More on Life Insurance
More on Life Insurance
While cremation has been a burial option for thousands of years, it’s only recently become a common option in the U.S. In 2020 alone, an estimated 56.4% of end-of-life celebrations were cremations while only 37.5% of people had traditional funerals.
By 2035, that number could be 80%, according to one estimate. Compared to the 40.4% of people opting for cremation in 2010, it’s evident that more and more are commemorating their loved ones with cremations.
Cremations alone can be affordable, but losing a loved one and celebrating their life comes at a cost. Memorial services and end-of-life medical costs can add up well into the thousands. Setting up a life insurance policy to cover these bills while formally spelling out your final wishes in a will can save your loved ones the burden of sorting out your end-of-life expenses.
If you’d prefer a cremation due to cost, a direct cremation with no memorial service is the most affordable option
Green burials and sustainable alternatives are available to people who want an eco-friendly funeral
Life insurance coverage is the best way to cover your final expenses, cremation costs, and protect your loved ones from financial duress
Why is cremation gaining momentum in the U.S.? Two reasons: cost and growing concerns for our ecological footprint. Not only are cremations often the cheaper way to have a funeral service, but they also have less of an impact on the environment than a traditional burial.
Over the last 30 years, burials have gotten costlier — they now cost 227.1% more than they did in 1990. The $8,000-$10,000 expense often leaves loved ones left behind strapped for cash and isn’t feasible for many Americans.
Cremations, which don’t always require embalming and expensive caskets can be a fraction of the cost of a traditional burial, depending on the type of cremation you choose. There are two types of cremations to choose from:
Cremation preceded by a funeral or memorial service
Direct cremation, or cremation that does not include a memorial or funeral service
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Some people choose to have a traditional funeral service, after which the body is cremated rather than buried — though the cremated remains may be buried as a part of the ceremony. Cremations and a funeral service together aren’t quite as expensive as a funeral with a burial, but they can still end up costing your loved ones thousands.
Memorial services allow your loved ones the opportunity to gather together and celebrate your life after you’re gone. Commemorating loved ones is an important process for many people, but the expenses can add up: from food, beverages, floral arrangements, and anything else that may be required.
According to the 2020 Cremation and Burial Report by The National Funeral Directors Association, here are the average costs of a funeral service followed by cremation:
|Casket viewing with ceremony before cremation||$6,645|
|Direct cremation, with container supplied by family||$2,395|
|Direct cremation, with container supplied by funeral home or crematorium||$2,495|
|Alternative cremation container||$150|
As you can see, the cost of cremation can end up being comparable to that of a burial service — or even more. And these costs don’t include a reception following a casket viewing for loved ones.
The services included in these costs are:
Basic services charge
Removal and transfer of remains to the funeral home
Preparing the body (such as embalming)
Facility use and staff pay for viewing
Facility use and staff pay for ceremony
Ceremonial cremation casket
Fee for cremation
If cost is why you’re choosing a cremation, you may want to consider a direct cremation.
Direct cremations do not include a memorial or funeral service, which ultimately makes them the cheapest option for cremation services. After the body is cremated, the ashes are returned to the family, at which point they can choose to disperse them how (or where) they wish or keep them in an urn.
The costs of direct cremations usually include:
Cremation and crematory costs
Direct cremations tend to be more affordable than a traditional burial or cremation followed by a gathering and are estimated to cost about $1,400. But how much you will actually pay will depend on where you live and the funeral services offered in your area. For example, the cost of a direct cremation in Detroit, Michigan might cost $925, while a cremation in Los Angeles could be as low as $595. Comparing the costs at multiple crematoriums is the best way to find the most affordable price.
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If you’re choosing a cremation for environmental reasons, you may want to incorporate a green burial or a natural option into your final plans. While cremations are more environmentally friendly than funerals, they still have an impact on the environment — but with proper planning, your carbon footprint can be minimal. Whether you choose a green burial or a sustainable cremation, there are more eco-friendly end of life options.
Green burials or carbon-neutral cremations are part of conservation efforts to mitigate the negative impact funerals have on the environment while preserving and even replenishing eco-systems. Options are varied, but they generally forgo pollutants and extra material, such as embalming or metal caskets and coffins.
Like most other parts of end-of-life planning, how you plan your sustainable burial or cremation is a completely personal choice. Directories like the Green Burial Council can help you search for sustainable end-of-life options. Options range from biodegradable shrouds to tree of life celebrations, where cremated remains are used as nutrients for trees.
Amidst the grief of losing a loved one and uncertainty about the future, the deceased’s family must make funeral arrangements almost immediately — usually within days.
Planning ahead for your cremation may be an uncomfortable undertaking, but doing so protects the people you love and ensures that your final wishes are carried out and your family isn’t left to figure out all the plans. Cremation plans made ahead of time can ease the financial and emotional burden on your loved ones. And if you’d prefer an environmentally friendly commemoration, a little forethought into your final plans can go a long way.
There are a few main factors to take into account when creating an end-of-life plan.
Making arrangements in advance
Laying out your wishes
Similar to the rest of your end-of-life plans, you should lay out any wishes for a sustainable cremation or green burial beforehand. The more written information you provide, the better, though the best thing you can do for your loved ones if you want a sustainable option is to plan your green burial ahead of time yourself.
How you plan your cremation is a deeply personal choice. As it’s a final celebration of life, you will want to consider not just cost, but also the people who are mourning the loss of someone they love. What experience will allow them to honor your legacy?
Planning your end of life ceremony in advance may also help your loved ones receive benefits that they otherwise might not have known were available.
End-of-life planning requires accounting for all the resources your loved ones might have at their disposal, and doing so requires the time to do the research and have some big conversations.
