Funeral insurance is a type of life insurance that helps seniors plan for final expenses. Funeral insurance usually offers coverage up to $25,000, relatively low rates, and does not require a medical exam to qualify. It’s geared toward paying for a funeral, which costs $6,000-$11,000 on average, but the payment can be used for other end-of-life costs too.
|Note on insurance terminology: |
Funeral insurance can also be called “final expense insurance” or “burial insurance.” All three names refer to the same type of plan. For the purposes of this article, we use the term “funeral insurance,” but you may see others used elsewhere.
In many ways, funeral insurance works like other kinds of life insurance. The person who needs coverage applies, selects a coverage amount (or “death benefit”), and names a beneficiary.
As long as the insured person stays current on premium payments, the death benefit will be paid to their beneficiary when they pass away. It can then be used to pay for final arrangements for the deceased.
But there are some key differences about how funeral insurance works, too.
Chris Acker, a certified life underwriter and chartered financial planner, explains:
“Funeral insurance policies are designed to be small, whole life policies, typically issued with death benefits of $25,000 or less. Most funeral insurance carriers offer guaranteed issue online processing and will issue a policy in days.” –Chris Acker, CLU, CFP
Here’s what that means for you.
There are a few features that set funeral insurance apart from “traditional” life insurance plans, like term or whole life.
These unique features are what make funeral insurance appealing to some seniors.
It can be an affordable, accessible option for people that can’t get life insurance coverage elsewhere.
Smaller coverage amounts can make funeral insurance more affordable. However, since there’s no medical exam, funeral insurance is still more expensive per dollar of coverage than most fully-underwritten policies would be.
The smaller coverage amounts also limit how far the policy will go to help surviving family members.
“The benefit of a bigger [life insurance] policy is to provide ongoing benefits to one’s heirs,” explains Tony Steuer, CLU, LA, CPFFE, Author and financial preparedness advocate.
“It can help a spouse keep their home by providing mortgage payments or rent,” Steuer says. “It can also fund retirement plan contributions. The other big thing is setting money aside for kids to go to college.”
This is what we mean when we say funeral insurance is meant for those with limited coverage needs.
Are you considering funeral insurance for yourself or a senior relative? If so, it’s important to consider both the pros and cons before buying.
Ultimately, the decision to buy funeral insurance or not comes down to your individual circumstances.
“Funeral insurance is a completely useful product — especially for someone who wants simple coverage for a specific need, and doesn’t have a ton of money to spend,” says Steuer.
You can use the link below to explore customized funeral insurance policies and rates.
The main goal of funeral insurance is to cover funeral expenses. A funeral, with burial or cremation, costs $6,000 to $11,000 on average — so having a financial plan to cover funeral costs is incredibly important.
But funeral insurance can be used for other things, too.
As with all life insurance policies, the funeral insurance “death benefit” is paid to a pre-selected beneficiary.
That person, usually a spouse or close relative, can use the funds however they see fit. There are no rules that say the death benefit must be used for funeral costs.
Some of the most common uses for a funeral insurance policy include:
Of course, this list is just an example.
Funeral costs tend to be high, and proceeds from an average funeral insurance policy are relatively small. So many people will simply use the payout to cover all or part of the funeral arrangements.
Below is a breakdown of average funeral costs for 2019, according to the National Funeral Directors Association.
Many people are not aware how quickly funeral costs can add up.
Customers do have the right to compare costs from different funeral homes and find the most affordable option. However, non-negotiable fees like the “funeral home service fee” often cost a few thousand dollars.
So regardless of the funeral arrangements someone chooses, it’s crucial to plan for these expenses ahead of time.
For many people, funeral insurance costs between $30 and $200 per month. But premiums can vary widely depending on the applicant’s unique profile. The main factors that impact cost are age and gender. So the older you are, the higher the premiums will be. And men usually pay more than women.
Sample rates shown here are a snapshot meant for comparison only. Check personalized funeral insurance quotes to see what your own rate will be.
CTA: Check custom funeral insurance rate quotes
Like we mentioned above, funeral insurance tends to be more expensive per dollar of coverage than other types of life insurance. That’s because, without a medical exam, companies can’t fully measure the “risk” of insuring someone. But they’re still promising to pay a death benefit. So they charge a higher premium to balance out the cost.
“These policies are typically ‘guaranteed issue’ plans with few or no medical questions,” explains Acker. “And they are priced assuming all applicants are in poor health.”
Bur for people that are in poorer health, a guaranteed issue policy may be the best option.
“If people can’t get — or don’t need — higher amounts of life insurance, this process makes it easy and relatively painless to secure at least a small amount of life insurance for their loved ones,” says Acker.
And for many, having some life insurance is better than having none.
