Author: John

I am a CFP® Professional and have an MBA. I founded My Family Life Insurance to provide honest, trustworthy advice and economical insurance solutions to individuals, families, and business owners. Contact me if you have any questions. There is no risk! If I can't help you, you've learned a little more, and we'll part as friends. Seriously! Can your current agent say this? View my linked-in profile here: www.linkedin.com/in/johnbarnescfp

Here’s How To Avoid The Missing Tooth Clause | We Discuss What The Missing Tooth Clause Is And 3 Options To Avoid It

Updated: April 12, 2024 at 9:38 am

missing tooth clause

Let me guess. You’ve never heard of the missing tooth clause until your dentist’s office manager told you about it, right?

If so, you are not alone.

The missing tooth clause, common in many dental insurance plans, borders on unfairness (more on that in the article). I understand, but it is in place for a reason. We will get to that in a minute.

You think you are covered for a pre-existing missing tooth until you go to the dentist. The dental office checks your dental coverage. They inform you that the carrier won’t cover your bridge or implant.

In this article, we discuss the missing tooth clause and how to best avoid it. Note that all the solutions herein are not perfect.

First, let us answer the question, what is the missing tooth clause?

What Is The Missing Tooth Clause?

The missing tooth clause in dental insurance policies states that the insurance company will not cover the replacement of any missing tooth or teeth that occurred prior to the start date of the policy.

In other words, if you currently have a missing tooth, that missing tooth is a pre-existing condition. While many dental insurance policies cover pre-existing conditions, they generally do not cover the replacement of a pre-existing missing tooth,

The reason for this is because of cost. The cost of dental implants, bridges, root canals, etc. is high. Additionally, without that clause, people with pre-existing missing teeth could buy dental insurance, get the implant (or partial denture or bridge), then cancel the dental insurance.

That is unfair to everyone including current dental policy owners. Today’s dental plans really don’t cover a pre-existing missing tooth.

You really have to read the fine print in a dental insurance plan to even know the missing tooth clause exists. Here is one example of the missing tooth clause:

an example of the missing tooth clause.

You can see that the fine print is “sneaky” and doesn’t directly call out the missing tooth clause. However, this is the missing tooth clause.

Let’s give an easy example of the missing tooth clause.

Example Of The Missing Tooth Clause

You put off purchasing dental insurance for a while now. But, your bicuspid fell out. Now you need to get that fixed. You just purchased dental insurance and go to the dentist. Your dentist is in the plan’s network, and that makes you feel good because you’ll save more money that way. The dentist suggests a removable partial bridge. The office manager obtains a pre-treatment estimate and submits the dental claim.

However, you turn upset when the office manager informs you that your partial bridge won’t be covered. The reason, she tells you, is because of a “missing tooth clause” with your dental insurance. You’ll have to pay 100% out-of-pocket expense for the cost of your tooth replacement.

So, to recap, if you have a missing tooth or teeth, the cost to replace these teeth with a crown, bridge, implant, or some other device won’t be covered IF…

…the missing tooth or teeth occurred BEFORE the insurance begins.

Think of this as a pre-existing condition in dental insurance.

Of course, if the missing tooth or teeth occurred AFTER the insurance begins, you have coverage according to your plan’s provisions. Look at the excerpt above. It clearly states that a missing tooth is covered as long as the missing tooth occurred while coverage is in place.

Typically, dental implant procedures, bridges, etc. are all major work. Depending on the dental insurance plan you have, the cost of these major services may push you up against your plan’s annual maximums. The annual maximums for a typical dental plan is usually $1,500 to $2,000. We at My Family Life Insurance do work with plans offering $5,000 annual maximums and even a few at $10,000!

3 Ways To Avoid The Missing Tooth Clause

The missing tooth clause creates a financial challenge for many people. There are, however, ways to avoid the missing tooth clause within your dental insurance policy. We discuss these next.

Get Dental Insurance Before “Now”

We receive a lot of phone calls from people needing major dental procedures done “now”. Like, tomorrow. They need a crown put in or are missing teeth. They put off purchasing dental insurance. Now, they have a dental problem. They decided to go to the dentist for dental treatment. Additionally, they don’t have any dental insurance coverage.

Honestly, if this is you, this is a self-inflicted problem. You can avoid this problem.

A simple way to avoid the missing tooth clause is to purchase dental insurance before you need it. Again, see the excerpt above.

Really, this is the easiest solution. If you have a missing tooth or teeth after you purchase the policy, the insurance covers the replacement of your tooth.

For seniors, the best time to purchase dental insurance is a year before you go off your company’s dental insurance plan as you enroll in Medicare.

It may seem like a waste of money to pay premiums for insurance you don’t need right away. But, many dental insurance plans have waiting periods of 12 months for major services. Moreover, if you do lose any teeth, the plans cover the replacement of your teeth. Getting dental insurance now minimizes potential, huge out-of-pocket costs down the road.

The cost of NOT having dental insurance is potentially greater than having it.

Dental Discount Plans

Dental discount plans might help. There is no missing tooth clause as a dental discount plan is not dental insurance. It is simply an agreement that the dentist will charge you less than their “retail” price and honor the procedure.

I like discount dental plans. I think they can work if you find the right dentist who accepts them. That leads me to my point. Many dentists do not accept discount dental plans. If you really want a discount plan, be prepared to switch dentists or go out of your way to find one.

You can search for dental discount plans here: www.dpbrokers.com/170829.dp

Just enter your zip code to find plans available in your area.

Moreover, dentists who accept dental insurance already agree to a discount from their retail cost.

Nevertheless, a discount dental plan is an option. We outlined several ways a discount dental plan is better than dental insurance. The moral of our article, however, is finding the right dentist for you who accepts the discount plan. If he or she is great and knowledgeable, then likely the discount plan and your situation are a great fit.