If you aren’t able to pre-arrange your end-of-life plans, you should spell out your final wishes. Doing so saves your family from the string of decisions they’d need to make if you died unexpectedly. And if you’re leaving behind any assets or a life insurance death benefit, it’ll help them to take on these new financial responsibilities without having to do the guesswork.
“When someone is planning their afterlife care, they need to understand what their wishes are or make sure they make their wishes known. Pre-planning … takes the burden off the family at the time of death and that actually fulfills the wishes of the deceased. Financially, it usually helps because… all of a sudden the family is stuck with a pretty good-sized bill. If it's pre-planned and funded properly, it's such a burden taken away from that family,” says Jenkins.
Ideally, you’ll leave your plans somewhere where they can be easily accessed after your death — with an estate planner, financial adviser, or funeral service. Using a professional service ensures your wishes are seen after your death, but a trusted friend or relative can work too.
Not only will laying out your wishes help your loved ones make your final arrangements, but it could also ease any newfound financial responsibilities they have. If you’re responsible for mortgage payments, bills, or any other expenses, it’s best to spell out how to allocate and budget the death benefit or any savings you left behind.
Cremations can be significantly cheaper than funerals, yes, but if a celebration of life is a part of your plan, a memorial service can still put the cost of your final expenses into the thousands. You don’t want your loved ones taking out loans or dipping into their savings.
The best way to allow your loved ones to properly grieve your loss without suffering financial hardship is to set up some protection with a life insurance policy. Even if you choose to have a direct cremation with no additional services, your savings might not cover all of your end-of-life expenses. Not having a life insurance policy to cover final expenses, including final medical bills, can leave your family under financial strain.
The graph below lays out the average cost of end-of-life medical bills in each state and how much your loved ones may end up spending on end-of-life costs.
|STATE||AVERAGE COST OF END-OF-LIFE MEDICAL BILLS|
You also want to think about the lasting financial consequences of your death. Do you provide vital income that affords your family’s everyday expenses? Are you responsible for a mortgage on the home where your family would continue to live? Would your contributions to the household need to be replaced if you died? If the answer to any of these questions is yes, then a life insurance policy would protect the financial security of the people you love.
Families who have lost a loved one due to COVID-19 may be eligible to get assistance from FEMA of up to $7,000. According to FEMA, this subsidy can cover:
Transportation of the deceased
Two death certificates
Interment or cremation
Funeral costs incurred from January 20, 2020 to December 31, 2020 are eligible. Currently, funerals held in 2021 are not eligible.
Estate planning is another vital part of ensuring that your loved ones would be financially protected after your death. Drawing up a will and testament delegates not only how you’d like your final arrangements carried out, but also how your estate is dispersed. Your will ensures that any, like your house, car, or other valuables go into the right hands after your death.
But your estate isn’t always enough to protect your family after you’re gone. If you owe debts, creditors can seize what you owned before your family gets to access it. Alternatively, if you used government programs such as Medicaid, they may use your assets for repayment. If you own enough in assets, there are also estate taxes to consider.
Life insurance, on the other hand, isn’t taxed, cannot be taken by creditors, and will only be paid out to your beneficiaries. Adequate coverage ensures you’re not taking any chances or risking your family’s financial health.
The type of life insurance policy you should get largely depends on your age and your coverage needs.
Term life insurance policies last for a set period of time of your choosing, usually anywhere from 10 to 30 years. After the policy expires, you no longer have coverage and your family won’t receive the death benefit if you die. If you currently have a term life insurance policy in force, you may want to consider converting it to a whole life insurance policy at the end of its term so you can be certain that your loved ones will be able to pay for your end-of-life expenses without dipping into their savings or going into debt.
Whole life insurance is a type of permanent life insurance, which means it lasts your entire life as long as you keep paying the premiums. On one hand, if you need coverage to pay for your funeral expenses and final medical bills, a whole life insurance policy ensures that your term length is long enough and never expires. On the other hand, it’s five to 15 times more expensive than term life insurance which can make it unaffordable.
Final expense life insurance, also called burial insurance, is exactly what it sounds like. The coverage amount you can get with a burial insurance policy tends to be lower than that of other life insurance policies because it is only meant to cover final expenses: medical bills and the costs of a funeral.
If you don’t have any dependents that rely on you financially or can’t get a traditional life insurance policy due to health or age, a final expense policy might work for your needs. But it tends to cost a lot more than term life insurance while offering less coverage. If you’re young enough and eligible for a term life insurance policy, you might be better off with one. However, the policy you go with depends on your individual circumstance.
“The thing you need to remember is, depending on your age, when you take out a term insurance policy, that isn't going to cut it. Let's say you're 40 years old, and you take out a 30-year term policy — it's going to be gone when you're 70. If you're trying to plan for final arrangement expenses, you probably need to focus on a policy that is going to last as long as you're on the planet. It's got to be a product that's going to be available when your loved ones need it, not one that expired 10 years ago,” says Founder & President of Omega Wealth Management, Lisa Kirchenbauer.
Planning for and talking about death isn’t easy. But it’s an important conversation to have so that when you die, your loved ones aren’t struggling financially and can focus instead on celebrating your life. Having a plan in place means their grief won’t be amplified by financial duress or making tough decisions. A trusted professional can help you with your arrangements and in setting up a robust plan to protect your loved ones financially.
“The key to getting started is you have to talk about it. If you don’t talk about it, nothing's going to happen. And by talking about it, you give your family one of the greatest gifts because the day you pass away is not the day that they should have to make all these decisions,” says George Frankel, CEO of Eternal Reefs.