Can You Use Life Insurance To Cover Funeral Expenses?
My mother died in 2017. I don’t know how to express how devastating it was to find her lifeless body in her bed. One moment I was washing the dishes, and the next moment I was mentally processing that my mother’s spirit had entered the next existence. I was unemployed, aimless, and without purpose at the time. I was living with her. And it hurts me to know that she understood I couldn’t take care of myself when she passed, unlike now. I could only process shock as she passed, I didn’t think about whether she had life insurance to cover funeral expenses.
My eldest brother gathered her insurance information and took it to the local funeral home. Many funeral homes process life insurance policies instead of accepting cash to facilitate a funeral.
There are many things I don’t like about my eldest brother. But he was strong enough to have my mother’s body processed in the hospital morgue and transferred to the funeral home.
I don’t enjoy writing about this moment at all. I do so to express to you that life can end at any moment. The average human being lives to be about 78 – my mother was 71.
Get life insurance and assess and update your policy as needed. Don’t get a life insurance policy, stick it in a drawer and forget it. My mother assessed her policy regularly with one of my sisters when she was alive.
Make sure you have a plan and assign someone to oversee your funeral process after passing. After all, someone else will have to take care of it. This could be the funeral home or a relative.
No one likes thinking about death. But don’t leave it to fate for your loved ones to find out if they use your life insurance to cover funeral expenses.
Average Funeral Costs
People don’t appreciate how expensive a funeral can be until they have to deal with it. I was too emotionally scrambled to even think about it – my eldest brother handled the paperwork.
The average cost of a funeral in the United States is $8,100. However, that is a deceptive estimate. The cost of a funeral in your city can be lower or much higher relative to the local cost of living standards.
For example, the average cost of a funeral in Hawaii is $15,000. And in California, the average cost of a funeral is about $12,000.
And it is important to remember that a “funeral” is a series of separate expenses that come together.
There are local fees that must be paid to break earth for the coffin and initiate the funeral. You have to pay for the coffin, wake, and funeral. A funeral plot is like the real estate market. The small plot of land you use for the burial varies in cost relative to the local cost of living.
You need a plan to determine how to use life insurance to cover funeral expenses.
Can You Use Life Insurance To Cover Funeral Expenses?
Absolutely. Life insurance policies are designed to be used to offer death benefits to beneficiaries and to be used to pay for funeral expenses.
How the death benefits are used to pay for the funeral expenses differs from company to company. Here are several ways that you use life insurance to cover funeral expenses.
Funeral Home Processing
In many cases, you can take the life insurance policy directly to the funeral home. The funeral home will then claim enough of the death benefits on the policy to cover the costs of the funeral.
The funeral home will call the insurance company directly and process the paperwork. In this situation, the funeral home is technically a death beneficiary who receives enough benefits to facilitate the funeral.
Assigned beneficiaries or a trusted person will fill out the paperwork to assign the funeral enough benefits to cover the costs of the funeral. Whatever is left over will then be divided amongst all named beneficiaries in the policy as death benefits.
Make sure you re-evaluate your policy often in this circumstance to make sure everything is planned correctly.
Death Benefits Assignment
The whole purpose of life insurance is to increase the value of the policy via premium payments to generate a policy value that can then be distributed as death benefit payments to all named beneficiaries.
You can assign beneficiaries to use their death benefits, or a portion, to pay for your funeral after your passing. Make sure you assign trusted individuals who will honor your posthumous wishes.
Burial insurance, which is also known as final expense insurance, is a specialty life insurance product designed to cover funeral expenses.
Life insurance can be bought at any age but is more expensive the older you become. Burial insurance is specifically designed to be marketed to senior citizens.
Burial insurance policies usually range between $5,000 to $25,000 and feature low premium amounts. No physical exams are required. Some burial insurance policies will cover medical costs. And some burial insurance companies will insure people up to age 85.
Burial insurance is an alternative for older people who don’t qualify for life insurance.
You can use burial life insurance to cover funeral expenses, just make sure such policies will cover your needs.
It is an easy thing to say “plan ahead.” But you should make time every month or bimonthly to make sure your life insurance policy and funeral arrangements are paid up and up to date.
It is asking a lot to assume that your loved ones will automatically know what to do once you pass away in terms of your funeral expense needs.
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.