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Funerals are an important celebration of life but they can also become a financial burden to those in charge of planning and arrangements. The best way to protect your loved ones from financially suffering after your death is to have a robust plan in place before you die.
You can do this by setting up a life insurance policy for them to afford funeral expenses, while also utilizing a will and testament to designate how you’d like your funeral to be conducted. Creating a comprehensive plan of action can protect your loved ones from financial duress.
On average, funerals cost $8,000 to $10,000
Where you live will likely affect the cost of your funeral
Purchasing a life insurance policy will help your loved ones cover your funeral expenses
You should create a robust plan for your family that includes your last wishes and a financial safety net
In the United States, there is an average of 2.4 million funerals a year, usually costing loved ones between $8,000 to $10,000. Dying is...expensive. And as time goes on, it continues to get costlier. According to The Consumer Price Index, funeral costs have risen by a whopping 227.1% in the last 30 years.
The graph below displays the median funeral costs in 2021 according to the National Directors Funeral Association :
|Basic services fee||$2,500|
|Funeral director's fees||$1,500|
|Embalming and body preparation||$750|
This doesn’t include end-of-life expenses, such as final medical bills that loved ones might have to cover after you die.
Similarly to the cost of living, the cost of dying is going to vary based on where you live. The table below can give you an idea of what costs would look like for the state you’re in. You’ll notice that in some states where the cost of living is high, like New York and California, a funeral can end up costing above average.
|STATE||AVERAGE COST OF FUNERAL||AVERAGE COST OF END OF LIFE EXPENSES||AVERAGE TOTAL COSTS|
Funeral expenses often come as a shock to grieving families and can compound grief when financial insecurity is added into the mix. Many people don’t have funds readily accessible and may have to dip into retirement savings, 401k funds, or even take out a small funeral loan if they have no assets.
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No one wants to plan for their death, but it’s important to have arrangements in place for the people you’re leaving behind. When your family is already coping with the loss of a loved one, a threat to their financial security is only going to intensify their grief.
“Having an open and transparent conversation around end-of-life planning, albeit difficult, is critically important. While never a fun conversation, it can save everyone a lot of stress in the long run. Having to guess or assume what a loved one might have wanted may end up costing you more than they would have preferred to have spent on them,” explains Priya Malani, founder of Stash Wealth.
With adequate planning in place, you can protect your loved ones from the financial burden of a funeral. There are two key ways to prepare your loved ones for your death.
Ensuring that they’re financially prepared for the cost of your death
Spelling out your wishes with your financial planner or in a will and testament
The best way to make sure that they don’t end up dipping into their savings or going into debt to arrange your funeral is to set up some financial protection with a life insurance policy.
“If you haven't planned ahead and made arrangements through insurance or pre-purchasing cemetery of grave space, your family is sort of stuck with it. And the money is due at the time of the funeral,” says Rick Paskin, founder of Funeralwise.
The cost of funeral expenses can be high, but there are other associated costs with death that are important to consider, such as end-of-life care or everyday bills and expenses that you covered.
“When somebody dies, that's not the only expense that’s left behind. There could be medical bills, legal bills, [and] accounting bills. Depending on where they were living, there could still be rent [and] utilities,” Paskin explains.
With the right coverage in place, your family will be able to finance your funeral and additional expenses, which will allow them to instead focus on honoring your legacy. When you die, life insurance pays out a death benefit to your designated beneficiaries, which can be used however they please. Extenuating circumstances notwithstanding, the turnaround time to get the death benefit tends to be pretty short, sometimes even within a week of filing a claim.
When you die, your loved ones will immediately need to make decisions about your funeral arrangements. The death of a loved one is an emotional time — and planning a funeral on top of it can be overwhelming.
Planning a funeral can be likened to planning a wedding. Every small detail will need to be organized — from picking out your casket to choosing the catering and flower arrangements for your memorial service. The difference is, people often spend months planning their wedding, while a funeral needs to be organized in only a few weeks’ time and is compounded by grief.
You can make this less burdensome for your loved ones by putting your wishes into writing. Instead of a traditional funeral, you may prefer cremation or a green burial. If you don't lay out these wishes for your loved ones, they will never know.
Funeral arrangements can be laid out in your will and testament or left behind as written instructions with someone who manages your affairs, like a financial planner or lawyer.
