Planning Ahead: A Guide to Burial Insurance in Canada
While the topic of end-of-life expenses is often avoided, a conversation about financial planning for the future is a key component of a comprehensive personal finance strategy. In Canada, many people are turning to a specific type of life insurance product known as burial insurance, also referred to as final expense insurance or funeral insurance, to address these needs.
What is Burial Insurance?
Burial insurance is a form of permanent life insurance designed with a specific purpose: to cover the costs associated with your passing. Unlike traditional life insurance, which is often used to replace lost income or pay off large debts like a mortgage, burial insurance typically has a much smaller death benefit, usually ranging from $5,000 to $25,000. This amount is intended to provide a financial cushion for your loved ones, ensuring they have the funds to pay for immediate end-of-life costs.
A defining characteristic of this type of policy is its simplified application process. Many burial insurance products are offered on a “simplified issue” or “guaranteed issue” basis.
- Simplified Issue: This policy requires you to answer a few basic health questions, but a medical exam is not necessary.
- Guaranteed Issue: This is a policy with guaranteed acceptance for eligible individuals, regardless of their health status. There are no medical questions or exams required.
This makes burial insurance an accessible option for seniors or individuals with pre-existing health conditions who may not qualify for a traditional, medically underwritten life insurance policy.
Key Features of Burial Insurance
Burial insurance policies in Canada typically offer several features that distinguish them from other life insurance products:
- Permanent Coverage: As a type of permanent life insurance, the policy remains active for your entire life as long as premiums are paid. It does not have a set term like a term life insurance policy.
- Fixed Premiums: The premium rates for burial insurance are typically fixed at the time of purchase and will not increase over time. This provides stability and predictability for your budget.
- Smaller Death Benefit: The coverage amount is tailored to the specific costs of a funeral or other final expenses, making the policy more affordable than a traditional, high-coverage life insurance plan.
- Guaranteed Payout: Upon your death, the policy pays out a lump-sum death benefit to your designated beneficiary. The payout is often fast, which is critical for covering immediate expenses.
- Flexible Funds: While the policy is designed to cover final expenses, the beneficiary is not legally obligated to use the funds for that purpose. They can use the money as they see fit, whether it’s for funeral costs, outstanding medical bills, or other debts.
Understanding Waiting Periods
It’s important to be aware of the waiting period, a common feature in many burial insurance policies, particularly those with simplified or guaranteed acceptance. A waiting period is a set time frame, often two to three years, during which the full death benefit is not paid out if you die from non-accidental causes. If death occurs within this period, the beneficiary typically receives a refund of the premiums paid, sometimes with an added interest. The waiting period helps the insurance company manage its risk when issuing policies without a medical exam.
Who Should Consider Burial Insurance?
Burial insurance is not for everyone. For young, healthy individuals with significant financial obligations, a traditional life insurance policy is often a more suitable and cost-effective choice.
However, burial insurance can be an ideal solution for:
- Seniors: Individuals over a certain age may find it difficult or expensive to obtain a traditional life insurance policy.
- Individuals with Health Concerns: Those with chronic or serious health conditions who may be denied coverage elsewhere can secure a policy.
- People on a Fixed Income: The lower premiums and manageable coverage amounts make it a viable option for those on a pension or limited budget.
- Anyone Concerned about Burdening Their Family: It offers peace of mind, knowing that your loved ones will not be faced with a financial strain during an emotionally difficult time.
By understanding the unique features of burial insurance, Canadians can make an informed decision to secure their end-of-life finances, providing a sense of security for themselves and their families. Connect to an independent local mortgage broker by submitting a form below.
