When starting to think about the end of your life it is important to understand the costs associated. For standard traditional services, the cost can range from $8,000 to $12,000.
This price does not include other bills and liabilities left behind, taking these financial obligations into account, end of life expenses can easily reach $20,000.
So when looking into a life insurance policy it is important to know if there are any rules or regulations for the financial distribution and what it can be used for.
Can Life Insurance Pay For Funeral?
Life Insurance policies, in general, can be used for funeral costs and any other expenses deemed necessary by the beneficiary. Funeral Insurance specifically does not get tied up in probate and will get your family members the financial resources they need within a week.
Fortunately, Funeral Insurance is specifically designed for the expenses that come at the end of one’s life and can be a monetary lifeline for some families.
What Is Funeral Insurance?
This product is designed to be a simple and affordable way to plan for the inevitable end-of-life expenses. There are five key features that are included with this type of plan.
Price never increases: The monthly premium will never change. Knowing your expenses down to the penny each month is a critical feature for most seniors on a fixed income.
Coverage never decreases: When taking out a policy it is important that the death benefit is available for your loved ones when it is needed most. This product guarantees a set death benefit that will never diminish or terminate.
Builds a cash value: For each payment made a portion will go towards the cash value each month. Over time you will be able to borrow from the money that has accumulated.
Simplified issue underwriting: You will never be asked to take a medical exam, instead, you can answer a series of simple yes or no health questions that will qualify you for coverage. This process can be done over the phone from the comfort of your own home.
Affordable coverage: This product offers coverage amounts from $2,000 to $40,000, this makes your monthly premium much less than a larger traditional whole life plan, while also receiving some of the same great benefits.
What does it cover?
There is no mandate on what the policy must be used for however there are typical items that beneficiaries will commonly spend the money on.
- Memorial / Celebration of Life
- Post Mortem Expenses
- Medical Bills
- Outstanding Bills
- Legal Expenses
- Leaving an Inheritance
- Charity Donations
- Other End of Life Expenses
How Much Does It Cost?
The price of your policy can be vastly different than the price your spouse will pay. This is because the cost will heavily depend on four factors.
Health: The health of the proposed insured carries the most weight when determining the cost. If you have a healthy medical history then the providers will award you a better rate due to the lower health risk. If you have a complicated medical history you will still able to find reasonable pricing.
Age: Once you take out your policy the price never changes, however, the initial age upon application does matter when it comes to setting the price. The sooner you take out the policy the lower your cost will be.
Gender: On average females live four years longer than males, this ties directly into the cost difference between men and women. Females will pay less than males for the same coverage.
Coverage Amount: The more coverage you take out the higher your premiums will be. This is why larger traditional whole life policies are more expensive than the smaller funeral insurance coverage.
This chart ranges from the low end to the high end of funeral insurance quotes.
The healthier your medical history is the less you can expect to pay.
|45||$26 – $46||$37 – $68||$48 – $89|
|50||$29 – $58||$42 – $77||$55 – $101|
|55||$35 – $65||$51 – $84||$67 – $125|
|60||$43 – $69||$62 – $99||$82 – $138|
|65||$56 – $86||$82 – $125||$108 – $184|
|70||$73 – $117||$108 – $150||$143 – $215|
|75||$99 – $169||$148 – $207||$196 – $303|
|80||$133 – $246||$197 – $368||$262 – $539|
|85||$183 – $300||$273 – $449||$363 – $597|
|45||$22 – $34||$32 – $49||$42 – $64|
|50||$24 – $46||$35 – $53||$46 – $74|
|55||$28 – $51||$41 – $64||$54 – $95|
|60||$33 – $53||$48 – $74||$62 – $110|
|65||$41 – $65||$60 – $91||$79 – $135|
|70||$53 – $84||$78 – $110||$103 – $164|
|75||$72 – $123||$107 – $160||$141 – $235|
|80||$98 – $175||$146 – $262||$194 – $383|
|85||$132 – $191||$202 – $284||$269 – $377|
Other Ways To Plan
There are other vehicles to cover these costs depending on what your finacial situation is. Each of the following products has a specific use and should be discussed with a trusted advisor and your loved ones to make sure it is right for you.
Traditional Whole Life
This product is similar to funeral insurance in the fact that they are both whole life coverage. However, while most of the benefits are the same, there are also some key differences.
Whole Life Benefits: As previously mentioned, all whole life policies come with coverage that never terminates and a price that never increases. Also included is a cash value that is built over time.
