Funeral expenses can be shockingly expensive. Many people who are caught unaware by a sudden or unexpected death find their savings account depleted by caskets, burial plots, payments to the funeral home, and other expenses. In order to defray these costs, many people choose to take out a life insurance policy in hopes that the death benefit will cover the cost of a funeral. Indeed, for many insureds, funeral expenses are the primary purpose of a life insurance policy. Will life insurance pay for a funeral? Are there any problems to be prepared for in advance?
Traditional funerals can cost upwards of $10,000. Some budget-conscious morticians offer reduced-cost funerals for around $2,500, but even these expenses can be a tremendous financial blow to the deceased’s surviving relatives, especially if lingering medical bills are already leaching away finances. Several expenses are associated with funerals such as:
- Funeral home fees
- Burial plot and associated fees
- Officiator services
- Hearse rental
- Casket and/or cremation fees
- Obituary notices
Many funerals have several other associated expenses, as well, depending on how you choose to remember the deceased.
Life Insurance Benefits
The benefit payout of life insurance varies tremendously between policies. The total amount of a policy will usually be well over $10,000, with policies in the six-and-seven digits not unreasonable for most consumers. In that regard, using life insurance to pay for a funeral should be no problem.
The concern with life insurance is that the payout may take a long time to process, and the funds may not be available right away for use on funeral expenses. In addition the standard processing delays, some deaths may take longer to investigate. For example, if the death is found to be suspicious, an insurance investigator will need to be assigned to the case, prolonging the pay-out further.
Causes of Benefits Delays and Coverage Investigations
Life insurance claims will be investigated for several mitigating factors, and may be denied depending on the provisions of the policy:
- If the death is suspected as a suicide
- If the insured died as part of a violent crime
- If the insurance company has any reason to suspect fraud
- If the policy had lapsed
Of course, for most people, the life insurance claim will be found non-fraudulent and the payout will be made to the beneficiaries. This process can take a very long time, however, and in the meanwhile the deceased’s loved ones are left paying funeral expenses out of their pocket. Some may have savings available to dip into, while others are forced to charge the expenses to a credit card or other financing option.
If you have life insurance that cannot pay for the cost of a funeral, or if you do not have life insurance, there are still several options for ways to pay for a funeral:
- Opt for a lower-cost ceremony by comparison shopping and removing expensive “extras” from the service
- Consider cremation rather than burial
- If you meet the eligibility requirement, the Social Security Administration can provide $225 toward funeral costs
- Veterans can receive funeral benefits through the Department of Veterans Affairs
- The Crime Victims’ Compensation Fund may cover funeral costs if the deceased was a victim of violent crime
It’s important to discuss your wishes with your spouse or other loved ones far in advance of funeral expenses. Elderly individuals or those suffering from terminal illness have probably discussed their preferences in regards to burial or cremation and other funeral decisions. Even people who are young and healthy should think about their wishes, however, in the event of untimely death. Advising your loved ones of your wishes can help reduce stress during the mourning period, as your family will not need to make sudden decisions or fall victim to guilt-induced up-selling by unscrupulous funeral home directors.
Of course, even if your life insurance death benefit does not arrive in time to cover your funeral costs, your loved ones can still enjoy the financial security granted by life insurance. Life insurance benefits can be used to pay off lingering medical bills and debts, and can go toward the living expenses of surviving relatives in the wake of an individual’s death. Even though your life insurance may not pay in time to cover your funeral, it can still provide a college fund for your child or pay off the mortgage on your home.
Before purchasing a life insurance policy, it’s wise to review the exact details of your policy. You can ask your insurance provider how long to expect for a pay-out, and plan accordingly. With a little foresight and a policy that matches your family’s needs, you can rest easy knowing that your family will be secure long after you pass away.
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