too, like the Better Business Bureau.

You’ll get an intimate look into the experiences other people have had with the provider and gain a better understanding of their customer service and transparency.

7. Consider Financial Strength Ratings

Perhaps the most crucial item on the agenda is assessing a company’s financial strength.

With a purchase as important as life insurance, you want to be sure you’re working with a provider you can depend on to pay out your policy as promised when the time comes.

You should always start by checking a company’s credit ratings.

The four major credit rating agencies include A.M. Best, Moody’s, Standard & Poor’s, and Fitch.

Each rating agency provides a financial strength score which suggests the insurance provider’s ability to meet its future obligations.