Funeral insurance costs vary by person. But they also vary by company. That’s because each insurer calculates price differently based on the applicant’s age, gender, basic health status, and other factors. The price estimate a company gives you is called a “funeral insurance quote.”
“Funeral insurance is one of those marketplaces where there’s huge variance [in cost]. Make sure you compare options.” –Tony Steuer, CLU, LA, CPFFE, Author and financial preparedness advocate
The goal as a consumer is to find the lowest premium for the coverage you need. So it’s important to compare quotes from a few different funeral insurance companies before buying.
You can compare personalized quotes to get the rightfuneral insurance company right here.
Comparing rates from a few different companies lets you find the best value for your funeral insurance plan.
To help you get started, we compiled a list of the top seven funeral insurance companies based on market share data from the National Association of Insurance Commissioners.
Companies are ranked based on their customer satisfaction score from J.D. Power’s 2019 life insurance survey. The J.D. Power study measures customer satisfaction with every part of the life insurance process — from application to price, billing, and customer service.
|Company||Funeral Insurance Policy||Funeral Insurance Coverage Amounts¹||Accepted Ages for Funeral Insurance||2019 Customer Satisfaction Score²|
|State Farm||Final Expense Insurance||$10,000||50–80||808/1,000|
|Mutual of Omaha||Whole Life Guaranteed||$2,000–$25,000||45-85||795/1,000|
|AARP (provided by New York Life)||AARP Easy Acceptance Life Insurance||$2,500–$25,000||50–80||770/1,000|
|John Hancock||Final Expense Insurance||$2,000–$20,000||55–80||739/1,000|
|Transamerica||Final Expense Insurance||$2,000–$50,000||0–85||732/1,000|
|AIG||Guaranteed Issue Whole Life Insurance||$5,000–$25,000||50–85||722/1,000|
|Globe Life||Funeral and Burial Insurance||$5,000–$50,000||Not listed||Not listed|
¹ Available coverage amounts and age restrictions may vary by state² Customer satisfaction survey data from J.D. Power 2019 U.S. Life Insurance Study
State Farm is one of the biggest and best-known insurance companies out there. Along with more common offerings like home and auto insurance, State Farm has a funeral insurance plan called “Final Expense Insurance.” It offers exactly $10,000 in coverage and is available to customers age 50 to 80. State Farm’s coverage is right in line with the average cost of a funeral with burial.
Mutual of Omaha has funeral insurance plans ranging from $2,000 to $25,000. The company lists this policy as “Whole Life Guaranteed,” but despite the name, it works just like other funeral insurance plans. Customers can apply from age 45 through 85. And coverage is guaranteed with “no medical exam or health questions to answer.”
For senior members of the AARP, funeral insurance is available through the New York Life Insurance Company. The plan, called “Easy Acceptance Life Insurance,” is available to members starting at age 50. And it offers coverage from $2,500 to $25,000. Eligible spouses can even apply for AARP funeral insurance starting at age 45.
Funeral insurance — or “Final Expense Insurance” — is available from John Hancock in face amounts of $2,000 to $20,000. Customers can apply from age 55 to 80. However, with death benefits capped a little lower than other companies, John Hancock is a better choice for those with very limited insurance needs.
Transamerica sells funeral insurance coverage from $2,000 to $50,000. That’s about the widest range of funeral insurance policies one could hope to find. With Transamerica, this coverage is available at any age up to 85 years old. (Note: Transamerica also calls its plan “Final Expense Insurance.”)
Funeral insurance from AIG starts at $5,000 and goes up to $25,000. AIG calls its funeral insurance plan “Guaranteed Issue Whole Life Insurance,” and it’s available to customers age 50 through 85.
Globe Life specializes in no-exam online life insurance applications. So it’s only natural that the company also offers guaranteed issue funeral insurance. Policies are available with coverage from $5,000 to $50,000, though policy options and age of issue vary by state.
Funeral insurance is a simple way to pay for a funeral with life insurance. Coverage is easy to get, and seniors can choose a small policy amount to match funeral expenses.
But when it comes to actually paying for the funeral, there are a couple options to be aware of.
The funeral insurance death benefit can be used however the beneficiary sees fit. Many people use the one-time, lump-sum payment to cover funeral expenses. However, life insurance often takes up to 30 or even 60 days to payout. So if the policy does not pay until after the funeral, the family may have to cover funeral costs out of pocket initially. Then, they can take the death benefit as a form of reimbursement.
Pre-need funeral insurance can protect the family from having to cover any funeral expenses out of pocket. With a pre-need policy, the insured person chooses a funeral home and makes funeral arrangements during life. And that funeral home is named as the beneficiary of the insurance policy. That way, life insurance proceeds go to the funeral home instead of the family, and funeral costs are covered directly.