As always, if you find a dental discount plan and a dentist in your area, please contact the dental practice before enrolling. It is good practice to confirm that the dentist accepts the dental discount plan.

Purchase Dental Insurance That Avoids The Missing Tooth Clause

As we stated, many dental insurance companies have missing tooth clauses. Even if you had the dental insurance for years…if you had a missing tooth prior to coverage, the insurance won’t pay.

Sure, you can try to have your dentist submit the claim to your insurance. Chances are, for something like this, the carrier will request your dental records. In those dental records will be a note of your missing tooth or teeth. So, there is no getting around it.

We only know of one dental insurance that does not have a missing tooth clause. That is right. It will cover the replacement of missing teeth for any teeth missing PRIOR to coverage starting.

However, the replacement of missing teeth is a major service. This policy has a 12 month waiting period for major services.

This means you have to pay the premium for 12 months before you can use the policy for a pre-existing missing tooth.

Nevertheless, it will cover the replacement of a missing tooth or teeth once this 12 month period is met.

We are not contracted with this particular carrier, so please contact us through our portal if you would like more information on this carrier.

Frequently Asked Questions About The Missing Tooth Clause

We answer some frequently asked questions about the missing tooth clause.

Isn’t The Replacement Of A Missing Tooth Covered By Medical Insurance?

Not usually. Your medical insurance generally won’t cover a pre-existing missing tooth unless your mouth or teeth got damaged in an accident. Consult your medical insurance policy for more information.

Can I Obtain Dental Implant Insurance?

Dental implant insurance really doesn’t exist as a stand-alone insurance. Many dental insurance plans now offer dental implant coverage, up to annual maximums or lifetime maximums. For example, a dental insurance plan may offer a $5,000 lifetime benefit for dental implants.

Contact us if you would like to learn more.

What If I Have A Congenitally Missing Tooth?

A congenitally missing tooth is a missing tooth that was not formed at birth. Some plans may cover congenitally missing teeth. Contact us to learn more.

Now You Know How To Avoid The Missing Tooth Clause

I hope you are now more knowledgeable about the missing tooth clause common in many dental insurance plans. We discussed options to avoid the missing tooth clause.

Do you have a missing tooth? Do you want to know your options? Or, do you want to get started and simply figure out the right plan for you?

Contact us or use the form below. Unlike other agencies you read about, we only have your best interest first. That means if there is a plan available that better fits your situation, we will tell you that. We will also do our best to put you in contact with them.

Learn More

Are you interested in learning more about the information in this article? Please fill out the form below, and we will email you additional information or give you a call. We always work in your best interest. By entering your information, you are providing your express consent that My Family Life Insurance may contact you via e-mails, SMS, phone calls, or prerecorded messages at any phone number(s) that you provide, even if the number is a wireless number or on any federal or state do-not-call list. Additionally, you understand that calls may be placed using automated technology, and that consent is not a requirement for purchase. Your information will NOT be sold and will remain private. However, you may opt out at any time. We respect your privacy first and foremost. By contacting us, you agree to receive text messages from our number (800) 645-9841. If you no longer wish to receive text messages, you may opt out at any time by replying "STOP".

3 Life Insurance Options For People With Rheumatoid Arthritis [Approved! And, Here’s How]

Updated: April 12, 2024 at 9:38 am

If you have rheumatoid arthritis, you may wonder if you can purchase life insurance.

The answer is more often than not, “yes”. You most certainly can obtain life insurance if you have rheumatoid arthritis. Additionally, as we will discuss, you’ll probably have affordable life insurance options available.

Continue reading 3 Life Insurance Options For People With Rheumatoid Arthritis [Approved! And, Here’s How]

Best Low Cost Burial Insurance For Seniors 2024 | Your Guide To Selecting The Right Burial Insurance For Your Situation

Updated: April 12, 2024 at 9:38 am

Many people and seniors ask me if we have low cost burial insurance available.

We do, and we at My Family Life Insurance have more options compared to other agents or brokers.

You see, many seniors go online or see an ad on TV about burial insurance and think that is the right carrier.

They then find out the burial insurance is going to be very expensive (for a variety of reasons we will discuss later). They then stop looking for this important insurance because they think burial insurance is all the same.

Burial insurance isn’t the same. Although the end result (paying a death benefit for your funeral expenses and final needs) is the same, how burial carriers asses your situation is different. No two carriers are the same.

This means many low cost burial insurance carriers exist. Additionally, many agents and brokers overlook these valuable, low-cost options.

In this article, we will discuss:

Let’s jump in and level set about burial insurance.

What Is Burial Insurance?

Here is a secret. Burial insurance is simply a whole life insurance policy (typically. More on that in a minute.) with a small death benefit like $15,000 or $25,000. The life insurance industry calls it “burial insurance” because it is an easy way to describe its main intention – to pay for your burial expenses and final expenses upon your death.

That is all it is.

Consequently, you may hear or read different terms describing burial insurance. Some other names describing burial insurance include:

  • final expense insurance
  • funeral insurance
  • final expense life insurance
  • end-of-life insurance
  • final expense policy
  • burial policy
  • senior life insurance
  • burial life insurance

These all mean the same thing. These policies are typically whole life policies designed to pay for:

  • funeral costs including your memorial service, if any
  • burial plot and headstone
  • medical bills
  • your outstanding debts
  • other end-of-life expenses

How Burial Insurance Works

These burial insurance plans have some key advantages. First, they pay a lump

How burial insurance works.

sum death benefit amount directly to your named beneficiary who can pay for your funeral. Additionally, many of these carriers allow you to assign all or part of the death benefit to a funeral home, mortuary, etc. That is a nice option. This brings us to the final advantage. Burial insurance policies help ease the financial burden placed on your loved ones and family members after your death. 

