Does Life Insurance Pay For Funeral Expenses? How Long Does It Take? As you grow older, you may begin to consider what will happen when you pass away. It’s critical to plan ahead of time for that day so that your loved ones aren’t left to make unpleasant decisions after you pass away.
Planning your funeral and how to pay for it is an important aspect of thinking it all through.
This isn’t always the case, though. If you’re currently planning a funeral, find out if life insurance will cover the costs.
Does Life Insurance Pay for Funeral Expenses?
The majority of life insurance contracts pay out a lump payment to a named recipient. A life insurance payout replaces lost income while also paying off any debts and taxes that your estate may owe.
Your estate may also owe Medicaid recovery programs a charge for any services you received via the state’s program. Unexpected bills and even legal costs are common occurrences. Insurance coverage may not always be sufficient to cover the cost of a funeral. It does not always turn out that way, though.
There is no legal duty to utilize the money from your insurance policy to pay for your funeral as a named beneficiary. Your plans may be jeopardized if the beneficiary decides to keep the money for their own expenditures.
For example, if you have an adult kid who is a gambler or a drug addict, or who is deeply in debt, your funeral arrangements may not be a top concern for them. They could choose to spend the money from the insurance policy on anything else, leaving the funeral to the rest of the family. In the worst-case situation, no one will honor your funeral arrangements.
If your beneficiary is unreliable or has financial struggles, life insurance may not be the best plan to pay for your funeral expenses. When planning for your funeral using life insurance, make sure your beneficiary understands what you expect and will carry out your wishes.
Insurance Policy Timeline
An insurance company may withhold reimbursement for a variety of reasons. Your death could be the subject of an investigation or a legal snafu. Even a clerical error could prevent funds from reaching your relatives in time for your burial.
If this is the case, your loved ones may find themselves footing the expense and wondering when they will be reimbursed. Your family may not be able to finance the funeral you had planned in some instances.
What About Burial Insurance?
“Final Expense” or “Burial Insurance” is simply another term for a life insurance policy purchased particularly to cover funeral costs. “Modified whole life insurance” is another name for it. Funeral flowers, a vault, a casket, and payment to an officiant are all covered by this sort of insurance policy.
The beneficiary determines whether or not burial insurance will pay your final expenses. By law, the recipient is free to use the money from the burial or final expense policy in any way they see fit. Hold-ups in administrative or investigative processes can still occur. These insurance policies are very similar to life insurance.
This alternative entails pre-planning and paying for your own funeral expenditures. You and your loved ones won’t have to worry about who will pay for your funeral plans if you plan and finance it yourself.
The funds you set aside for your funeral are used solely for your funeral. They are not used to paying taxes, a loved one’s debt or insurance administrative expenses.
Make a Pre Plan
Another benefit to making a pre-plan directly with the funeral home is that you work with your providers directly to plan and pay for everything ahead of time. Planning together allows you to get to know the funeral director and how they will work with your family. You can understand what resources they have available to help your family with grief. You see their facilities and know precisely where and how to plan the entire funeral.
When you make funeral plans along with making the payment, you set your plans in stone. No family members can change your last rites into something different than what you would have wanted. You retain the ability to plan your last event. Since your funeral is a celebration of your life, isn’t that how it should be?
How Long Does It Take?
Many families consider using life insurance to cover the funeral expenses and burial costs after a loved one dies. The average price of a traditional funeral service can reach $8,000, so using life insurance can help ease this financial burden. However, the process is not as simple as it sounds, so it is essential to understand how it works ahead of time. Here’s what you need to know about using life insurance to pay funeral costs.
Payouts Take Time
Life insurance payouts don’t occur immediately. This process takes time, which can be challenging while making funeral arrangements as payment is often expected upfront for most funeral providers.
It can sometimes take anywhere from 30 to 60 days before beneficiaries receive payment, although—if the policy has complications—it can take several weeks or months.
The number of beneficiaries also affects the total distribution, so the person paying the funeral costs might not be able to cover all the charges with their portion of the benefit.
Policy Assignment Options
The beneficiary will fill out a form directing the benefits to the funeral home or a third party, who will subsequently submit a claim with the life insurance company.
Policyholders can choose this option when pre-planning a funeral by naming the funeral home as the primary beneficiary. Most funeral homes accept life insurance policies as a form of payment.
Advance Funding Can Help
Advance funding companies, like Beneficiary Advance, are another option if you need money to pay funeral expenses when a loved one dies. As the name implies, advance funding offers policy beneficiaries an advance on their life insurance benefits. This solution can help if the family needs money quickly to finalize funeral arrangements. x
Make Updates Regularly
After big life events like marriage, divorce, or retirement, always check your policy. You should also examine your beneficiary list on a regular basis and make any necessary changes if circumstances change.
It’s important to remember that a recipient can use the insurance money for whatever purpose they want.
While using life insurance is one way to pay for funeral expenses, the ultimate guide from Funeralocity offers alternate payment options that you can use. Funeralocity helps to simplify the process by letting you compare costs and services while making funeral arrangements.