“Burial insurance” usually refers to a whole life insurance policy
with a death benefit of from $5,000 to $25,000. As its nickname
implies, people buy this type of policy to provide money for funeral
and burial costs for themselves and/or family members. It is
possible to buy a policy after answering a few health-related
questions on the application and with no medical exam.
Premiums are payable weekly or monthly. The death
benefit is whatever that premium will buy given the insured’s
current age. For example, a $12 per month premium might buy a $6,000
death benefit for a 36-year-old man or an $18,000 death benefit for
a 9-year-old boy.
Burial policies may be designed to cover one person or everyone in a
family.
Funeral homes may be licensed to sell burial
insurance, but it is mainly sold through brokers and agents of
insurance companies licensed to sell life insurance.
An approach that is similar to burial life insurance (and sometimes
called burial or “pre-need” insurance) is pre-payment of your
funeral arrangements. Under this program, you may select the funeral
home, type of service, casket (or cremation), flowers, headstone,
burial plot, the cost of digging and filling the grave, and other
items, and lock in the prices for them by paying in advance
Should I buy life insurance on my child’s life?
The main reason for buying life insurance on anyone’s life is to
replace income “lost” or pay for expenses caused by the death of the
insured person. If your child dies, there’s no lost income, but
there will be funeral, burial and related expenses that could run to
thousands of dollars, which might cause a financial hardship to the
parents of the deceased child.
Another reason for buying life insurance on a child’s life is to
guard against the possibility that, when the child is older, he or
she might not be able to buy life insurance because of intervening
illness or other circumstance.
Still another reason for buying life insurance on a child’s life is
part of a program to teach the child financial responsibility.
Typically the insurance is whole life insurance, ownership of which
is transferred to the child when he or she turns 21.
Most insurance advisors recommend that families spend their
insurance budget to buy life and disability income insurance on the
parents first, before considering insurance on children’s lives.
Death of a parent, particularly an income-earner, could have
financial consequences that are devastating compared to the
financial effects from a child’s death.
Do "empty nesters" need life insurance?
Quite possibly. Here are 10 reasons to own life insurance after your
kids have left home:
To meet
goals
If your children are in college and/or not completely
financially independent, life insurance can help “finish the
job.” Although you may have saved enough for tuition, the kids’
living expenses (e.g., room and board, laundry,
entertainment/activity costs, etc.) continue.
To support
other dependents
If you have parents, disabled adult children, or others who
depend on you for financial support, life insurance would
continue this support if you die before they do.
Protection
A recent study showed that 5 percent of married women ages 51-64
were poor, but 20 percent of widows that age were poor. This
happens because many people don’t plan for life insurance to pay
income to the surviving spouse after their kids are grown.
To offset
reduced CPP survivor’s benefits
To offset
other “lost” retirement savings
Also, because of the deceased’s early death, he or she didn’t
get salary increases that might have boosted employer pension
benefits and/or RRSP contributions. A life insurance policy can
help offset the effect of these reduced retirement savings.
To meet
commitments based on two incomes
Most two-earner couples make financial commitments (e.g., home
mortgage, loans, leases, etc.) based on their combined income.
Life insurance on each earner enables the survivor to continue
to meet those commitments.
To pay
unplanned expenses caused by an early death
Young people don’t generally plan to have savings available to
pay for funeral and burial costs, final medical expenses, estate
administration and transfer costs, and income
and estate taxes. Life insurance can cover these costs, which
can easily reach tens of thousands of dollars.
To create a
financial “safety net”
Conventional wisdom says each household should have an
“emergency fund” equal to about half a year’s income, to meet
surprise unavoidable outlays. If the household does not already
have an emergency fund, the post-death family will be even more
financially vulnerable without one. Furthermore, it might also
be somewhat more difficult for the survivors to obtain credit.
Life insurance can solve this problem.
To offset
lost income if a spouse dies after beginning CPP
retirement benefits
When a couple retires and begins receiving CPP
retirement benefits, each one receives an income. When one spouse dies, the
one retirement benefit continues but the second benefit stops. Life insurance can offset
this income drop.
To provide
bequests to heirs and charities
If you want to be sure that your heirs and/or favourite
charities get money after your death, you can designate some or
all of your life insurance benefits to go to them. This is
particularly useful if, without the life insurance, your
executor would have to liquidate other assets to meet this
objective.