As we discussed, the death benefit usually runs up to $25,000. Some policies allow for a greater death benefit.

According to the National Funeral Directors Association, the average cost of a funeral is about $7,500. As such, these burial insurance plans work well to pay for your funeral, final arrangements, and other related costs.

Additionally, applying for these burial insurance plans is easy. Carriers don’t require a medical exam. We discuss more in our underwriting section.

How To Find Low Cost Burial Insurance – Underwriting!

The key to finding low cost burial insurance is underwriting. Underwriting is simply the process of analyzing risk. In your case, the risk is too early of death.

Oh geez, John. Am I going to have to go through exams and take a blood test? 

No. The great news is that burial insurance traditionally has an easy underwriting process. The list below shows what burial insurance carriers look at when assessing your risk (i.e. the risk of dying too soon):

  • age
  • gender
  • nicotine use status (note: marijuana use is usually OK)
  • any health issues – carriers cover many medical conditions such as heart issues, bipolar disorder, diabetes, etc.

They do this by:

  • looking up your medical history through the MIB
  • prescription drug history
  • a possible phone interview
  • answers to a health questionnaire (i.e. an application)

Essentially, the better your health, the more low cost burial insurance options you will have. We will show more in a minute.

The application is probably one of the easiest components of the burial insurance process. Every carrier has a list of health questions to answer related to specific health conditions. The great thing about burial insurance underwriting is that all of the carriers don’t usually consider common ailments like high blood pressure or high cholesterol. If you have these ailments only, you can obtain burial insurance rather easily. 

Additionally, carriers will cover serious health problems. People with or who have had cancer, heart problems, stroke, sleep apnea, COPD, surgeries, or other major illnesses or health conditions can obtain low cost burial insurance. 

Burial Insurance Application And Process

The application and approval process is simple. You just answer and fill out an application containing a “yes/no” health questionnaire and then the carrier looks up your medical history. If all checks out, you are approved for burial insurance. 

A typical question on the application could go something like this. 

Within the past 2 years, has the proposed insured been diagnosed with, prescribed medication for, or had or been advised to have treatment for chronic obstructive pulmonary disease or emphysema?

You just answer “yes” or “no” on the application. They will then look up your medical history through the MIB and your prescription drug history. Most burial insurance carriers have eliminated the phone interview (although a handful still requires it). 

If all checks out, then you will likely obtain immediate coverage burial insurance.

What do you mean by “immediate coverage” burial insurance, John?

This might be a good time to introduce the types of burial insurance. 

Types Of Burial Insurance Plans For Seniors

A few types of burial insurance exist for seniors.

The types available to you are directly proportional to your health and how carriers underwrite. It is that simple.

The first one is called an immediate death benefit. Some carriers call it a level benefit plan. 

They mean the same thing. It means if you pass away, anytime, your family receives the death benefit. It doesn’t matter if you pass away 3 months after your policy is in force or 20 years later.

An immediate death benefit plan is what you want. Not only is the full death benefit available to you (more on that in a minute), but also it is likely the lowest-cost option. Immediate death benefit plans are available for those people in good health.

The second is called a graded death benefit plan. People with recent, serious health conditions usually get graded benefit plans. For example, people who have had a stroke or heart attack within the last couple of years usually only qualify for a graded death benefit plan. 

Graded benefit means that your beneficiary receives a percentage of the death benefit if you pass away from natural causes or illnesses in the first couple of years. For example, if you die from a heart attack in the first year, your beneficiary may receive 10% of the death benefit.

Guaranteed Issue Whole Life Insurance For Seniors

Finally, the remaining plan is called guaranteed issue whole life insurance. Only the seriously ill are eligible for this type of policy. Guaranteed issue is just how it sounds. You apply and have life insurance. No underwriting exists.

However, it is also the most expensive option (usually). Additionally, because carriers do not underwrite, they place a waiting period on the death benefit, which is usually 2 years. That means if you die from any natural causes or illnesses during the waiting period, then your beneficiaries receive the premiums you paid + any interest. These plans cover accidental death during the waiting period.

Note: if you have a terminal illness, then really no burial insurance option is right for you. You are best to save your money or work directly with a funeral home.

Popular Burial Insurance Carriers For Seniors

We aren’t going to belabor what’s been written on the internet already. You came here for low cost burial insurance, not the same-old-same-old information. Look up “low cost burial insurance” in Google or anywhere else, and you will find “guides”, “best of”, “best companies”, and “top 10 lists” of these supposedly “low cost” burial insurance policies.

You will see lists containing Mutual of Omaha, Transamerica, Royal Neighbors, etc, etc. These are all very good and well-capitalized carriers. They offer traditional whole life insurance policies that are the common structure of burial insurance. We offer these carriers to our clients as well.

Other popular carriers include the ads you see on TV. Colonial Penn, in particular, advertises a lot on TV.

These TV options may not be in your best interest. As we wrote in our article about Colonial Penn, they may not be worth the money. For example, Colonial Penn’s “995” plan is strictly a guaranteed acceptance life insurance policy. It is guaranteed issue. Their commercials sound and look good. However, they do not offer the lowest rates and may not be the best option for your situation. What if you are generally healthy? If you purchase Colonial Penn, you will be spending (likely) thousands of dollars more per year than you have to. Moreover, you have the waiting period to contend with.

Our goal in working with you is to find the lowest cost, immediate coverage burial insurance policy you can find for your given situation. For example, your choices of carriers are very limited if you have type 1 diabetes or had cancer 2 years ago.

Additionally, if your monthly premium is $100, and you have immediate coverage, then that is the best choice.

