Funeral Insurance, or often called Final Expense insurance or Burial Insurance is a whole life insurance policy designed to provide financial coverage from expenses resulting in ones funeral.These policies are typically around $10,000-$20,000 in coverage, and while called funeral insurance, the funds can be used for any expenses that may incur in a families time of need. They are typically much easier to qualify for than larger life insurance policies and do not require a medical exam.
Funeral Insurance is certainly not the most fun thing to talk about but as you age, thinking about your financial future and well-being of your family is something that naturally and regularly comes up. Throughout middle age, many people purchase life insurance policies, health plans, supplemental insurance policies, and retirement plans. Oftentimes, however, expenses can occur even after somebody passes away, which leaves cost out of their control and it often becomes a burden to surviving family members.
The term funeral insurance can be misleading. It is impossible to purchase an insurance policy that will specifically cover all of the expenses related to your death, but it is possible to purchase a small policy that will help alleviate the cost of your funeral once you pass away. Because of this, funeral insurance plans are a small life insurance policy that will leave some money to those who will eventually be responsible for the costs of your final expenses.
You many also hear a funeral insurance plan commonly referred to as burial insurance, final expense insurance, or pre-need insurance. Although different people will refer to it with different names, it is the same product. There are different kinds of policies available, however.
Dealing with the loss of a loved one is a tumultuous time rife with grief and mourning. The last thing family members and friends should be concerned about during this time is cost. Unfortunately, modern funerals come with high price tags that can compound an already stressful situation.
Planning the funeral or burial services of a recently deceased loved one can be a frustrating and painful process, and coming up with the funds to finance a traditional service can feel impossible. Due to the numerous expenses related to death, costs can quickly pile up for loved ones left behind. Many are turning to funeral insurance to help cover these costs in the event of their death, ensuring their family and friends aren’t saddled with insurmountable expenses during a time of grief.
What’s in a Name?
Funeral insurance goes by many names, and these terms are often used interchangeably. This type of coverage can also be referred to as burial insurance, final expense insurance, memorial insurance, and pre-need insurance. Depending on provider and context, these terms can reference the same types of policies. Regardless of name, funeral insurance plans are designed to serve a singular purpose: providing coverage plans for individuals that want to ensure they’ve covered all of their financial needs and bills before they pass away.
Final expense insurance isn’t connected to a specified funeral service provider, and it can come in various forms, including permanent and term life insurance policies. Term life insurance specifies an amount of time for coverage; these dates serve as a window for available benefits. Term life insurance involves coverage that only applies for a pre-specified and agreed upon amount of time. Time ranges can vary from anywhere between five years of coverage to 30 years of coverage, and the longer you’re covered, the more you’ll pay in insurance costs. In general, these policies are only meant to cover death benefits.
On the opposite end of the spectrum, a permanent life insurance policy is designed to provide coverage for the rest of an individual’s life. It comes with a cash value accumulation feature, making it a better choice for a larger payout in benefits; however, these policies tend to be much more costly as they provide guaranteed payout. This type of policy is used for more than death benefits; funds from these types of payouts can be put towards hospital and medical bills, hearse rentals, cremation costs, and other funeral service expenditures.
Funeral insurance coverage and cost is based upon the planned expenses for your eventual funeral, and is laid out according to your specifications and recommendations.
Funeral Insurance vs. Life Insurance
Up to 30 percent of U.S. households don’t have life insurance, and a large portion of this population leaves no funding or financing options behind for their families in the event of their death.
If you don’t already have life insurance, how do you plan on paying for funeral services? For most, the answer comes in funeral insurance.
Understanding the Differences
It’s important to differentiate between funeral insurance, pre-need funeral insurance, and whole life insurance.
Funeral insurance can cover funeral costs and end of life care expenses. Final expense insurance and funeral insurance generally refer to the same types of coverage; however, burial insurance generally sees an individual choosing a cemetery or mortuary to serve as a beneficiary.
Pre-need funeral insurance only covers the cost of the funeral, and nothing beyond that. Generally this involves a contract with a specific funeral home, and it’s not generally an insurance product. This type of coverage sees individuals pre-paying for their specified funeral costs.
Life insurance provides a general payout that can be put towards funeral costs, end of life care bills, and dependents’ needs. These types of policies are generally much more expensive, with rigid qualification meters that can be hard to reach.
