 Personal Finance PowerPoint presentation, burial insurance. Prepare to get financially fit by practicing personal finance. Insurance is part of our long-term risk mitigation strategy where we follow the adage of measure twice, cut once, put in a formal process in place, look in something like set the goals, develop a plan to reach them, put the plan in action, review the results and repeat the process periodically. Most of this information can be found at Investopedia Burial Insurance which you can find online. Take a look at the references. Resources continue your research from there. This by Julia Kagan, updated December 31st, 2021. In prior presentations, we've been talking about insurance in general. Then moving on over to the life insurance. Keep in mind the major two categories of life insurance, that being the term, the pure life insurance, which you want to be comparing everything else to and then the permanent life insurance. And now we're getting into more kind of subcategories here. This time talking about in the context of that overall insurance discussion, what is burial insurance? Burial insurance is a type of life insurance used to pay for funeral services and merchandise costs after a death. The policy can be bought online or by telephone without waiting for an insurance company doctor exam. In fact, burial insurance does not require a medical exam at all. So it's a specific kind of insurance clearly designed for a specific need. And therefore you would think then the amount of the payouts might be smaller, which could lower the premiums. However, you also have that situation where you don't have the medical exam and that usually would require more risk on the insurance company side of things, which could increase the cost of the policy. So we want to be keeping in our minds as we think about these specific types of insurance, whether we're already covered, for example, in some way for the costs of, say, burial costs, possibly with some other kind of insurance, which could also be used, of course, for those types of expenses possibly and or possibly because we have net assets, meaning note that when you're usually buying the insurance, oftentimes classical life insurance is bought during the middle of the life when we're basically possibly starting a family, have multiple people dependent on someone's income, possibly having a debt or being in debt in the fact that we might have like a mortgage or something later on in life. Hopefully we pay off the mortgage and we have basically net assets at that point in time. So if you have net assets at that point in time, clearly you might have the assets to set up your funeral arrangements in that way and or the net assets possibly can be used for those kind of costs or you might have some other kinds of life insurance which could possibly be used or go towards these needs as well. So keeping those in mind, this kind of niche type of area may be applicable in certain situations. So applicants are asked about age, smoking history and whether they have serious conditions. So now we're going to obviously the insurance company asking those standard questions, how old are you? That's going to have an impact on the premium calculation, the smoking. They always ask the smoking thing and whether you have serious conditions. For some policies, acceptance is guaranteed. So we talked about guarantee insurance in a prior presentation. You could take a look at that. Others require a two-year premium paying period before collection is possible and only provide coverage to 100 years of age. So meaning after you live past 100 might not apply for some coverages past that point in time and you might have that waiting period as well. Because remember, if you don't have like a doctor's exam or if there's a guaranteed kind of payment, kind of insurance policy, the insurance company is clearly taking on more risk in those cases because they don't know exactly what the medical conditions are and therefore they might try to mitigate that risk by saying, if you have a waiting period, so if you die within the waiting period, then it's not going to pay out. You've got to live for the two years in order to get the benefit to basically pay out, for example. So burial insurance is a cash policy, which means it builds a cash value over time. Burial insurance, so that's more like not say a term or pure insurance. That's more like a permanent insurance kind of policy because it has that cash value component to it. Burial insurance can be purchased for small amounts such as $5,000 and $10,000. That's one of the benefits of this kind of insurance because you might say, I just need a limited type of insurance so they can burn me up and throw me in a coffee can or something without a cost of them. But the coffee can somewhere that doesn't cost too much or something like that. While other term, whole life insurance may require substantially larger minimum coverage, obviously. So most life insurance is going to have the larger coverage to make it worthwhile to both you oftentimes but also to the insurance company. So it takes kind of like a specialized type of company to be issuing policies for such a low amount and you're going to have policies or possibly insurance companies that would need to be streamlined to deal with specifically those kind of conditions to make it cost effective from a business standpoint on their end. So the premiums for Burial insurance may therefore seem more affordable than bigger benefit policies. Premiums for this type of insurance do not change and this policy provides permanent coverage. Some of the costs covered by this insurance include funeral service, cemetery plot and headstone, casket funeral, processions and other miscellaneous costs. Life insurance, similar cost, more benefits. Consumer advocates have raised red flags about Burial insurance. So some people have said, you know, the Burial insurance, you know, is it a worthwhile type of thing and are people that are selling Burial insurance doing a good thing or possibly could they be playing on emotions for people that maybe don't need that kind of insurance or it might be for a specific situation. Some consider it a predatory type of insurance targeted to people who tend to be less educated, minority and low income. That a medical exam is not required and is guaranteed means the pool of insured people is high risk. So basically obviously if there's no medical examination and it's guaranteed you have a more high risk pool of people generally. In order for the insurer to make a profit the premiums have to be high related to the benefits. So obviously that's just part of the case here because, you know, for them to be able to pay the insurance or make a profit on this if they're dealing with people that are high risk to die and they're going to have to pay off the benefits, then you would expect the premiums to be higher. Therefore you would think that from your standpoint to purchase insurance you'd want to think, first do I need insurance, can I cover these costs with the assets that I have at this point in time and if I need insurance is it possible for me to purchase some other kind of insurance, possibly standard always comparing back on over to the pure insurance, the term insurance and seeing if that would be the first kind of place you'd want to be comparing to and even if you need, even if you have medical problems, you still might be able to purchase normal insurance which possibly would be cheaper given the insurance company is aware of whatever medical problems are there and can then appropriately calculate the risk. So yet most people even with severe health issues qualify for policies many times better than burial insurance. So many people might, you know, this is where the predatory situation comes in because if a company is specialized on burial insurance that means that they might be really streamlined to that specific kind of insurance and there might be many people that they're selling the insurance to that could qualify for other insurance which would be more affordable. They might not think so because they might have medical conditions but there might be other types of insurances that would be willing to basically ensure even given fairly serious medical conditions and have a cheaper policy given the fact that they have the medical information. So if the pressing issue is to make sure there are sufficient funds available to survivors to pay the funeral and settle bills a term or permanent life insurance policy can be purchased. If the main concern is to ensure that the individual wishes for burial, cremation or memorial services will be funded and followed and the demise is expected in the next few years. It may also pay to make prepaid pre-need arrangements with a funeral provider. So in other words, you might have a couple needs here. You might first be saying, well, first of all, I don't want to put this problem of not having the money to deal with my funeral costs, that burden on the people that are after my death. Well, so obviously you could buy just normal insurance, you know, term insurance for example if you qualify for it might be beneficial in those cases and if you can't get that and you might also have assets already that you can kind of prepaid it to basically set up your funeral arrangements or make sure that that is available to cover those types of costs if you have net assets over the liabilities at that point in time. And if the if the thing is, well, I want to make sure my setup is the way I want it to be set up when I die then then you can make your own arrangements if that's basically the case so that you can you can set up how how you want things to go so that you don't just give them the money and then they put you in a coffee can and basically go on vacation or something like that. In any case, another strategy for making sure survivors have money to pay for funeral costs is to contribute regularly to a savings account for that purpose set up either as a trust or simply as a joint account with a designated survivor. So you might just kind of self insure in that case that this money could be withdrawn immediately if needed after you die. Survivors won't have to wait for the insurance check or probate. So in that way, the money is even more right right on hand, right? And that would be the easiest that would be the nicest thing to be able to do. So you could just say, OK, we've got the money in the account here and we can use. We don't have to worry about this whole process for the for the funeral arrangements.