Having said all this, we introduce 2 low cost burial insurance options for seniors.

The Best Low Cost Burial Insurance For Seniors

We have two different, low cost options for seniors looking to save money on their burial insurance.

Yes, that is right. Low cost burial insurance does exist.

We describe them next.

The application process is a bit similar to that of traditional burial insurance. Both options offer a simplified application process where you likely won’t need to submit a paramedical exam.

Some of these aren’t final expense policies in the traditional sense. However, they are life insurance policies. Remember, burial insurance is simply a whole life insurance policy that pays a small, lump sum death benefit.

Guaranteed Universal Life Insurance

Often overlooked as burial insurance, guaranteed universal life (GUL) is an interesting option. Guaranteed universal life insurance is considered a permanent life insurance plan like whole life. However, guaranteed universal life operates much differently than whole life, specifically with the cash value.

The cash value in a comparable whole life policy, increases over time. It is a stable policy with guaranteed cash value and non-guaranteed cash value. Carriers guarantee the monthly premiums, too. As we said before, traditional burial insurance is a whole life policy with a small death benefit.

to discuss 2 low cost burial insurance options: GULs and fraternal life insurance.Without getting in the weeds, however, a traditional universal life insurance policy doesn’t have all those guarantees. You can pay as little as you want or more than the “target” premium. While paying little sounds great, doing so has potentially dire consequences with your universal life policy. If not enough cash value exists to support the cost of insurance, and you aren’t going to pay more into the policy, the policy itself terminates. 

However, not with guaranteed universal life insurance!  As long as you pay the target premium, the GUL keeps going, even if there is no cash in the policy. The fact there is limited cash provides a low cost burial insurance option.

Here is a premium comparison for $25,000 of burial insurance for a healthy, 60 year old non-smoking woman.

With whole life insurance, she could expect to pay, at minimum, around $98 per month.

With a GUL, the same woman could pay around $70 per month – a $28 difference per month.

Guaranteed Universal Life Insurance Helps With Medicaid

Additionally, since there is likely no cash value in the later years of the policy, she likely won’t have to worry about losing her burial insurance through the Medicaid spend down process.

The underwriting process is simplified, but a little more stringent. I would say you have to be more “healthy” than someone who can qualify for traditional burial insurance. However, even if you take a couple of basic medications and have good height/weight, you will qualify.

We have helped many people enroll in GULs for burial insurance. I am sure we can help you, too. 

Not-For-Profit Life Insurance

Why pay more when you can get the same product, essentially, for less?

Let’s compare two cars. They are the same. Same engine. Same color. The suspension is the same. The safety rating is also the same. Same radio, too. Maybe with the exception of a few nuances, they are essentially the same. Would you spend an extra $15,000 on one of the cars? Yeah, likely not! The same goes for burial insurance. There are a lot of burial insurance carriers available. They are all essentially the same. We discussed that nuances among carriers exist, usually with underwriting, but they all are generally the same. If you could purchase your burial insurance for less money, wouldn’t you? Yeah, that is right, you would. 

Many people don’t realize that there are life insurance carriers that are “not-for-profit”. I know. Crazy, right?

What Are Not-For-Profit Life Insurance Carriers?

Carriers that offer not-for-profit life insurance are called fraternal benefit societies. These societies were initially established for a certain sect of people. For example, many European immigrants established these societies here in the US to help their fellow kind as well as to create social events. Over time, some religions developed fraternal benefit societies (for example, the Catholic Order of Foresters). Today, while these societies exist, many have evolved and opened to anyone with a common, social goal.

The American Fraternal Alliance has more information about fraternal benefit societies. They are not-for-profit. Any profits they make, within IRS guidelines, must be issued back through the fraternal society, back to its members and communities. In other words, the profits go back to you in the form of member benefits, charitable giving, and other social events.

Additionally, the not-for-profit status makes, in general, life insurance rates comparatively less than their for-profit counterparts. Why? They are not beholden to profits, but rather that not-for-profit, social mission. Let’s use that example again of the 60 year-old, non-smoking woman looking for $25,000 of burial insurance.

She could purchase that $25,000 through a for-profit carrier at $98 per month. Or…

She could purchase that $25,000 through one of the fraternal carriers we work with for $61 per month!!!

Wow!!

Moreover, the above fraternal premium assumes dividend-paying paid-up additions. Most fraternal benefit societies offer paid-up additions on their whole life insurance. This means the fraternal life insurance certificate is dividend-paying. You receive dividends back and can elect to purchase more life insurance with these dividends.

What could you do with $37 per month savings? I bet a lot.

More On Fraternal Life Insurance And Fraternal Societies

A lot of agents like to disparage fraternal societies. They say their financials aren’t strong, they are smaller (in asset size), and they can’t serve customers, or their AM Best rating is inadequate.

Many of these anecdotes are completely not true. Many of these societies have been around since the mid and late 1800s and have seen every economic crisis in the United States. War. The Great Depression. Economic Growth. Recessions. You name it. They have paid their claims and haven’t skipped a beat.

Additionally, many of them are conservative with their member’s money. Don’t you want your money to be there when you need it the most? Of course, you do. And, yes, some of their AM Best ratings aren’t “A” like the for-profit carriers. They might be B+. Is that a bad thing? Some agents say “yes”; however, many of these fraternals have stronger solvency ratios, liquidity, and reserves/surplus than their for-profit counterparts. That is something these agents don’t talk about. They are just small carriers.

It is important to note that we are neither for nor against fraternal benefit societies. We are for YOU! If that means a for-profit serves your situation better, that is what we will recommend. If a fraternal carrier does, then obviously that is what we will recommend. We are not beholden to any life insurance carrier or commission. We are beholden to serving you.