Funeral insurance is vastly different to life insurance, and there are some key factors to keep in mind when considering the right policy options for you including eligibility requirements, funding allocation, and current financial limitations. Funeral insurance may prove to be more valuable for many individuals for a variety of reasons.
Determining Eligibility for Insurance Coverage
One reason funeral insurance is so popular is the ease of application and approval. The eligibility requirements for burial insurance policies are much more relaxed, meaning this coverage is available to a wider demographic.
Unlike life insurance and pre-need insurance policies, which require medical exams, funeral insurance policies require only a health questionnaire. Life insurance policies can build cash value, and while the majority of funeral insurance policies do not, there are certain coverage plans that will provide cash accrual opportunities. The major difference between life insurance and final expense insurance is the intended use of funds: life insurance payouts are intended to provide funds for dependent family members for living expenses.
Types of Funeral Insurance Policies
For the most part, funeral insurance policies offer payouts around $10,000. There are certain policies that provide less or more depending on personal preference, and some lower end plans provide as little as $1,000 in coverage. High-end coverage plans can cover up to $50,000 in final expenses and funeral costs. The premiums for these plans depend on desired coverage, and the more coverage, the higher your premiums. Rates can also be dependent on your age and health. While there’s no medical exam for these types of policies, there are health questionnaires. Your answers can work against you in terms of policy coverage and approval processes. Lifestyle habits like smoking can result in an application rejection. Pre-existing medical conditions may also exclude you from certain policy coverage.
When shopping for funeral insurance, keep in mind the various types of policies you may encounter. You’ll be asked to choose between two basic options: medically underwritten policies and guaranteed issue policies.
With a medically underwritten funeral insurance policy, the insurance company in question evaluates your health. They base their evaluation on a series of questions, often in the form of a health questionnaire regarding your medical history. Because burial insurance limits are lower than traditional insurance limits, underwriting requirements are less rigid, but there’s still a chance you’ll be declined based on your answers.
Guaranteed issue funeral insurance policies are easy to qualify for, and generally don’t even require medical questionnaires. Most who apply for this type of coverage are accepted, but this does come at a cost. Premiums for these types of policies are much higher because these types of policies are riskier for insurance companies. Another factor to consider when deciding between guaranteed issue and medically underwritten policies is the potential of grading. Guaranteed issue policies are generally graded, meaning you can’t access the full benefit until you’ve held onto the policy for a specific amount of time. In most cases, this timeframe last several years. If the policyholder happens to die before this waiting period is over, the beneficiary will only receive a small portion of the benefit.
You’ll also need to choose between term policies and whole life policies. Whole life policies are available for the duration of your life, although certain coverage options do expire when the policyholder turns 100 years old. Whole life policies provide an extra measure of security as they guarantee the beneficiary of the policy receives a certain amount of money after your death. It can be harder to qualify for these types of policies, and the premiums related to these options are much higher. The bulk of funeral insurance policies are categorized as whole life policies.
In contrast, term policies expire at a pre-determined date, which is sometimes based on age. In general, these policies are designed only to cover death benefits. If you outlive that predetermined date, your beneficiaries will not receive the premiums you’ve paid. These policies tend to be more popular because of their inexpensive rates, and they’re also easier to apply and qualify for.
The Rising Costs of Funerals
The cost of the modern funeral continues to rise, and many loved ones find themselves unable to handle the costs of a burial or cremation service for their deceased family member or friend when the day arrives.
Like all other goods and services, the average cost of funerals in America has been on the rise for the last century. Typical funerals can cost upwards of $7,000, and estimates such as these generally don’t include the additional expenditures including burial plot and cemetery costs, flower arrangements, headstones, and more. Numerous costs extend beyond the actual funeral service, and generally these expenses can quickly add up to several thousand dollars—on top of the basics.
When planning a funeral, most people will turn to funeral homes. Generally, these establishments are run by a funeral director, who may serve as the private owner of the funeral home or be an employee of a corporation that runs a chain of funeral homes. While funeral directors can provide essential guidance and support during the planning process, it also bears mentioning that their compensation is generally tied to profits generated within the funeral home—he or she will work on commission, and is incentivized to offer a variety of goods and services to increase earnings. Upselling is a commonality in the funeral industry, and while the services of an experienced funeral director are invaluable, understand that you’ll be enticed to purchase further goods and services.
