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Burial Insurance May or May Not Be the Answer to Covering Your Funeral Costs

We are all going to die. It’s not a pretty thought, but it does mean that we will all need to be buried or cremated. And that means we should all have a plan for funeral costs, whether that includes a formal funeral insurance policy or just a dedicated savings account or something in between.

When facing an inevitability, such as death, we often turn to insurance as a way of defraying our potential costs. But before jumping in to dedicated funeral expense insurance, let’s consider several options to pay for your funeral.

Planning ahead for how to cover your funeral expenses relieves your loved ones of extremely stressful decisions during an already traumatic point in their lives. Which route you take depends on a lot of factors, so let’s break them down one by one.

What about your existing insurance?

If you already have a sufficient life insurance policy, you probably don’t need a separate funeral insurance policy. Life insurance, and especially term life insurance, has been falling in price constantly over the past few decades, and you will get much more bang for your buck going with a traditional life insurance policy than buying dedicated burial insurance.

A typical life insurance policy should have enough of a final payout to cover the income your family will lose when you are not there, plus expenses like your mortgage, your kid’s college, and the like. Making sure you add a little extra on that policy to cover your burial is an inexpensive way to make sure your final arrangements are taken care of.

Keep in mind, though, even if you have a large life insurance policy, it is still an excellent idea to talk to your loved ones and the beneficiaries of the policy to explain how you want your final arrangements to be made. You never know — they may have other plans for that money.

It is also important to remember that most people opt for “term life” insurance policies, meaning that if you don’t die during the period that the policy is in effect, it simply goes away and you get nothing.

Now, not dying is a good thing, but if you were counting on a term policy to pay your final expenses, someone might end up on the hook without the money to cover the funeral.

What is the best burial insurance?

If you cannot qualify for a traditional life insurance policy, or if you just want to keep things separated, then there are a few dedicated options for paying for your funeral costs.

One is a dedicated funeral insurance policy. These are typically dedicated “whole life” policies that spell out specifically that they are for paying the cost of funeral or cremation expenses.

Even though they have a small monthly price tag, burial insurance policies are relatively expensive policies compared with term life insurance, and they don’t pay out nearly as much.

But on the other hand, burial insurance policies also don’t expire as long as you continue to make the premium payments.

One major benefit to a funeral insurance policy compared with traditional life insurance is that it is a dedicated-acceptance policy, meaning you could qualify even if you were elderly and suffering from a  terminal disease. That isn’t typically the case with traditional life insurance.

Another option for paying your funeral expenses is to sign a “pre need” contract with a funeral home.

Pre-need contracts are a way to lock in your rates so if the average cost of funeral services goes up over time, you only have to pay today’s price.

This is essentially a contract with the funeral home allowing you to pay in advance for what you will inevitably need.

Pre-need contracts are designed as a way to budget for exactly what you want.

Just make sure you understand the paperwork because not all policies are the same, and each state regulates them differently.

And never sign something you don’t completely understand. It would be a shame to sign a contract for what you think is a guaranteed price only to find out that it doesn’t increase over time, leaving your loved ones with an unwelcome bill.

It never hurts to consult a lawyer with experience in these types of contracts before getting locked in to a long-term deal.

How much does a funeral cost?

This is all such an important consideration because of the large variation, and potential eye-popping numbers involved in funeral expenses. Even though everyone will eventually go through it, many people still wonder how much is a funeral.

It certainly makes you think hard about a funeral expense insurance policy.

According to the National Funeral Director’s Association, the national median cost of an adult funeral with a viewing and a burial is about $8,700.  Foregoing the embalming and instead going with a cremation and viewing still comes in at about $6,200.

But those numbers are medians and don’t completely answer the question of how much does a funeral cost.

That’s because every funeral is different, as are the expenses. If you are a minimalist, you could be looking at just a few hundred dollars for a simple cremation and quiet service at home. Meanwhile, you could go all out and be looking at more than $10,000 for a full-on New Orleans-style jazz funeral.

The key is to not be surprised by the sticker price later and to plan for your funeral costs now, consider whether you should be shopping for the best burial insurance, or just making other plans with your family.

National Median Cost of an Adult Funeral with Viewing and Burial

Source: National Funeral Directors Association

National Median Cost of an Adult Funeral with Viewing and Cremation

Source: National Funeral Directors Association