However, we do work with many more fraternal carriers than the average broker. Contact us if you would like to learn more.

We introduce premium comparisons next. Of course, premiums are examples and subject to change.

Low Cost Burial Insurance For Seniors In Their 50s And 60s

Here are some low cost burial insurance comparisons for seniors in their 50s and 60s. These are example purposes only and premiums are subject to change. Additionally, available burial insurance options depend on your specific situation. If you would like to quote your own burial insurance, feel free to use the quoter below:

As you can see, the GUL and fraternal carriers are more competitive on average compared to traditional burial insurance:

to show cost comparison of low cost burial insurance for seniors in their 50s and 60s

Low Cost Burial Insurance For Seniors In Their 70s

Here are additional comparisons for burial insurance for seniors in their 70s.

to show low cost burial insurance comparisons for seniors in their 70s

Low Cost Burial Insurance For Seniors In Their 80s

As seniors age, the cost of burial insurance increases. GULs and fraternal carriers remain competitive, assuming seniors qualify.

to compare low cost burial insurance options for seniors in their 80s

Note: not many options exist for seniors in their 90s.

How To Apply For Low Cost Burial Insurance

Applying for burial insurance is easy. All you need to do is:

(1) contact us

(2) tell us your situation, including any health conditions and medication

(3) we prequalify you with carriers, many which are low cost

(4) you apply with us over the phone

(5) you are approved

It is really that simple. 

Frequently Asked Questions About Low Cost Burial Insurance For Seniors

Here are some frequently asked questions about low cost burial insurance.

Can I Buy Burial Insurance For My Parents?

Yes, you can buy burial insurance for your parents. You and your parents just need to be on the phone with us during the application process. You can always contact us beforehand and prequalify your parents. We just need to know your parent’s health history including any medication they are on.

We then get on a call to enroll your parents over the phone.

As said before, as long as you are transparent with your parent’s health conditions and medication, we should be able to get them the burial insurance they need, including options from the low cost carriers we discussed.

What Are The Age Limits To Buy Burial Insurance?

The age limits usually are between 50 and 80; however, some carriers go as low as age 18. Only very few carriers offer burial insurance after the age of 85. Contact us for more information. 

Does Burial Insurance Pay For My Funeral?

Yes, burial insurance can pay for your funeral and burial costs. You select a trusted loved one as the beneficiary who will pay for your funeral or assign all or part of the death benefit to the funeral home.                

Does Burial Insurance Cover Accidental Death?

Yes, burial insurance (and the other life insurance plans we discussed) all cover accidental death. As we discussed, Immediate or level benefit plans pay a benefit on day 1 for any type of death. Graded and guaranteed issue plans are set up differently. They have a waiting period. These plans will always pay for an accidental death, anytime. If you pass away during the waiting period from illness or natural causes, your beneficiary receives a percentage of the death benefit or the premiums you paid + interest. After the waiting period, the carrier pays 100% of the death benefit.                

Do Pre-Need Plans Work?

Pre-need plans are funeral or burial plans purchased directly from the funeral home. They can work, but I believe having some type of life insurance in your name offers way more flexibility than working directly with a funeral home. We discuss many of the advantages and disadvantages of pre-need plans in our guide to having life insurance pay for your funeral. We also discuss many of the advantages life insurance contains over these pre-need plans.                

What Are Plans That I Should Not Buy?

Many life insurance products exist that do not work well. Here are a few plans that you should not buy unless these are your only options based on your situation:

(1) term life insurance policy – these policies are great for your unexpected death. Additionally, they only last a term, like 20 years. What happens if you are still living after the term expires? Your family gets no death benefit.

However, if you want coverage for your funeral, a permanent life insurance policy like the ones we discussed in this article works. As long as you pay the premium, the death benefit coverage amount is guaranteed and goes right to your beneficiaries. 

(2) pre-need plans – we discussed this previously. Pre-need plans lack the flexibility of burial insurance policies or permanent life insurance policies. Moreover, they are generally more expensive. We discuss many of the disadvantages of pre-need plans. 

(3) guaranteed issue life policies – These are good policies, but are reserved for people who have severe health conditions or lifestyle situations. The reason why I say you should not buy them is because most people qualify for something better. However, as I said, if this is all you can get, then these are good policies.

Can I Lie On The Life Insurance Application?

No. Carriers have ways of finding out if you lie nowadays. Don’t even think about lying on the life insurance application. As one underwriter told us, paraphrasing, if we feel the applicant is conscientiously lying, we will decline. Carriers have ways of finding out things, so be truthful.  

Now You Know Seniors Can Get Low Cost Burial Insurance

We hope you enjoyed this article on low cost burial insurance options for seniors. While traditional burial insurance is available, we have helped many individuals obtain low cost burial insurance through:

  • guaranteed universal life insurance and
  • whole life insurance policies issued through fraternal carriers

What is the right choice for you? That is where we can help. In every case, the right solution is the one that fits your needs and situation. Not someone else’s and definitely not the life insurance agent’s interest.

We at My Family Life Insurance pride ourselves on serving our clients with their best interests first. It is the only way we know how. If you were presented with a burial insurance plan and want to know your other options, or want to work with an agency that values you and your family, contact us, or use the form below. We would be happy to help and serve you in any way we can.

Learn More

Are you interested in learning more about the information in this article? Please fill out the form below, and we will email you additional information or give you a call. We always work in your best interest. By entering your information, you are providing your express consent that My Family Life Insurance may contact you via e-mails, SMS, phone calls, or prerecorded messages at any phone number(s) that you provide, even if the number is a wireless number or on any federal or state do-not-call list. Additionally, you understand that calls may be placed using automated technology, and that consent is not a requirement for purchase. Your information will NOT be sold and will remain private. However, you may opt out at any time. We respect your privacy first and foremost. By contacting us, you agree to receive text messages from our number (800) 645-9841. If you no longer wish to receive text messages, you may opt out at any time by replying "STOP".

