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The idea of burial life insurance is something that has been slow to evolve and is often misunderstood. In its’ purest form it is a contract taken out with a mortuary and for an up front payment they promise that a burial is prepaid. What people should be coming around to is that there are almost always more expenses than just a burial and it may be a prudent thing to carry a “final expense” policy of $25,000 or $50,000. Something that doesn’t break the bank, but takes care of things.

I have some first hand knowledge of this since my father passed away a few months back. He and Mom had taken out burial life insurance policies a long time ago so that neither the surviving spouse or the family would have to deal with any expense. Within the past 5 years they both made a decision to be cremated and made that part of their living will. The policy that was supposed to “bury” my Dad didn’t even pay the full cost of the cremation and memorial service.

You often hear of burial life insurance policies or final expense policies in relation to AARP and Colonial Penn. These two companies have long histories of being easy to apply with and they advertise to older folks knowing that they are targeting a market who might be giving some thought to mortality and burials and such.

I guess the issue that needs to be brought to the forefront is the huge cost, compared to traditional life insurance, that people are paying because they believe that these stalwarts of the older age life insurance business are really there for them. Let me just say that from a consumer standpoint the only difference between traditional insurance and the simplified issue stalwarts is an exam and a huge difference in cost. The exam doesn’t cost anything and you don’t have to go anywhere to have it done, they come to you, but that exam can mean leaving a lot of money in your pocket and paying out a lot more to your beneficiary when you die.

I did a comparison the other day between a $50,000 burial life insurance policy through AARP and a $50,000 policy through West Coast Life and it was shocking even to me. Starting that policy at age 55, by age 80 with AARP you had already paid for your death benefit while with West Coast Life you would have paid a fraction of that. If you lived to age 100 you would have paid in over $150,000 for a $50,000 return to your family. With West Coast it was still substantially less than the death benefit. Colonial Penn only offers up to $25,000 coverage, but their price per thousand is even more outrageous than AARP. Both of the stalwarts offer a combination of term insurance and whole life insurance to get you through the years.

So what to do? Anyone considering a final expense policy who is in reasonably good health should contact an independent agent and compare costs between traditional life insurance with a guaranteed level premium, usually a universal life with a no lapse guarantee, against those products available elsewhere.

Bottom line. Be careful out there. The burial life insurance products available through Colonial Penn and AARP are expensive and get more expensive the older you get. This is a problem because it not only opens the drain on your finances, but it can become cost prohibitive at some point and the only choice may be to lapse the coverage. That’s a lose/lose situation for you that doesn’t need to happen.