A “funeral assignment” diverts life insurance proceeds directly to a funeral home to pay for its services. The insured person can buy this kind of policy through a funeral home directly (known as “pre-need funeral insurance”). Or, with an “assignable” funeral insurance policy, the beneficiary can sign proceeds over to the funeral home after the insured person passes away.
If the beneficiary chooses to assign life insurance funds to a funeral home, any money left over after the funeral has been paid for will be returned to them.
Whether or not you can assign life insurance proceeds depends on the funeral home and the insurance policy. When you’re checking funeral insurance quotes, ask the company whether assigning the benefit to a funeral home is an option.
Life insurance can be used to pay for funeral expenses — but only if the beneficiary is able to file a claim and retrieve the payout. This is simple enough if the insured person kept their affairs in order. But oftentimes, it can be difficult to locate a life insurance policy after someone passes away.
If your loved one had life insurance and you need to file a claim, try this resource: 12 steps for locating a lost life insurance policy, from the Insurance Information Institute.
Or, try the Life Insurance Policy Locator from the National Association of Insurance Commissioners.
How much funeral insurance costs depend on your application. Since funeral insurance is “guaranteed” coverage, your premium will not depend on health questions. However, factors like age and gender still affect rates. And the company you choose makes a big difference, too. Most customers can expect to pay anywhere from $30 to $200 per month. But to get an accurate estimate of funeral insurance costs, check personalized rates here.
Like all life insurance, funeral insurance has a two year waiting period or “contestability clause.” This waiting period determines whether or not a funeral insurance policy will pay out. If the insured person dies within two years of buying their policy, it’s likely their family won’t receive a death benefit. Instead, they’ll probably receive a return of any premiums paid by the insured. The waiting period usually also states that if the death was a suicide, the company may not pay, or may pay a reduced premium.
Yes, it’s possible to buy funeral insurance if you have cancer or another terminal illness. That’s because qualification for funeral insurance is not based on a health exam. You may have to answer a few basic health questions on your application, but being diagnosed or treated for a serious illness should not bar you from getting coverage. These policies are priced higher than other life insurance policies to accommodate that extra risk for the company. Just remember: There’s a two year waiting period for funeral insurance, and the death benefit won’t be paid if the insured dies within two years of getting coverage.
Funeral insurance is a type of life insurance. But there are some key differences between funeral insurance and more common plans like term or whole life. First, funeral insurance guarantees coverage. You won’t be denied based on health issues or advanced age. Second, funeral insurance comes in small policy sizes. It generally offers $2,000 to $25,000 of coverage, while term or whole life starts around $100,000. Finally, funeral insurance is more expensive than most insurance. But thanks to smaller policy sizes, it can still be affordable for those that can’t get covered by traditional life insurance.
Having a funeral plan makes it possible for one’s family to pay for the funeral without financial strain. Having a financial plan is important, as funerals cost between $6,000 and $11,000 on average — no small sum for a family to cover without a payment plan in place. Of course, there’s more than one kind of “funeral plan” to help families prepare. Prepaid funeral plans let you select funeral services and pay for them ahead of time. Life insurance can help pay for a funeral if you already have it. And for seniors that don’t already have life insurance, a funeral insurance plan offers coverage to help with these costs.
Yes, you can buy a funeral plan for someone else. If you want to buy a funeral insurance plan for a parent or family member, you have to have an “insurable interest” in them. That means you’d be financially impacted if they passed away — for instance, if you’d have to pay for the funeral. If you do have an insurable interest in the person, you will likely need their approval and signature on the policy. However, rules vary by company.
Life insurance can absolutely be used to pay for a funeral. Most funerals cost somewhere in the neighborhood of $10,000 — so if this is your main goal in purchasing life insurance, make sure you have sufficient coverage. Families should also remember that life insurance can take up to a month or two to payout. So funeral costs may have to be paid out of pocket and then reimbursed by life insurance. But this is avoidable if the death benefit can be assigned directly to a funeral home.
Typically, the next-of-kin is expected to handle funeral expenses. If they need to pay for the funeral without life insurance, there are a number of options. First would be using the deceased’s assets (savings, investments, proceeds from the home sale, etc.) to cover funeral expenses. Some people qualify for assistance from employers or veteran’s benefits. Social Security may provide a small sum, but it’s only about $200. And families can look for government assistance programs, which vary by state. It’s also possible to lower funeral costs by shopping around for the most affordable funeral home and services.
Funeral insurance is designed to be an affordable, accessible option for seniors. It’s easy to apply for coverage online and buy only as much insurance as you really need.
But remember: Since there’s no medical exam, costs are higher per dollar of coverage than they would be with other types of insurance. That makes it extra important to compare quotes and find the best rate.
You can check personalized rates from multiple companies right here.