Does Life Insurance Pay For Funeral Costs? [Yes, Here’s How] | The Ultimate Guide to Paying for Funeral Costs with Life Insurance

Updated: April 12, 2024 at 9:38 am

Does life insurance pay for funeral costs and expenses? Many people ask me this question.

The answer is “yes”. Life insurance will pay and cover funeral expenses.

However, like anything, there is a right way to go about having your life insurance cover your funeral costs and a wrong way.

We discuss the right way and how to go about setting up your life insurance to pay for your future funeral expenses and costs.

In this article, we will discuss:

Let’s discuss further life insurance paying for funeral costs.

Does Life Insurance Pay For Funeral Expenses?

Yes, life insurance will pay for funeral expenses and costs. The life insurance company pays out a death benefit. Your beneficiaries can use the death benefit amount for anything, including paying for funeral and final expenses such as medical bills and outstanding debts (also known as end-of-life expenses).

Having the life insurance pay for funeral and burial costs takes a huge financial burden off of remaining family members and loved ones. As a CFP® Professional, I generally recommend clients use life insurance to pay for funeral and burial costs.

Why do I recommend life insurance? Life insurance has 3 main advantages that other options don’t have. We discuss these advantages later in the article.

But, John. A friend of mine had a policy that didn’t pay for any funeral costs!

I hear this a lot. This generally isn’t true. However, if this statement is true, the reason is that the insured/owner set up the life insurance policy the wrong way (or had the wrong type of policy).

In order to discuss the right way to pay for a funeral using life insurance, let’s first introduce how life insurance works.

How Life Insurance Works

Life insurance is really a simple mechanism of wealth transfer or money transfer.

The insured is the person whose life is covered. When the insured passes away, the life insurance carrier pays out the death benefit to a named beneficiary. The named beneficiary is the person who receives the life insurance payout. Usually, this payout is paid as a lump sum.

to show how a life insurance policy pays for funeral expenses.The owner of the life insurance policy controls the policy. He or she can change the beneficiary to someone else and payment methods, for example. Usually, the owner of the policy is either the insured or the beneficiary.

Take a look at this simple example about Harry. Harry buys a life insurance policy on himself (so he is both the insured and owner) and names his wife, Rita, as the named beneficiary. Upon his death, Rita contacts the life insurance company. She submits the claim information along with the death certificate. She receives the life insurance proceeds (i.e. death benefit) a week later.

As the beneficiary, she can use this money however she wants to. She uses part of it to pay for Harry’s funeral.

Now that you understand how life insurance works, let’s discuss the proper ways to pay for funeral costs using life insurance.

2 Proper Ways To Structure The Life Insurance Death Benefit To Pay For Funeral Expenses

Two main ways exist to pay for funeral expenses. There is a 3rd that exists that we will touch on.

The Named Beneficiary Pays The Funeral Costs

The first, and more common, way to pay for funeral costs is through your named beneficiary. We illustrated this in the example and diagram above with Rita.

The beneficiary, in turn, pays the funeral home the cost of the funeral.

However, the underlying assumption here is you have a responsible beneficiaryto show the 2 ways to properly pay for your funeral with life insurance. who will pay the funeral costs. Now, most people do – a beloved spouse or children. However, as I stated earlier, a beneficiary can, technically, do anything with the money. Conceivably, he or she can spend it on a trip and let your remaining loved ones figure out how to pay for your funeral!

One way around this is to start your funeral planning before you pass away. If you are already covered by a life insurance policy, you essentially have the money for your funeral already.

You can visit your local funeral home and speak with the funeral director. One of the first things the funeral director will want to know is how you will pay for the funeral. I recommend bringing the life insurance policy and your beneficiary to this meeting. The funeral director will likely want a copy of the insurance declarations. He or she will also ask if you could assign the death benefit to the funeral home. We discuss this next.

(Related: see our article on life insurance beneficiary mistakes.)

Assignment Of The Death Benefit To The Funeral Home

Assigning part of the death benefit to the funeral home might be a better option. This means you assign part of the life insurance death benefit to the funeral home.

John, can’t I simply name the funeral home as the beneficiary?

Good question. While some carriers allow entities to be a beneficiary, most do not. The proper way of naming an entity as a beneficiary is through an assignment of the death benefit.

Let’s use Rita from our example above. Let’s say she and Harry went to the funeral home a year before Harry’s death and set up their funerals. Harry has a $50,000 burial insurance policy on his life. His funeral will cost $15,000. For ease, Harry assigns the funeral home $15,000 of the death benefit. The remaining $35,000 goes right to Rita.

The benefit of this process is ease. Rita doesn’t need to coordinate the payment to the funeral home. Harry’s funeral is, essentially, pre-paid by the assignment.

Life insurance companies have assignment forms. The owner of the policy fills out the form and notes the entity (in this case, a funeral home) as the assignee and the death benefit amount assigned.

Note that there are a couple of types of assignments. You will want a collateral assignment. The benefit of the collateral assignment is that it can be rescinded, removed, and/or changed by you, the life insurance policy owner. Let’s say your children move to Arizona, and you want to be closer to them. You can rescind the assignment with the current funeral home and create a new assignment with a different funeral home in Arizona.

How great is that? What an advantage.

This might be a good time to discuss why life insurance is the best way to pay for funeral expenses.

3 Advantages Of Life Insurance To Pay For Your Funeral

Three advantages exist with life insurance, which makes it a perfect conduit to pay for funeral expenses.

