Burial insurance is a life insurance policy especially curated to pay for an individual’s funeral and burial expenses. Funeral or burial insurance requires the insurer to qualify for the eligibility criteria of the lender. Individuals with a critical illness can also qualify for a burial insurance policy if the premiums are paid on time. Some of the basic benefits of having a burial insurance are as follows:

• A burial insurance policy pay the burial and funeral costs at a quicker pace than any other life insurance policy
• Unless the insured has complicated health conditions, the burial policy coverage is day 1, which means if the insured died the next day, the beneficiaries will have the money to spend for the funeral of the insured
• Unlike savings such as annuities and savings account that are taxable, the death benefit for a burial insurance is tax-free
• The burial insurance policy covers important health conditions like heart illness and obesity, among others

Here are five types of burial insurance that you should avoid purchasing.

Term life insurance
Most of us believe that term life insurance creates the base for a long-term financial plan as it provides both a low-cost option as well as the right death benefit coverage. While quite a few policies offer additional benefits such as coverage for serious illness, term life insurance still remains only a term insurance and not an exclusive burial insurance. In case the insured passes away after the term of the insurance, then one does not get the money from the term life insurance policy for the funeral.

Universal life
Universal life policies were a popular option in the 1980s and 90s. The success of these policies is because of their interest rates. For instance, higher the interest rate of these policies, more will be the growth of the cash value of the policy. On the contrary, if the interest rates are lower, then the cash value would decline, demanding for additional premiums that would keep the policy running. As the universal life policies have a significantly dropping interest rates, thereby calling for higher premiums, which are more than the normal ongoing rates to keep the policy in force.

These policies need watchfulness because of the effects of the insurance costs and interest rate. In case you have bought a universal life policy and require a death benefit, a feasible solution is to transfer the cash value to a full-fledged burial insurance whole life policy.

Guaranteed issued whole life
These policies are life insurance policies that do not come with any underwriting. All you need to do is fill out the application and you will get a life insurance policy. Much more graded and expensive than its counterparts, these policies are bought by those who are undergoing serious health conditions. So, a guaranteed issued whole life insurance policy should not be considered if you are looking for a burial policy.

Policies that do not protect you from Medicaid’s excess expenditures
There are a few drawbacks of a burial insurance policy as the generated cash value isn’t protected by the spend down rules of Medicaid. This simply means that you will be paying for the expenses incurred towards long-term care in any burial insurance policy before Medicaid pays for the same.

In case the beneficiary of the insured wants to keep the policy ongoing, there are a few ways in which they can pay but they would be required to pay more. In short, these policies simply terminate, which means that you spend money for nothing substantial in the end.

Don’t fall for any insurance policy that comes in the mail
Although you might find attractive policies for as low as $1 on an email or a TV advertisement, it is highly recommended that you do not fall for such tricks. Such policies do look alluring but always come with some hidden terms and conditions.

The only policy that you should purchase is the one that suits your specific needs and requirements. How would you know if the policy mentioned in your email is the right one for you or not? You might end up spending your hard-earned money on a policy that does not fit your requirements.

Moreover, you can also consult a policy advisor to find the right burial policy that meets your specific needs.

One of the feasible solutions is to use a funeral trust as it pays for the funeral expenses of an individual and ensures that the money is available in the time of need. The trust-based burial policies do not involve any costs. Some of the states have funeral trusts, while others don’t. It is best to research about funeral trusts and keep all the necessary information handy.