When you die, your loved ones immediately will face what are called "final expenses"—and face them at a time of grieving and emotional stress. There are many things you can do to ensure that money is there for funeral and other expenses, and even arrange some services ahead of time, making things easier for family and friends left behind.
There are many ways to pay final expenses (also called "funeral expenses" or burial expenses") One is to purchase final expense life insurance; but there are many other ways. Before looking at typical final expenses and ways to pay them, however, what exactly is final expense insurance?
What is final expense insurance?
It is not the same as life insurance. A life insurance policy pays out money when you are gone to beneficiaries such as your family who depend upon you financially:
- Term life insurance guarantees a certain fixed sum of money will be paid upon your death.
- Permanent insurance policies incorporate an investment feature, so your policy has "cash value" that you can draw upon, then pays the balance to your beneficiaries when you die.
By contrast, final expense insurance is a policy that pays money upon your death to meet the expenses of your funeral, your medical bills, and even a trip on which your loved ones will scatter your ashes. While other forms of life insurances can top payouts of a million dollars, final expense insurance policies rarely are more than $20,000. How much will be needed for your personal final expenses?
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Funeral and other final expenses
A National Funeral Directors Association study showed that in 2021 the average cost of an adult funeral with viewing and burial was $7,848, up 6.6% from 2016. The average cost of an adult funeral with viewing and cremation was $6,970, up 11.3% from 2016.
Most of these expenses are connected with a funeral and may include, for example, a burial casket or a cremation casket, urn, cremation fee, services of the funeral home, and so forth. Therefore, most people should assume around $10,000 for funeral expenses. Other expenses might be anticipated, though, such as a catered get-together after the service or payment of big bills you may leave behind.
How final expenses can be met
How will these expenses be paid? Here are some options.
- Your family may have enough money to handle final expenses without any special financial arrangements. This sometimes is called "self-insurance," which only means you count on your own financial resources.
- You can leave money in a savings account or trust designated for final expenses and payable to a person you choose. If both your names are on the savings account, that person can access the funds immediately upon your death.
- You should check whether your life insurance policy includes a "death benefit" that is paid specifically to meet final expenses. Unfortunately, you cannot count for much from the Social Security "lump sum death benefit," which is only $255.
- You can arrange with a funeral home, paying the future costs of your funeral and related expenses. If you do this, however, you are assuming you will not move to another state during your lifetime. It is important to compare costs charged by funeral homes, including cremation costs. Rules established by the Federal Trade Commission (FTC) require the funeral home to sell you the goods and services you want, not insist on a "package." Funeral homes are required under the same rules to quote you prices over the phone and, if you visit, give you a printed list of the prices of separate items.
You should realize, however, that these options (such as a trust) involved financial planning and discipline on your part or extra steps that your family must take when you are gone. Final expenses insurance is easily arranged; you can set up automatic payment of your premiums; and the money will be there right when your family needs it, with no more than a call to your insurance agent.
Other sources to cover final expense
Your family can turn to many other sources of support if they do not have money for your final expenses:
- If you are a veteran, you can be buried in one of the 141 national cemeteries at no cost.
- The Federal Emergency Management Agency (FEMA) provides assistance for burial in the case of death resulting from a declared disaster or emergency.
- Many states have financial assistance programs for those who cannot afford a funeral.
- Others ways are taking a personal bank loan or even turning to "crowdfunding."
Once again, however, considerable paperwork is required for these options and that work must be carried out very rapidly, at a time of stress and grief for your loved ones, whereas financial expenses insurance removes all the hassle.
Shopping around for the right final expense insurance
If you decide is to take out a final expenses insurance policy, giving those you leave behind readily available and flexible funds when they need them, then you should shop around for the right policy. Most major insurance companies offer them.
The monthly premiums for final expense policies are typically between $30 and $70. But that depends upon several factors including the amount of coverage you want and your age and health. Another source reports that premiums may be as low as $18 a month or as high as $286, depending upon the insurance company you choose, your age, your sex, the coverage amount, and your overall health. Although you can get a policy without a medical exam, if you are in good health and can answer "no" on the insurance application to questions about health problems, your premiums may be lower.
Your insurance agent or financial advisor can discuss what you should look for in a policy, and get quotes from different companies, but the policy you want probably has most of these features:
- Whole life with no expiration date.
- Cash value.
- Fixed premiums.
- Affordable rates.
- Option of no medical exam.
- Easy application process.
Bring family members into the picture
My Eligibility Resource can help you understand all options for planning to help your family meet your final expenses, including finals expense insurance. It can be a good idea to bring along family members when you meet with a My Eligibility Resource program professional. Family should know what arrangements you have made for final expenses and, later, when they are facing arranging a funeral, including choosing a funeral home and other decisions, they can turn to My Eligibility Resource for any need.