Basic Services Fee
While funeral costs can vary based on home and director, all funeral homes are legally permitted to charge a basic services fee. This fee covers services generally found in all funeral services, regardless of details and funeral arrangements. Services covered by this fee include permits and copies of a death certificate, notice preparation, storage of remains, and general funeral planning arrangements.
Cash Advance Fees
A cash advance fee is charged by the funeral home or service provider. This fee comes into play when the funeral home must purchase merchandise from an outside vendor to use within the funeral service. This fee is commonly found in the case of flower arrangement ordering, obituary orchestration, and performers or clergy that may have a role in the services.
Whether you plan a traditional burial or cremation, you’ll be expected to handle container costs. These can run the gamut; simple storage solutions can start at $50, while the more expensive options can easily exceed $9,000, with the most costly options coming in at an astounding $65,000.
There are three basic container types: caskets, cremation urns, and vaults. Family members and loved ones generally select one out of the three based on the individual’s wishes.
Family members who wish to see their loved one’s remains entombed in a mausoleum must purchase a vault. A mausoleum is a small building that houses the bodies of deceased individuals after funeral services. It serves as an above ground burial option, where embalmed bodies and ashes remain above the ground. The reasons for a vault purchase can vary—some family members do not like the idea of interring their loved one’s remains in the ground, and those with ecological concerns appreciate that a mausoleum saves on ground use. Urn vaults and burial vaults can cost anywhere from $700 to nearly $10,000.
Families of individuals who have chosen to be cremated after their death often elect to save the ashes in memorial. A cremation urn is simply a container that holds the remains after a cremation. Some family members choose to use a simple box or storage container they already own, but many choose to purchase special cremation urns in honor of their lost loved one. The simplest of containers can run under a hundred dollars, while the more expensive options can easily exceed $3,500. Family members can also rent urns for the funeral service, but you’ll be saddled with an extra rental fee.
Still far and above the most popular option for traditional burial services, caskets tend to be on the more expensive side of the equation. Families who wish to have their loved one put to rest with a traditional funeral are required to purchase a casket and outer burial container. Caskets can make up the bulk of total expenditures related to a funeral, but for many services, they’re an unavoidable expense. A casket is required for viewings and any services in which the body is present. However, if family members choose to have the body cremated after the visitation or memorial service, they can elect to rent a casket, which can save them a great deal.
There are a variety of casket types, from metal to wood, and the style chosen can dictate cost. The most common types of caskets include:
If the body of the deceased is not immediately interred into the ground following death, or the family plans to host viewing services before burial or cremation, the body will need to be embalmed. Embalming preserves the body from natural decomposition and also helps retain the individual’s appearance. It is the process of cleansing and disinfecting a body after death. While not required by law in most cases, the majority of bodies in the United States are embalmed. However, according to the Federal Trade Commission, embalming can be considered necessary with the arrangement of particular funeral facets, including viewing services.
There are numerous transportation costs related to death and funeral services. Funeral insurance can help families cover these costs. Common transportation expenditures include transporting the body from the site of death to the funeral home, then transferring the body from the site of services to the crematory or cemetery.
Family members must also cover cemetery costs, which include internment expenses, opening and closing of the grave, burial vaults, and headstone installation. This goes beyond simply buying the plot, and these expenses can quickly add up to thousands of dollars. If you choose to have your loved one interred in a vault, you will have similar expenses.
If there will be a viewing service, the deceased will need to be dressed in the clothing of the family’s choice. Burial clothing can be something selected from the deceased’s closet, but many loved ones choose to purchase specific clothing for the service.
Flower arrangements are a traditional facet of funeral services, and the cost of these arrangements can widely vary. General estimates see funeral floral arrangements costing upwards of $300.
Cremation Vs. Traditional Burial
Whether you’re pre-planning your own funeral or orchestrating the services of a loved one who has passed away, one of the most significant choices you’ll be asked to make comes in deciding between cremation and traditional burial services. There are a variety of considerations to take into account when choosing between these two options.
Traditional burials continue to be a popular option, and this lasting tradition has been upheld for a variety of reasons, including religious beliefs, cultural behaviors, and personal preferences.
Traditional funeral services typically take place over two days, with various stages. First, loved ones attend a viewing or wake, where the deceased’s body is on display for final respects. After the viewing, the service is performed.