“It's a really thoughtful [and] caring thing to do — to at least leave a plan. If you can put financial arrangements in place with insurance, that's great, but at a minimum, leave a plan. [It] doesn't cost you anything to leave behind the plan,” says Paskin.
To protect your family from financial suffering when you die, you can choose from a few different life insurance options. Each pay out a death benefit, but how they function and the type of coverage they offer differ greatly. You’ll want to speak with an independent broker like Policygenius to distinguish the best option for your individual circumstance, but it’s a good idea to go into the conversation with an understanding of how these policies work and differ.
A term life policy is the most common type of life insurance. It usually lasts 10-30 years and is the most cost-effective option. Because a term life policy is the most affordable, it’s an ideal choice to get the most coverage at the lowest cost.
Although a term life policy is usually the best type of life insurance coverage for most people, it does have an expiration date. If you’re planning to use term life insurance to cover the cost of your funeral expenses, you’ll want to make sure you don’t lose your coverage by either converting your term policy to a whole policy or purchasing an entirely new life insurance policy altogether. (Hot tip: Do this at least six months before your policy is set to expire to avoid a coverage gap).
Whole life insurance is a form of permanent life insurance. It lasts your whole life but comes with the caveat that it’s five to 15 times more expensive than term life insurance. Its high cost often leads to policy lapses — 45% are abandoned within the first ten years of being in force. But a whole life policy is a good option for some people, such as individuals with long-term dependents or a high net worth.
If you’re closer to retirement and don’t have to cover everyday costs for any dependents, final expense insurance can be a good policy option. It tends to be costlier than term life insurance, but doesn’t require a medical exam and is guaranteed issue, meaning that you’ll be approved for the policy as long as you can make the premium payments and don’t have a terminal illness.
Final expense policies offer a comparatively low death benefit, but enough if you’re only looking for coverage for funeral expenses (and possibly final medical costs). It’s a lot costlier than term life insurance, but can guarantee that your loved ones are covered if you’re unable to get a traditional — aka term — life insurance policy
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If you’re banking on leaving your estate and assets to your beneficiaries to financially support your loved ones and cover the costs of your funeral, it’s important to recognize that this strategy isn’t foolproof.
When you die, your estate is subject to probate, which makes certain that your assets go to the heirs you designated in your will and testament, but also evaluates where you may owe debts and ensures that any creditors you owe receive repayment as well.
Because that payment is first made to creditors before your dependents receive anything from your estate, they may not get as much as you had planned — or depending on your debts, anything at all. They could end up not having the funds to pay for your funeral or having to choose between everyday costs and your funeral arrangements.
A life insurance policy can’t be taken by creditors and isn’t subject to the probate process. Only the beneficiaries you designate in your policy can get the payout — making it a surefire way to offer your loved ones financial support in the event of your death.
Additionally, due to the probate process, your estate and assets aren’t dispersed as quickly by your executor as the life insurance death benefit.
“Once you get the death certificate, the process of getting insurance proceeds — unless there's something odd about the death — can come pretty quickly. So it can really make a difference. It may be a little harder for that executor to get access to resources,” explains Lisa Kirchenbauer, founder and president of Omega Wealth Management.
The best way to prepare your loved ones for your death is to have a robust plan set in place, combining a life insurance policy with enough coverage to afford your funeral and additional expenses with a will and testament that designates your estate and final wishes.
“What I see is a lack of planning. If you can imagine you've just lost your spouse, or somebody in your family who you care deeply about and the funeral home — maybe the hospital — they're coming to you and asking questions. [And] they're looking for answers right now,” says Kirchenbauer.
By working with a financial planner and instituting the proper safeguards, you can allow your family members to mourn your loss without stressful distractions. Kirchenbauer also refers her clients to Five Wishes, which can help people lay out their end of life plans for family members.
“It's a gift. We always describe it as a gift,” says Kirchenbauer. “Whether you just put your wishes in writing, whether you have a contract with a funeral home [or] you've picked out your casket. Those kinds of details are all really important and somebody's got to decide them and I can tell you, it's not a lot of fun, having to decide it right after having lost your loved one. So it's a real gift.”
Nupur Gambhir is a life insurance editor at Policygenius in New York City. She has researched and written extensively about life insurance since 2019, with specialties in life insurance companies, policy types, and end-of-life planning. Her writing on insurance and finance has appeared on MSN, The Financial Gym, and end-of-life planning service Cake. Previously, she worked in marketing and business development for travel and tech.