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Pre-paid funeral plans. Pre-paid burial plots. Burial Insurance. All are products that are designed to tug at the emotions, tug just hard enough to get you to ignore the realities, ignore the math, and ultimately make a decision that is free from logic.

If memory serves me right, my parents bought pre paid burial plots way back when they were much younger. The idea (the pitch) was probably something about wanting to be buried near loved ones or perhaps being able to ensure being buried next to each other. My dad reads these blogs so I’m sure he’ll correct me if I’m wrong, but the sum of $600 sticks in my head as what they paid. This had to have been 30 or more years ago and they held onto that idea until recently when they decided to be cremated rather than buried.

So, the math to see if the deal was good for them is simple. They gave someone $600 and let’s say they left it with the funeral home for 30 years and let’s be modest and say the funeral home made a 12% return on that money. Am I using too aggressive an interest rate? I’m thinking not because if you know, just based on mortality statistics that you have a long time to use money, high yield mutual funds will provide that kind of return. And, after all, they would need to earn interest to cover the current cost of a plot. So a plot today would go for about $2500 and the money earned by the funeral home would be about $10,200. At the time my parents bought those plots it would have been no hardship for them to have put that money aside. Ultimately they plots were sold and a handsome profit realized by the plotters.

On the other end of the spectrum are burial policies or final expense policies. Globe Life is famous for offering these with no exam and only $1 premium for the first month. The dirty truth is that they are guaranteed issue whole life policies that are exorbitantly priced. In their advertising you will see “rates as low as $3.27 per month”. What they don’t tell you is that is for the youngest age group and that is the per thousand cost, so $10,000 is $32.70 per month and so on.

It is guaranteed issue so if you’re really sick it may be the only deal in town, but if you’re healthy keep in mind that they are offering you the same deal that they’re offering to someone who is really sick. I’m not opposed to permanent life insurance for final expense purposes. If you are reasonably healthy there isn’t any reason that you can’t have substantially more life insurance using a universal life policy with a no lapse guarantee, for less money.

Bottom line. Burial insurance is a rip off as offered by most of the companies selling life insurance under that heading. Again, unless you are too sick to qualify for traditional insurance, burial insurance is a poor choice.