How to Pay for a Funeral

When it comes to the end of life, many people like to joke that they don’t care what happens because “I won’t be there”.  Well actually, you will be there.  It’s just a question of what form – full body or ashes.  Regardless of how you want your life to be celebrated and your body to be disposed of after your passing, it’s going to cost some money.  Although the funeral home industry always gets high marks for compassion and friendliness, they are not going to do it for free.

In 2019, according to the National Funeral Directors Association, the national median cost of a funeral with viewing and burial was $7,640.  If a vault is included, something that is typically required by a cemetery, the median cost is $9,135. This cost does not take into account cemetery, burial site headstones and marker costs or miscellaneous cash-advance charges, such as for flowers or an obituary. (https://nfda.org/news/statistics) “Funeral Poverty” is a real thing in America and is getting worse every year.  With my own mother’s funeral and cremation, the final expenses, without a lot of bells and whistles, came to a little over $12,000.

When it comes to having a funeral, there are several ways in which a person, or a family, can pay for the funeral expenses.  As with all things financial, there are pros and cons with each of them.  Let’s take a closer look at some of the more common options.

1.  Pay for the expenses out of your own funds.   This is the easiest and most straight forward method to pay for final expenses.  For most couples, the surviving spouse will pay for their deceased loved one’s funeral with money from bank account or cash proceeds from investments.  But what happens when a single parent or the surviving spouse passes?  Are the kids supposed to pay?  Generally speaking, mom or dad should have left instructions, hopefully before their passing, on how the family should pay for their final expenses.  Parents can spell out these instructions within a will, within trust instructions, or simply having a conversation letting the kids or family members know where the funds are located.
2.  Buy Burial insurance.   In a nutshell, burial insurance IS life insurance and it is bought by the children to cover final expenses for their aging parents.  Unlike regular life insurance, burial insurance is much easier to qualify for and there is never a physical or medical examination.  Why do people buy burial insurance on their parents?  Because their parents have no means to pay for their final expenses. And instead of getting stuck with a large bill, many children are turning to burial insurance.

There are only two requirements to be able to buy burial insurance.First, there must be “insurable interest”.This criteria is met if you are related to the person you are buying the policy for.Second, your parent(s) must consent to having their medical history reviewed.This is just a simple questionnaire to make sure they are eligible for coverage. It makes sense for insurance companies to do medical histories.Companies are not going to stay in business very long if they are insuring people who are going to die within the first couple months or years of a new policy being issued.

3.  Buy a pre-paid funeral plan.  More and more Americans are buying prepaid funerals as funeral prices continue to increase.  However, there are two camps with this particular option.  The following chart shows both sides of the equation:

While all the above points are valid, there is NOT a black and white answer to buying a pre-paid funeral plan. For some, buying a burial plan will give them peace of mind knowing that their children or family members will not have to be stuck with a large amount of funeral expenses.For others, who are not sure where they will be living or feel their money can grow in investments up to the time of their passing, a pre-paid burial plan probably wouldn’t be a good fit.

4. Term insurance.  Term insurance is the least expensive type insurance on the market.  For only a small premium every year, this may allow you to pay your final expenses for a fraction of the actual costs.  As an example, for a $15,000 term policy with a non-smoking male, depending on your age, one can obtain coverage in the range of $10 – $25 per month.  That’s only $120 – $300 per year.  Another nice thing with life insurance policies is that many funeral homes will accept an “assignment” of your policy.  That means that proceeds from the life insurance policy can be made directly to the funeral home.

These are four of the more common ways that a person can pay for their final expenses.  The best thing that a person can do, and you are never too young to do this, is to write out your plan and let others know how you want to be celebrated and how to pay the bills.  This plan should include:

• Do you want a public viewing or just for family members?
• Do you want to be cremated?
• If cremated, do you want to be buried with a headstone, or have a family gathering to spread your ashes at a special location?

And most importantly, spell out how to pay for any final expenses for yourself and your spouse if married.

This blog is created and authored by Chuck Henrich (Content Creator) and is published and provided for informational and entertainment purposes only. The information in the Blog constitutes the Content Creators own opinions and it should not be regarded as a description of services provided by Southwest Michigan Financial, LLC. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.  It is only intended to provide education about the financial industry.  The views reflected in the commentary are subject to change at any time without notice.

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