Burial Insurance for Parents
Purchasing burial insurance for parents is an important decision. While many parents are still in excellent health in the “golden years,” others have problems. Many have financial and health concerns and worry about the high cost of funerals and burials. They do not want to and leave the ones they love with the burden of debt. The rising costs of funeral expenses weigh heavily on the minds of the elderly. Purchasing final expense insurance can relieve their anxiety.
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An average funeral can easily cost $10,000 or more. And, not all families plan funerals the same way. Some families spend far beyond the average national amount. Looking beyond just the cost of a funeral service and burial, family members also must settle the estate. Deceased parents can have Loans and medical bills that may have not been paid. Usually, the home must be emptied and sold. The final cost of settling final expenses and saying “goodbye” can top several thousands of dollars.
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Burial Insurance for Parents and Funeral Pre-Planning
Without prior planning, a funeral can be extremely stressful at a time when emotions run high. Families should be comforting each other and celebrating a loved one’s life and not worrying about how to pay funeral expenses.
Not pre-planning or having burial insurance for elderly parents taken care of can be a heavy burden on loved ones at this emotional time. Some families can simply write a check for funeral expenses. However, those who are financially able to do this are usually very limited.
How many times have we seen jars in grocery stores, fundraisers in bars, and TV ads soliciting donations for burial costs? When there is no prior planning, the financial burden is left behind unpaid. Added emotional pressure at this time is not a positive memory of a loved one’s life. Still, others have had to take out loans to cover final expenses and paid on them for years. These expensed can tarnish the memory of those we love.
Check out these funeral pre-planning tips
The Importance of Burial Insurance for Elderly Parents
Burial insurance for elderly parents can cover all the potential expenses and provide the beneficiary with the necessary cash needed at this trying time. A burial or final expense policy offers the surviving beneficiary flexibility. They can use the money as needed at their discretion. If there is any money remaining, the beneficiary can spend the remaining money as they see fit.
Many parents often take out insurance policies with death benefits higher than the expected final expense costs. Since funeral costs continue to increase, the extra insurance assures that all final expenses can be paid. Furthermore, the cost of a funeral in 10 years is bound to be more expensive than what one costs today.
Parents also desire to leave extra cash for their beneficiaries to spend as they see fit. Many times, the extra money left in a final expense policy is for their grandchildren. These funds can help with future educational costs or used to set up a savings account.
Who Can Pay the Burial Policy Premium?
If a parent on a fixed income cannot pay for the policy themselves, a family member can pay part or pay the whole premium for them. The family member can be the owner of the policy and the payer of the burial policy. It is essential to avoid the “Goodman Triangle.” It deals with how to set up beneficiaries, payers, and owners correctly to avoid future tax consequences.
Since the beneficiaries are usually adult children or other family members, they are the ones who benefit from the burial policy the most. They deal with unpaid credit card balances, mortgage loans, and other unpaid expenses. Family members are the ones to step up and cover the cost of a burial policy. The family does not have to deal with the financial stress related to a loved one’s passing in the future.
One person can be the owner, payer, and beneficiary of the burial policy. However, the person insured must participate in the underwriting process. Companies will typically require a short phone interview with the parent, and they will need to sign the application. The life insurance policy should be set up with an automatic annual or monthly bank draft payment. Insurance policies will not lapse in the future due to missing payments.
Burial Policies Specifically Designed for the Elderly
A burial insurance policy for parents is a whole life policy with limited death benefit amounts. Benefits are usually limited to a death benefit of not more than $25,000. However, dependent on the annual income of the elderly parent, policies can be purchased up to $50,000.
Insurance companies have designed these policies so senior citizens can easily qualify, and they realize that everyone does not fit the same mold. Two people age 65 do not have the same health issues or height and weight. One parent can be as healthy as they were when they were 40. Another parent may not be fortunate. So, insurance companies have designed two types of burial policies to fit these health issues by offering two types of policies.
Guaranteed Issue Final Expense Policies
When searching for burial insurance for parents, this type of policy is, as the name implies, ensures coverage. You cannot be turned down and declined coverage regardless of your health. Insurance premiums for a guaranteed issue policy are usually higher than for a person who has good health. Life insurance cost is higher because companies have eliminated medical exams and tests for this type of policy. These burial plans are for people middle age up to age 80.
Some seniors in poor health put off purchasing life insurance. They worry about having to face passing a medical exam. For these people, this type of policy is a good option. Therefore, guaranteed issue policies should be considered the last choice.
They may very well be the only option for obtaining insurance coverage for some elderly parents. Many who resort to this policy have been declined coverage many times by other companies. Get a quote.
The Benefits of Guaranteed Burial Policies
- Death benefits up to $25,000.
- Guaranteed issue ages vary from 45-85.
- There are no medical exams and zero or limited health questions.
- The death benefit does not decrease as parents grow older.
- Insurance premiums do not increase and remain the same for the life of the policy.
- Coverage that cannot be canceled if the premium payments are paid.
- Death caused by accidental causes receives the full death benefit paid in full during the first two years.
- Flexible payment options that allow you to pay Monthly, Quarterly, Semi-annually, or Annually.
- The accumulation of cash value in the policy can be borrowed in the future.
Simplified Issue Final Expense Policies
This type of policy has health questions meant to weed out applicants who have serious health issues. A medical exam is not required. Qualifying for the simplified issue results in cheaper insurance prices and larger death benefits up to $50,000 or more. Depending on a person’s health, these policies offer immediate death benefits for qualifying individuals upon policy issues.
The insurance company may offer “graded death benefits” due to existing health conditions. It is recommended to contact an independent agent who can compare companies for you. Health conditions that receive a graded benefit from one company may qualify for an immediate death benefit from a different company. The insurance premiums may also be much cheaper.
With a graded policy, insurance companies require you to live for two years. After two years, the full death benefit in force. These policies have a graded death benefit. As a result, if death occurs during the first two years (with some companies, it is three or four years), the beneficiary receives back all premiums paid into the policy. They will also receive interest on the premiums paid, ranging from 10-20%. Once the graded period ends, after two years in this example, the beneficiary receives the policy’s full death benefit.
With a graded policy, insurance companies pay one-third of the death benefit the first year. They pay two-thirds the second year and the full death benefit is paid at the beginning of the third year. The graded policy prevents immediate payouts for critically ill individuals. It prevents those who may wish to sign up for a policy just in time for their families to receive death benefits. Click here to get an instant FINAL EXPENSE QUOTE.
A Life Example of a Graded Policy
I had a client in 1998, one of the first people to have had open-heart surgery. He had two open-heart surgeries and did not expect to have a long life span. He had tried to find life insurance for years and had almost given up. I was able at that time to insure him up with a graded death benefit policy. A graded policy at that time expected the insured to live for 4 years. After four years, the full death benefit amount was payable. In those early days, that was the best policy available.
The insurance company wanted him to live four years before the death benefit of $15,000 would payout. I remember him calling me and saying three months before the four-year period was up. He said, “All I have to live is for three more months, and my wife receives the death benefit?”
He lived many years past those initial four and eventually did die of heart failure. His wife received the death benefit he lovingly purchased for her. If he had died before the four-year period expired, she would have received all the premiums paid for the policy. He would have also received a 10% interest rate on those insurance premiums. Most guaranteed issue policies today do not require a person to live for four years. Today most death benefits are payable in 2-3 years, and this is a big improvement!
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