Talk to any life insurance sales representatives and they are likely to tell you that the number one reason for purchasing life insurance is to make sure all of your end-of-life expenses are covered. This is a very good reason, indeed. It is difficult enough on family members when a loved one passes away without having to burden them with the additional worries of paying for things such as the funeral and burial. Some people choose to cover those costs with burial insurance.
Burial insurance is a kind of life insurance that people purchase for the sole purpose of paying for things such as funeral services, a casket, a headstone, and a burial plot. The limited scope of burial insurance is such that policies rarely exceed $35,000 or so. The average policy is actually quite a bit less. The question is how do you know how much insurance you should buy? That question can be answered by budgeting your burial costs.
Buy Your Plot
The first step in budgeting your burial costs is to look into buying your plot. Obviously, buying now means you will incur the expense right away. However, you can most likely work out a deal with your local cemetery to put a down payment on your plot and then make installment payments thereafter. Any balance left on the plot when you die could be covered by your burial insurance.
If you do not want to buy your plot now, you can at least visit the local cemetery and find out what the going prices are. Also inquire as to how much the cost of a plot tends to rise year-to-year. The business office can likely provide you with a history and a cost estimate for five, 10 or even 20 years down the road. This will help you come up with a budget number for your eventual plot purchase.
Price the Remainder of Your Expenses
Once you have the question of your burial plots settled, it is time to start thinking about the remainder of your end-of-life expenses. This is a good time to sit down with a funeral director and ask questions. You might even talk with several local funeral directors for the purposes of comparing prices. It may sound morbid, but comparing funeral and burial expenses is a good way to save money.
You are going to want to price all sorts of things including wakes, graveside or funeral home services, caskets, flowers, etc. Again, all of these costs do tend to go up from one year to the next, so what you are really looking for is current prices and estimates for five, 10, and 20 years down the road. Pricing all of the products and services you might be interested in will quickly give you an idea of how costly funerals and burials can be.
The last step in budgeting your burial costs is to determine approximately how much you want to spend to cover end-of-life expenses. This will tell you how much burial insurance to purchase. For example, if you are looking for a top-of-the-line funeral and burial that could run $20,000 or more, look at a policy that will pay out $30,000. This will give you some extra room for inevitable cost increases.
Keep in mind that burial insurance is a financial tool rather than an investment. This is important to remember because the policy will not pay any more 20 years down the road than it would pay today. You could very well end up with costs greater than the value of your policy if you do not plan well. Moreover, even if you do plan well, there is no guarantee funerals will not be significantly more expensive when you eventually pass.
Budgeting for your burial costs is intended to provide the estimates you need for adequate financial planning. Nevertheless, a budget is never guaranteed. If you plan to purchase burial insurance, sit down and budget your burial costs first. Doing so will give you an idea of how much insurance to purchase.