Large Policy Amounts: This product typically starts at $50,000 – $100,000 of coverage and can go well into the millions. The larger policy amounts make the monthly payment much more expensive.
Used To Preserve Wealth: If you speak with a financial advisor they may recommend using this plan type to shelter your wealth or to use it for tax saving purposes.
Term Life Insurance
This plan type might look like a great option for funeral insurance, however, there are a few major flaws to using it as your main financial plan.
Coverage Terminates: The coverage will eventually cancel. For example, if you take out a 30-year policy at the age of 50, your coverage will terminate when you turn 80 years old.
Price Is Cheaper: This product type is cheaper than a whole life plan because it eventually cancels. It is imperative that you read the fine print, some term policies actually raise in price the older you get.
No Cash Value Earned: For every payment made the provider is exchanging coverage for your premium each month. No additional cash value is added to your payments, this really is like renting coverage.
This product type is taken out with your local mortuary and is much more limited when it comes to what the funds can be spent on.
Pays For Specific Services: This product only pays for costs associated with the funeral home. This includes all the items needed to respectfully lay your loved one to rest.
The Beneficiary Is The Mortuary: When the insured passes away the mortuary will receive the distribution and use the money to fund your final wishes. This includes the casket or urn you decided on and other associated costs. Since the mortuary is the beneficiary it does not allow for flexibility in any extra money left over from the policy.
Not Flexible: Being proactive and planning your funeral is honorable, but it may not be the best option. This process will lock you into one mortuary, what happens if the business is no longer operating when you pass away, or you change where you would like your final rest place to be.
These scenarios can be problematic if your situation changes over the years.
Savings or Investment Account
A savings or investment account can be an option to put away money for your end of life expenses, however, there is still some uncertainty involved with this method.
Sudden Death: No one knows when their health will decline, this can cause you to come up short in your saving efforts and leave family members in a tough financial position.
Investment Volatility: Another way to save for the costs associated with death is through an investment account. This can work but it is impossible to know if your portfolio will cooperate with your plan.
Inflation: The US dollar is consistently changing in value. It is hard to say if your saving efforts will outpace inflation.
Things To Consider
When taking out a policy meant for your end of life expenses it is important to consider a few other factors.
Varying funeral costs
The costs are highly dependent upon where you live and what your wishes are. Depending on where you live geographically, your funeral costs will fluctuate.
For example here are the 10 most expensive and least expensive states to have a traditional service in.
10 Most Expensive States
10 Least Expensive States
One item individuals do not always think about is the legal process that occurs after they pass away.
Probate occurs to make sure the deceased debts have been paid and the remaining assets are distributed to the beneficiary. This process can take months and can be costly. This is often problematic for loved ones attempting to celebrate the life of the deceased but do not have access to funds due to this lengthy legal process.
Fortunately, as long as you name a beneficiary to your life insurance policy the funds should not go through a probate court. This is because the funds belong to the beneficiary by law and are not in your name.
This should be discussed further with your trusted advisor.
Create a detailed plan for your final wishes
When someone passes away there is typically shock and high emotions from family members. These two combinations do not always mesh well with planning someone’s celebration of life or service. Within 24 or 48 hours of death, loved ones are forced to start the planning process.
This can be an extremely volatile time, the best thing these family members can have is a detailed guide to what the deceased final wishes are. This will take out any guessing or disagreements and give everyone involved a guide on how to move forward and honor the final wishes of someone’s life.
There are many great resources to help families through this process.
Does Social Security give a death benefit?
Social Security will give the beneficiary up to $255 for a death benefit. This is nowhere near what is needed to properly celebrate someone’s life. Also, to receive this financial support your beneficiary will need to do some leg work to track this money down. You must also qualify in order to receive this distribution.
Do not rely on this option to pay for your end of life costs.
a. When looking into your financial options it’s important to ask, can life insurance pay for funeral. This product can pay for all costs associated with the end of one’s life and anything else the beneficiary deems necessary.
b. Funeral insurance is a necessity for any families who have not planned for the costs associated with death. For a simple and affordable monthly payment, you and your loved ones will receive peace of mind knowing these costs will be taken care of.
c. There are many financial vehicles to choose from when planning for funeral costs, each option is unique and should be looked at in detail to make sure it is a good fit for you.
Stacie is the trainer of sales and customer service at Willamette Life. She enjoys educating both the staff and the public about Final Expense Life Insurance. By taking the questions frequently asked by clients she has been able to assist in developing a series of blogs that will hopefully be able to help more people than just those we are able to speak with.
We would be happy to answer your specific questions if there is anything we haven’t covered yet.