Funeral Insurance Waiting Period: How It Works

A funeral insurance waiting period is a stretch after you buy a policy when the full death benefit is not paid. On guaranteed issue policies, which ask no health questions, NerdWallet says two years is typical. If you die of natural causes in that time, the insurer pays a refund of the premiums you paid, not the benefit. Policies that ask health questions can pay in full from day one.

What is a funeral insurance waiting period?

Funeral insurance, also called final expense or burial insurance, is a small life insurance policy meant to cover funeral costs. Insurers that accept people with poor health protect themselves by holding back the full benefit for the first years of the policy. Otherwise someone who knows they are very ill could buy a policy and claim a few weeks later.

The waiting period is part of the policy contract. It does not change the price you pay each month. You pay full premiums throughout, so the waiting period is a period of reduced protection for your family, not a discount.

Level, graded and guaranteed issue: how do the waiting periods differ?

Funeral and burial insurance is usually sold in these forms, though names and terms vary by insurer. Washington's insurance regulator says that funeral insurance is generally easier to qualify for than other life insurance, with few or no health questions and often no exam.

The exact percentages in a graded plan, and the length of the wait, are set by each insurer. There is no industry-wide schedule, so be wary of any guide that quotes one as though there were.

What does your family get if you die during the wait?

On a guaranteed issue policy, NerdWallet reports that the insurer pays a refund of premiums rather than the policy's death benefit if you die in the first two years. Here is how that looks in numbers. The figures are hypothetical, to show the arithmetic only. If you paid $80 a month for 14 months, you would have paid $1,120. A family covered by a $10,000 policy with a two-year wait would then receive about $1,120, plus any interest the policy adds, and not $10,000.

Three details vary between policies, so check each one:

• Interest on the refund. Some policies return premiums only. Others add a stated percentage.
• Accidental death. Some policies pay the full benefit for an accident even in the waiting period. Ask whether yours does, and how the policy defines an accident.
• Stepped benefits. A graded policy may pay part of the benefit in year one and more in year two.

The family can still make a claim during the wait. The policy stays in force; only the amount paid is limited.

Waiting period or contestable period: what is the difference?

They are separate rules, and people mix them up.

• The waiting period limits the benefit for a death in the early years.
• The contestable period lets the insurer review your application if you die within two years. The Texas Department of Insurance says life insurance policies have a two-year contestable period, and Washington's regulator says the company will investigate omitted information on claims in that window.

A level policy with no waiting period can still be contested. If the application left out or misstated health information, the claim can be reduced or denied. Answer every question fully and accurately. For more on what happens next, see what to do if a funeral insurance claim is denied.

Texas also says companies usually will not pay for a suicide during the first two years of a policy. Anyone thinking about suicide can call or text 988 at any time to reach the Suicide and Crisis Lifeline.

How can you avoid a waiting period?

1. Buy earlier. Health problems can move you from a level plan to a graded or guaranteed issue one. Our guide to the best age to buy funeral insurance covers the trade-off.
2. Apply for a policy with health questions first. Answer honestly. Conditions that are managed may still be accepted, but it depends on the insurer. See funeral insurance with pre-existing conditions and funeral insurance with no medical exam.
3. Compare several insurers. Each one sets its own health questions and limits.
4. Use the free look period. Texas policies have a free look of at least 10 to 20 days, and Washington gives 10 days, to cancel for a full refund. Read the waiting period terms during that time.
5. Check the cost against the benefit. Washington's regulator warns that what you pay in premiums may cost more than your funeral.

What are the alternatives to a waiting period policy?

If the waiting period or price puts you off, other ways to set money aside for a funeral include a savings account, a payable-on-death bank account, a prepaid funeral plan and, for some people, ordinary life insurance. Each has trade-offs. Our guides on funeral insurance vs life insurance and prepaid plans compare them.

What to do next

1. Find your policy's waiting period, benefit type and refund terms in the contract.
2. Check that premiums are paid on time. Texas says most policies have a 31-day grace period, and a policy that lapses may have nothing to pay.
3. Tell your family where the policy is and who the beneficiary is.
4. If a claim falls in the waiting period, read funeral insurance claim documents and ask the insurer for its decision in writing.