The typical traditional burial service involves some standard procedures, and takes place in a church or larger, public place. Generally, a brief sermon is performed by a clergy member, and this sermon may be followed by personal remarks and remembrances (a eulogy) from family members and friends. These services typically see performances of poetry, biblical readings, and songs.
After the services are complete, the body is interned. This sees pallbearers transporting the deceased from the service site to their final resting place, whether that be a cemetery or mausoleum. There may be special rites before at the burial site. For example, a veteran may have a three-volley salute at their burial. This ceremonial act consists of a rifle party that fires blank cartridges into the air three times. There are a variety of organizations that offer special rites to deceased members, including Veterans of Foreign Wars, Knights of Columbus, American Legion, Free Masons, and Elk Lodge.
Why People Are Choosing Cremation
While traditional burials still reign as the most popular choice, cremation rates have been on the rise for a long time. Consider this: in 1960, a mere 3.6 percent of Americans chose to be cremated. By 2020, the NFDA projects that the cremation will rise to a whopping 56 percent. What’s caused this dramatic increase in cremation interest? There are a variety of factors that play into this decision.
Due to the increasing movement towards sustainability in terms of burials, green burials have become more popular. These services include ways of caring for the deceased with minimal environmental impact. Some common alterations in services and preparation include the following:
Embalming: Instead of embalming with harmful chemicals that can make their way into the ecosystem, green burials see the body refrigerated or stored in dry ice.
Burial Containers: Urns and caskets in green burials are generally sourced from sustainable, natural materials. Caskets and urns are generally made from sustainable wood, and cloth inserts are woven with natural fabrics like linen or cotton. Recent advancements have seen newer green burial containers, including Eco-pods. These are biodegradable caskets that are made from recycled newspaper. Another modern option comes in the form of tree pods; Italian designers have come up with tree pod burial systems that see the deceased decomposing and providing nutrients for a growing tree seed.
Green-Certified Funeral Homes: Those looking to have a green burial, or those planning one, can work with certified green funeral homes.
Green Headstones and Markers: Instead of purchasing the traditional headstone, family and friends may elect for a green headstone or grave marker. The natural elements used in these situations can vary based on location and personal preference. Common green markers include trees, shrubs, rocks, stones, flowers, and other plants. It’s important to take into consideration the natural, indigenous plants in the area.
While these green practices can prove to have a positive effect on the environment, they also may come with much higher costs.
End of Life Care
When considering funeral insurance, remember that costs may arise long before your actual passing. From nursing homes to home health expenses like hospice, your family may find themselves saddled with bills long before you pass away. End of life care costs are on the rise.
End of life care can be intensive, and the related medical costs can increase exponentially within just a few months’ time depending on an individual’s condition and needs. A recently released study looked at the average end of life care spending between the years of 2010 and 2012. The average saw families spending about $18,500 for an individual’s care during the last six months of life. Even with Medicare and private insurance, many individuals still encounter a great deal of expenses. One study performed by the Mount Sinai School of Medicine saw that out of pocket expenses for Medicare recipients averaged around $39,000. For over 40 percent of these households, bills far exceed their financial abilities. Many Americans are shocked by the out of pocket health care costs they encounter near the end of their lives, and often it’s family members who are left to deal with these exorbitant expenses after their passing. Unfortunately, due to these high costs, those that are unprepared with life insurance or funeral insurance policies find they simply can’t afford the type of care they’d prefer due to rising costs.
Accurately estimating just how much you’ll need to live comfortably in your last few years or months of life can be difficult, but it’s a worthy endeavor. Without any type of insurance policies in place, your family could be left with extensive bills following your death.
The cost of health care continues to rise, and health care spending in the United States continuously proves to be greater in all categories of care when compared to other countries including Switzerland, Canada, Germany, France, and Japan.
Consider that in 2008, Medicare paid over $50 billion just for hospital and doctor bills during the final two months of patients’ lives. That number is greater than the budget for the Department of Education.
The funds aren’t limitless, and the number of people over 80 who are on Medicare is bound to expand thanks to increased age expectancies and health technology advancements. According to recent reports, the amount of people on Medicare that are age 80 and older will triple by the year 2050. What’s more? The number of people older than 90 on Medicare will quadruple.
Why does this matter? Medicare is expected to be exhausted long before then. Trustees of the Medicare program announced last year that they will exhaust their reserves in 2028, which is two years sooner than original estimates. While the depletion of funds doesn’t mean the disbanding of programs, it is something to consider when determining the funds your family will have to work with when providing end of life care.
