The average cost of a funeral in the United States is almost $8,000.
It is hard enough dealing with the emotional and administrative nightmare that comes with the death of a loved one. The last thing you want is your family panicking about where they will find that $8,000 to cover your funeral.
Luckily, you have life insurance. That will be sufficient to pay for your funeral, right? The answer might be more complicated than you expect.
While you could theoretically rely on life insurance to cover funeral costs, several problems could crop up.
Read on to understand whether it is genuinely possible to pay for all burial expenses with your life insurance or whether you need to develop a new plan.
What Is Life Insurance?
When you take out life insurance, you designate one or several people as beneficiaries. They will get paid a lump sum when you die.
The idea is that your beneficiaries can use this money to pay off debts, cover children’s education costs, or merely make up for the loss of income when someone dies.
Life insurance can also be a smart way of leaving an inheritance without a hefty tax burden.
Can I Use Life Insurance to Cover Funeral Costs?
Your family can use the money from your life insurance to cover your funeral expenses. However, there are critical things to keep in mind.
It can take anything from two weeks until two months for the money from your life insurance to be paid out. However, this can be impacted by several factors, such as how you die. That could result in the money being held up.
In the United States, funerals are typically held within a week of someone dying. The chances are high that your family will have to pay the funeral costs upfront and wait for your life insurance money at a later stage.
Suppose you want to rely on your life insurance to pay for your funeral costs. In that case, you need to be certain that your beneficiary will agree to spend the money they receive in this way.
If you have several children as beneficiaries, they would need to agree on who would use the life insurance for the funeral and how they would divide the costs.
So does life insurance cover funeral costs? Yes, but it is risky.
Benefits of Funeral Cost Insurance
Burial insurance is a type of life insurance, but it has a particular and limited goal. The difference between life insurance and a funeral plan is that the latter will pay out almost immediately upon your death.
Burial insurance is typically capped at around $50,000, as it generally has no other purpose other than paying for a funeral and surrounding costs. Funeral insurance costs between $50 and $100 a month, depending on various factors, such as how healthy you are.
The payout will cover cremation or a casket, flowers, the memorial service, snacks, and other funeral expenses.
However, the death benefit can also be used for any final medical expenses or as your family chooses.
Make It Easy for Your Family
Organizing a funeral can be overwhelming. While your family may be able to use money from your life insurance to cover funeral costs, nothing is certain. If you want to remove the financial burden of your burial from your family, it might be time to consider a specific policy.
Contact us to find out more about burial insurance or get a quote.