Life Insurance as the Answer to Funeral Costs

average funeral costWhat does an average funeral cost these days? Depending on whose funeral you’re talking about, this question can be a little unsettling to contemplate. But if you count on having a funeral, you can also count on someone having to pay for it. Anticipating the expense will be appreciated come the day your spouse or other loved ones must manage the cost of your funeral arrangements on top of their emotional distress. The good news is life insurance is a simple way to cover the cost of your funeral.

The $6,000 figure gets tossed around a lot in regards to the average funeral cost, but we’ve found this estimate to be a bit dated, and, sorry to say, low. A better figure is somewhere between the $8,000-$10,000 range, but it is hard to pin down an average funeral cost that is actually meaningful. Contributing to the price confusion is the fact that 86% of funeral homes in America are run by families or individuals, each with a slightly different opinion on how to conduct the delicate business of funeral services. Contrast this with the mere 14% that are owned by publicly traded companies who answer to a more transparent bottom line and one sees how the price of funerals can vary widely.[1] Thus, the ability to make price comparisons, a central skill of the informed buyer, is hindered. Then there’s the vulnerability of the bereaved survivor to consider, and don’t forget the inevitable disagreement between family members about the essentials of a proper memorial. The result is a recipe for conflict and financial hardship during a time that’s already laden with emotional suffering.

But these issues don’t need to be left for your survivors to handle on their own. Being proactive about one’s death, which has spawned the whole life insurance industry we know today, is imperative for anyone concerned about easing the practical and financial burdens her loved ones will face in the event of her demise. There is a long history of people using life insurance to insulate loved ones from financially burdensome funerals. Indeed, the multi-billion dollar life insurance industry of today has its roots in practically-minded working class people who got together and admitted that there wasn’t a single one among them who wasn’t going to die someday (given life-expectancies back then, death loomed pretty large by age 20). They were ancient Greeks and Romans and they formed “burial societies.” They pooled some of their money and resources together and agreed to help each other out when a family needed assistance with their deceased. This idea, to pool resources so as to have a safety net, still underlies all insurance programs.

But funeral costs have risen over time as death has evolved into a lucrative industry. The list of costs associated with death today is extensive: funeral director services, embalming, casket, grave site and burial, headstone, grave liner, hearse transportation, service presentation (flowers and programs), and reception needs. The market has responded to this reality with burial insurance, often called “final expense plans.” With burial insurance, the insurance company takes care of funeral costs when one passes away. Promoters of these policies often highlight the fact that one doesn’t need to pass a medical exam in order to be eligible, a typical requisite of most life insurance policies.  But the open-armed acceptance of burial insurance policies translates into costs that are, proportionally speaking, up to 20 times as high as life insurance policies.[2]

When you calculate your life insurance needs, you can and should factor in the cost of your funeral. This expense shouldn’t be itemized and treated with a different plan apart from other expenses you plan on your life insurance covering. By this token, prepaid funerals one should forgo as well. It would be more prudent to design your policy with funeral costs in mind. Factoring in an extra $10,000 to your death benefit for funeral costs is not the same as shelling out $10,000 now for a future funeral. In most cases, it’s going to be markedly cheaper and it accomplishes the same thing. Of course, you’ll want to make sure the disbursement of your life insurance policy allows your beneficiaries enough funds immediately after your death for the express purpose of funeral costs. Even if you decide on death benefit installments rather than a lump sump, most insurance companies will be happy to incorporate a funeral expense amendment to the policy.

When you stop to think about how often one is slapped with an unexpected $8,000-10,000 dollar expense, it’s not too regular an occurrence. The impulse to protect yourself and others from such a financial blow is natural but don’t overlook your life insurance as a way to alleviate the stress. That’s what it’s there for. It’s the post-you insurance. In addition to providing daily support for your loved ones by replacing your income, it can solve the very real problem of funeral costs.





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