We will discuss other options, but life insurance stands out as the best way (in my opinion, and I balance that opinion against other options below) to pay for funeral costs.

#1 Use Of Leverage

I know what you are going to say.

John, I already have my funeral saved in a checking account! I have $15,000 saved.3 advantages of life insurance that helps pay for funeral expenses

Good. For reasons I’ll explain later, this can be a bad decision.

With life insurance, you can use a small premium to get that $15,000.

For example, a 65-year-old woman could spend $60 per month on a $15,000 whole life insurance policy.

If she passes away at age 67, her family receives $15,000 and she will have spent $1,440 (24 X $60).

Let’s say she passes at 85.

I call this leverage. You are using a small premium for a larger potential benefit.

You can save that $15,000 for other things in your life.

#2 Income Tax-Free Death Benefit Payout

One overlooked advantage of life insurance is the income tax-free death benefit.

In other words, upon your passing, your beneficiary (or the funeral home if you assigned the death benefit to the funeral home) receives the death benefit and pays no tax on it.

The income tax-free status of the death benefit is a huge advantage over other options.

As we will discuss later in the article, other savings options could subject the beneficiary to tax implications.

#3 You Can Take The Life Insurance Anywhere

Another advantage of life insurance is that it is yours. It doesn’t belong to anyone, but you (assuming you are the owner as well).

You can go to any funeral home and set up your funeral. The “portability” of life insurance is another advantage. As we described earlier, you already have the funds and method (the life insurance) to pay for your funeral services and expenses.

We will discuss this important aspect in more detail later.

What Types Of Life Insurance Will Pay For Funeral Expenses?

All types of life insurance can pay for funeral expenses. These types of life insurance include:

  • term life insurance
  • permanent life insurance policies such as whole life insurance and universal life insurance
  • burial insurance

These types of policies can pay for the cost of your funeral. As we described above, your beneficiaries will have that life insurance death benefit payout to pay for the funeral.

Many people know what term life insurance and whole life are. Burial insurance is a new term. Let’s talk about burial insurance policies in more detail next.

How Do Burial Insurance Policies Pay For Funeral Costs?

I’m sure you heard of burial insurance. But, what is burial insurance?

A burial insurance policy is simply a type of whole life insurance policy with a small death benefit like $10,000; $25,000; or even $50,000. Like a traditional whole life policy, burial insurance contains cash value.

This type of policy is designed to pay for your funeral and burial costs. Hence the name “burial insurance”.

These policies are also called:

  • final expense insurance
  • funeral insurance
  • final expense life insurance
  • end-of-life insurance

They all mean the same thing. They are whole life policies designed to pay for your funeral costs (and anything else; money to your loved ones. See my example with Rita and Harry above.)

The advantages of these burial insurance policies include:

  • very easy to apply for. Usually, no medical exam is required. Burial insurance policies accept many types of health conditions as well as lifestyle situations.
  • designed to pay for your funeral. Most of the life insurance carriers that offer burial insurance policies allow the assignment of the death benefit to a funeral home.
  • generally affordable. People who are on a tight budget usually can afford these policies.

This all sounds good, John. But, how much should I be applying for?

Let’s discuss this next.

How Much Does A Funeral Cost?

The National Funeral Directors Association states that the average cost of a funeral is $7,848.

However, this average varies across the country as well as your needs and wants.

For example, the cost of a funeral is different in Massachusetts compared to Alabama.

Moreover, the cost of the burial plot and memorial service aren’t factored into these costs.

I always recommend an amount that is the highest you can afford and above this $7,848 average. Did you want to search for preliminary burial insurance costs? Feel free to use the quoter below. Just input some basic information about yourself and search. You can contact us if you have any questions.

Other Options To Pay For Your Funeral

Other options, other than life insurance, exist to pay for your funeral.

I do think life insurance is the best option to pay for your funeral; however, some of these other options can work as well.

Funeral Trust

Funeral trusts work very well in paying for your funeral because that is one of their intentions! One of the advantages of a funeral trust is that the carrier pays the death benefit directly to the funeral home.

Funeral homes like funeral trusts because of the ease and quickness of receiving the funds.

Great, John. I am going to sign up!

Not so fast. Funeral trusts are really designed for someone to qualify for Medicaid very quickly. If you have spendable assets like retirement accounts, checking accounts, investment accounts, and even permanent life insurance policies like whole life, Medicaid essentially forces you to spend these assets down to qualify for Medicaid.

You transfer the spendable assets into the funeral trust. By doing so, and retitling the assets to the funeral trust, you have just moved spendable assets to a non-spendable status and qualify for Medicaid.

The assets in the trust grow at a nominal interest rate. It’s not life insurance. The funeral trust is more like an annuity.

Upon your death, your loved ones contact the carrier and direct the carrier to mail the check to a specific funeral home.

Creditors, Medicaid, the IRS, and even you…no one has access to the money in the funeral trust except for the funeral home. Like life insurance, the money in the funeral trust avoids probate and goes right to the funeral home of your choice.

The funeral trust is portable and easy to set up. No underwriting exists. It is guaranteed issue.

Feel free to contact us if you have questions.

POD Account

Some people select a POD account and think it is related to paying for funeral services.

It isn’t.

However, a POD Account is one way to pay for your funeral, provided you have trusted loved ones. More on that in a minute.

POD stands for “Payable On Death”. This designation is really used by banks and financial institutions. With this designation, your assets transfer to a named beneficiary outside of probate. Avoiding probate is the main reason people use POD account designations.

Just like life insurance and funeral trusts, POD-designated accounts avoid probate; however, these accounts generally do not avoid any tax implications. In other words, your beneficiary will pay some tax on that account. It is important you speak to a qualified tax advisor about any tax implications on POD accounts upon your death.

