5 Differences between Burial Insurance and Life Insurance

Life and burial insurance are two different products. Although almost everyone knows what life insurance is, many are uninformed on the topic of burial insurance. While they both are related to the same topic, they offer very different benefits to the policy holders. What are the differences between burial insurance and life insurance? Here are a few things to keep in mind.

1. Life Insurance Benefits

Life insurance benefits pay a certain amount of money. If the life insurance policy that you have has a death benefit of $1,000,000, then your loved ones will receive a check for that balance when you die. They can pay for final expenses out of that check or they are free to use it however they want. The benefits have no restrictions on what you can use them for. 

2. Burial Insurance Benefits

Burial insurance is designed to take care of your final expenses. It is also sometimes called funeral insurance. This type of coverage can only be used to cover any costs associated with the funeral. You will not receive a lump sum like you would with insurance to spend however you would like. You are basically pre-paying your funeral costs before you die. There are strict restrictions on how the money can be used unlike life insurance.

3. Life Insurance Options

Life insurance has many options to choose from. You can choose a permanent life insurance policy or a temporary one. Whole life insurance is designed to be a lifetime policy while term only covers you for a certain amount of time. You could buy a term policy, live through the term and exceed the benefits at some point.

4. Burial Insurance Options

Burial insurance is different from some forms of life insurance in that it does not expire. It will be there until you die. The only time it pays out anything is when you die and it only pays for your final expenses. Therefore, you do not have many options with burial insurance. It's there for your burial only.

5. Cash Value

One key difference is in the area of accumulating cash value. With certain kinds of life insurance, you can accumulate cash value as you go. With this cash value, comes the ability to cash it out if you want. While you would lose the death benefit of the policy, if you need the cash you can have access to it. Another way that you can access the cash is through the use of a policy loan. Using a life insurance policy loan, you can access the funds with a low interest rate and flexible repayment terms. You also would not have to pay tax on the money that you use. 

With a burial insurance policy, there is no cash value that accumulates. You cannot borrow against it and you cannot cash it out. You simply pay your premiums or pay it all at once and it is there for when you die. 

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