Estimating Your Final Expenses
While the largest final expense comes in the form of funeral arrangements, final expenses can include a great deal of other costs left behind after a death.
The best funeral insurance policies cover more than the costs associated with the service itself. Final expenses can include a variety of expenditures and debt, including credit card debt, medical bills, and mortgages. Have you ever considered what bills you might leave behind in the event of your death? How will your family pay them off? Do you have a life insurance or funeral insurance policy? Will there be anything left for your family, or will they be saddled with the funeral bills?
No one likes to think about death, but asking yourself important questions like these can help alleviate the stress of your loved ones after your passing and ensure all of those final expenses are covered.
When estimating your final expenses, you’ll need to take a variety of aspects into account. Consider how much will be needed at the time of your death to meet any immediate obligations. This could cover a host of bills, including uninsured medical costs, settling the estate, any outstanding debts, a mortgage balance, or student loans and college costs.
Without funeral insurance and other policies, your family may find these costs insurmountable.
What Happens to Your Debts When You Die?
Americans are now in more debt than they were during the Great Recession. According to MarketWatch, the average household with credit card debt now owes $16,061. This is 10 percent more than the $14,546 average owed 10 years ago, and is only expected to increase. Total debt, which includes student loans, auto loans, and mortgages, is expected to surpass the amounts owed at the beginning of the Great Recession, mostly due to rising student loans and costly mortgages. If you’re currently in debt, you know how quickly these overdue balances can add up. So what happens to your debts after your death? Where does the responsibility for bill payment go?
According to recent reports, one in five Americans expect to die in debt. After your death, your debts become the responsibility of your estate. Your executor, the person that is responsible for dealing with your estate and will, is then charged with paying off your debts with your remaining assets. This could see them draining bank accounts or selling of your property to gain money to pay off these balances.
This section will explain what happens to your debts after your death; will delve into the responsibility placed on family members, explain interest issues, and discuss the role of a will executor in such situations. In some cases, your death means creditors are left with an unpaid bill. However, there are certain debts that can haunt your family members.
Once your estate has been purged and depleted, credit card companies can no longer go after your debts because this balance isn’t secured by assets. However, if you have a joint account holder, they’re now responsible for the unpaid bills. If you live in a state with community property laws, your spouse is responsible for any debt racked up during the marriage, including credit card debt.
If your property has a mortgage, the lender is protected up to the value of the property in question. Your family members won’t be tasked with paying off the mortgage immediately; however, they will be charged with taking over the mortgage payments.
If you instead have an outstanding home equity loan, the lender can force the individual that inherits the property to repay said loan immediately. In many cases, this forces family members to sell the house.
If you have a mortgage or home equity loans, it’s important that you have financial measures like funeral insurance in place to ensure your family is able to pay off the loan.
If you pass away and your car is not fully paid off, the lender can repossess the car. However, in most cases, whoever inherited the vehicle can continue making payments.
If you have unpaid student loan debts, your family members likely won’t need to pay them off. Lenders of this variety have no established recourse if your estate can’t cover your unsecure, paid obligations. Collection agencies may still accost your family with calls and notifications, but collectors are not allowed to tell family members they’re responsible for these types of debts.
Spousal responsibility and filial responsibility laws vary by state, and could see your loved ones saddled with your bills under varying circumstances, so it’s important to do your research and determine the rules in your area. It’s rare that these laws are enforced, but there are cases in which it can happen.
While burial and funeral insurance plans are always small life insurance policies, there are three main options when it comes to who receives the money or who provides the policy.
As you consider purchasing a final expense insurance policy, remember to purchase a plan that best suits your needs. Determine which aspects of your final expenses you will want to have covered, and decide how much you will need to pay for your arrangements. These are some good points to consider:
Once you have determined your specific insurance needs, you will be able to contact different policy providers to discuss policy amounts and pricing. We have made the shopping process simple by helping compare rates for you. Simply fill out the form and we will help provide you with a free quote for a burial insurance policy.
As you shop for a funeral insurance policy, be sure to keep in mind your exact needs and don’t purchase a plan that provides coverage you don’t want or won’t need. This policy is meant to bring peace of mind to your family as well as yourself and should help alleviate any financial burden or stress. Fill out the form or call (888) 953-9816 to speak with a licensed insurance professional who can help you asses your needs and build a custom policy that will work for you.