Recall that life insurance (and funeral trusts) have no income-tax implication to the named beneficiary.

FYI, if you have a stock brokerage account, a Transfer On Death designation works the same way. The designation passes your stock brokerage account to a named beneficiary and allows the account to avoid probate. However, just like a POD account, a TOD account may face tax implications whereas life insurance will not.

Pre-Need Insurance

Pre-need insurance is another option.

What is pre-need insurance? It is a fancy description of purchasing a funeral planto show other options to pay for your funeral, other than life insurance. directly from the funeral home. It is typically a whole life insurance policy with specific modes of payments such as:

  • lump sum, single payment
  • 3-year payment
  • 5-year payment
  • 10-year payment

These types of plans are specific to funeral homes, mortuaries, etc.

While a pre-need insurance plan seems like a good choice, there are better choices in my opinion. (Note: I am a CFP® Professional and hold fiduciary duty, which means I place your interests before my own.)

One disadvantage of a pre-need insurance plan is that it is tied directly to a funeral home. What if you want to switch funeral homes? Well, the plan usually doesn’t go with you. It is non-transferable.

Additionally, if the funeral home goes out of business, so goes your pre-need insurance as well.

Life insurance, in my opinion, is the best choice as it provides more flexibility/portability, an income tax-free benefit, and uses leverage.

John, a friend of mine says he is using an annuity for life insurance. What about that?

Good question. Let’s discuss annuities next.

Can Annuities Pay For Funeral Expenses?

Yes, annuities can pay for funeral costs and expenses. Annuities contain a beneficiary designation. As long as you name a beneficiary (and not yourself), the money inside the annuity goes right to the named beneficiary. It will avoid probate.

However, it won’t avoid any tax implications. In other words, your beneficiary will have to pay income tax on the annuity.

The money inside the annuity grows tax-deferred. That means the owner doesn’t pay any tax during this “accumulation phase”.

If the money in the annuity hasn’t been “annuitized” (that is, paid out as an income stream to the owner), then the beneficiary receives the accumulated value. Moreover, the beneficiary will face a possible income tax.

The income tax impact would be on the gain in the policy (the difference between the total value and the investment basis in the annuity). This difference is then taxed at ordinary income tax rates.

For example, Joe receives a $90,000 annuity from his deceased father, who paid $50,000 for the annuity. Joe will likely have to pay income tax on the $40,000 gain.

Moreover, annuities do not receive a “step-up basis” like other investments currently do upon the owner’s death.

The tax implication of annuities shows that life insurance still remains the best option to pay for your funeral.

How To Enroll In A Life Insurance Policy

Nowadays, it is very simple to enroll in a life insurance policy. Many carriers offer a “DIY, instant decision term life insurance“. If you are generally healthy and have no lifestyle issues like skydiving, you can apply here: Integrity4Life

Of, you can just contact us.

However, if you are looking for a specific type of life insurance to pay for your funeral expenses, burial insurance works great.

Burial insurance is easy to apply for. You just:

  • contact us
  • tell us your situation including any medication you are on and health conditions
  • we analyze your options
  • we go over a recommended plan and prequalify you with the carrier’s health questionnaire
  • you apply with us (over the phone)
  • typically, as long as you were upfront with your situation, you are approved

It is pretty simple and takes maybe 30 minutes, typically.

As we stated earlier, you can then have a loved one as a beneficiary or assign part (or all) of the death benefit to a funeral home.

Now You Know How Life Insurance Carriers Pay Out Your Funeral Costs And Expenses

Now you know that life insurance can pay your funeral costs and expenses.

We discussed 2 ways to structure your life insurance to pay for your funeral expenses. The first, and most common, way is to have a trusted loved one as the beneficiary. Upon your death, your beneficiary can pay for your funeral expenses from the death benefit he or she receives.

The second is assigning part (or all) of the death benefit to the funeral home. Many burial insurance policies allow assignment.

We also discussed the advantages life insurance has compared to other vehicles that pay for your funeral expenses.

Do you have any questions or need assistance with getting a policy? Contact us or use the form below. We don’t call you a thousand times per day, and you can always tell us to stop contacting you, no problem.

We only work in your best interests. That means we place your needs first, not our own. There is no risk of contacting us.

Moreover, if there is a better option available to you that we can’t offer, we will tell you that and point you in the right direction as best we can.

You can always reach back out to us if your needs change.

Learn More

Are you interested in learning more about the information in this article? Please fill out the form below, and we will email you additional information or give you a call. We always work in your best interest. By entering your information, you are providing your express consent that My Family Life Insurance may contact you via e-mails, SMS, phone calls, or prerecorded messages at any phone number(s) that you provide, even if the number is a wireless number or on any federal or state do-not-call list. Additionally, you understand that calls may be placed using automated technology, and that consent is not a requirement for purchase. Your information will NOT be sold and will remain private. However, you may opt out at any time. We respect your privacy first and foremost. By contacting us, you agree to receive text messages from our number (800) 645-9841. If you no longer wish to receive text messages, you may opt out at any time by replying "STOP".

 

Step-by-Step Guide to Understanding How Life Insurance Tables And Table Ratings Affect Your Cost

Updated: April 12, 2024 at 9:38 am

We aren’t talking about kitchen tables. In your search for affordable life insurance, you may have heard of the terms “life insurance tables” or “table rating”.

Or, maybe you applied for life insurance, and the life insurance company offered a “table rating”. You probably have no idea what this means.

Yeah, John. I am confused. They want to charge me a higher premium!

No problem. In this article, we discuss the importance of understanding life insurance tables and table ratings (hint: it saves you money!).

Continue reading Step-by-Step Guide to Understanding How Life Insurance Tables And Table Ratings Affect Your Cost