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Does Life Insurance Cover Funeral Costs?

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Thursday, April 30, 2015

Does Life Insurance Cover Funeral Costs?

When you buy life insurance, your No. 1 goal is to make sure your family can afford the cost of living after you're gone. Those long-term expenses could include your mortgage, your outstanding loans or medical bills, your kids' college tuition, and your spouse's retirement.

However, once you kick the bucket, your loved ones are also responsible for an immediate service that will cost them a pretty penny: your funeral.

When you die, your beneficiaries decide how to use your life insurance payout. Since funerals can be incredibly expensive, they'll probably use that payout to foot the funeral bill. Now here's the dilemma: If you don't have a big enough policy, your family has limited options. They'll have to pull funds from your estate (if you even have one), pay out-of-pocket, or just go without the services you and your family wanted.

You deserve a proper burial, and your loved ones deserve the peace of mind they'll get from saying their final goodbyes. Don't cheat your family because you didn't buy enough life insurance.

How Much Does A Funeral Cost?

Not sure how much life insurance you need to cover your funeral? The average cost of a funeral runs between $8,000 and $16,000. A cremation, the cheaper option that's growing in popularity, averages $4,000 to $12,000.

So, the first step in buying life insurance is to add up all the living costs you want covered by your policy. The second step is to tally the cost of the funeral and burial services you want, before you die. That way, you have a basic estimate of how big your policy should be.

Once you've started estimating funeral expenses, you and your family can take these extra steps to cut costs.

1) Shop Around

We're not saying funeral directors are hard-lining salesmen, but they aren't saints either. They run their business like any other, which means they follow the laws of supply and demand. If you live in a smaller town, and they're the only business around, they can significantly mark up their prices.

You don't need to stay local just because your family has always used the same mortuary or funeral home. Considering 20% of funeral homes are now owned by the two largest companies in the industry, your "mom and pop" funeral shop might not even be locally owned. To save some major bucks, shop around. If you really want to stay local, check out the farmer's market, not the funeral home.

2) Find Out Specific Costs

Funeral directors are required to give you an itemized list of prices for their products and services. This "General Price List" starts with the "basic services fee," which all customers pay to compensate the funeral director and staff, death certificate copies, permits, coordination with the cemetery or crematory, and storage of the body.

Ask each funeral director for the price of services you want. Then compare those prices to the national average, shown here:

  • "Basic fee" ($1,975)
  • Transferring the body to funeral home ($285)
  • Embalming ($695)
  • Other preparations, like hair and makeup ($225)
  • Metal casket ($2,395)
  • Cremation ($2,000-$4,000)
  • Viewing at a funeral home ($400)
  • Memorial service at a funeral home ($495)
  • Hearse ($175-$400)
  • Service car to transport family ($50-$300)
  • Grave site ($1,000)
  • Digging a grave ($600)
  • Grave liner ($1,000)
  • Gravestone ($1,500-$2,000)
  • Vault ($1,298)

3) Ask What's Really Necessary

In 1984, the Federal Trade Commission created the Funeral Rule to keep the "death care" industry in check. These regulations ensure that you have the freedom to compare prices and opt out of unnecessary expenses. Before you settle on your final funeral estimate, find out which services aren't actually required.

Here are some examples of how the Funeral Rule helps make your burial more affordable:

  • Funeral directors might insist that they embalm the body immediately. However, unless you do a viewing or move the body across state lines, the Funeral Rule doesn't require embalming. You can ask to refrigerate the body instead. It's a much cheaper option.

  • When you buy a casket, a cemetery might want to you to get a casket vault and liner to keep the grave from sinking when the casket breaks down. State laws don't require a vault or a liner.

  • Funeral directors can't require you to buy a casket for cremation. Technically, if you decide on a cremation without a service, you don't even need a casket. A cardboard box will do the job!

  • You can't be charged for buying a casket or urn outside the funeral home. Since items bought in the funeral home can cost almost 300% more than the wholesale price, you should definitely search elsewhere for a casket. CostCo and WalMart sell caskets and urns, so you could even find one on your next grocery run.

  • Funeral directors might ask if you want your casket sealed (so the the bugs and water stay out). That might sound like a good idea, but it's not. The seal is a cheap rubber gasket. Its value is nowhere near what you'll be charged. And not to be crass, but the gasket won't stop the body from decaying. Is there really any point in protecting a body that's already six feet under?

Does Your Life Insurance Policy Cover Funeral Costs?

No one wants to plan their own death, let alone their funeral. However, the point of life insurance is that your family won't have to worry about living costs when you die. For the sake of your family, estimate your funeral costs now--before you decide on a life insurance policy.

Once you've got an estimate, talk to an insurance expert. Insurance Clarity will put you in touch with an agent who can help you pick the policy that covers the full cost of the funeral you deserve.