Did you know that the average cost of a full-service "traditional burial" in the United States is over $7,000 excluding cemetery and reception costs?! This ranks funerals as the 2nd or 3rd most expensive life event. Unfortunately, less than 1/3 of the US population pre-plans for this life event and less than 40% have any form of life insurance to cover funeral costs.
Most funeral homes expect payment for services rendered upon completion of arrangements. However, with the right planning, you can prepare your family by sharing with them your preferences while setting aside funds to cover final expense.
Options for "pre-paying" for a funeral:
If you have wisely decided to pre-plan your funeral, outlining your wishes, and documenting the necessary information for a death certificate and obituary, then you should also consider your options for funding that funeral.
You can 100% pre-plan a funeral without pre-paying, but if you'd like to and are able to remove that financial burden from your family, below are the funding options available when pre-planning a funeral:
- Bank Accounts: including a standard Saving Account or a Payable on Death (PO) Savings Account
- Funeral Trust: setup with the assistance of your lawyer or financial advisor, you can create a trust to be used exclusively for final expense and designate beneficiaries.
- Life Insurance: The payout that comes after filing an individual or group life insurance claim is called the "death benefit." The death benefit can be used to cover final expenses including those incurred at funeral homes and cemeteries. Due to the large size of life insurance policies, this is typically more than enough for a family and there is no need to purchase additional "funeral insurance."
- Final Expense or Burial Insurance: Used interchangeably, these life insurance policies have a smaller-face value (typically less than $35,000), and are primarily used to cover final expenses. These can be a good option for those without any life insurance due to their lower monthly premiums and lighter under-writing requirements.
- Pre-Need Contracts: Available as a Pre-Need Trust or a Pre-Need Insurance Contract, these contracts are made directly with the funeral home, who is listed as the beneficiary. Typically you preselect the casket, services, etc., and contract is written in that amount. The cost may be guaranteed. If the cost is guaranteed, the funeral establishment cannot charge your relatives more than the contract states, even if prices rise. However, it can keep any funds remaining after the arrangements have been carried out.
All of pre-funding options have their pros and cons. One of our independent preplanning advisors would be happy to discuss those with you and help you decide what the best option is for you and your family.
Options for paying for an "at-need" funeral:
If you or your loved one has not pre-planned and set aside funds for a funeral, but a death has occurred and now you need to pay for the funeral expenses, below is a list of payment payment options that most funeral homes and cemeteries accept:
- Funded Pre-Need Contract: A funded pre-need contract via a funeral home or pre-planner prior to death occurring.
- Life Insurance: Verified life insurance policy(s) may be used for payment. Some funeral homes use a factoring company which provides the funeral home with expedited payments from the life insurance proceeds. A funeral home may require that the consumer pay the factoring fee for expedited payment services. Those fees range from 3.50% to 5.00% of the total cost of the goods and services that the life insurance will cover.
- Credit Card: Most funeral homes accept major credit cards. Previously, a funeral home could not charge a “usage/convenience fee” for using a credit card; however with new credit card regulations that went into effect on January 27, 2013, funeral homes may now do so in select states. See the following article for more info on credit card convenience fees.
- Payments Over Time: Some funeral homes may offer in-house or 3rd party payment programs for goods and services rendered. The qualifications for such services may be dependent on credit worthiness, down payments, and interest is may be charged.
- Veteran's Benefits: If the veteran or spouse of veteran qualify with specifications by the VA, portions or even all of the funeral costs will be paid for by the VA. The veteran and the spouse may even be entitled to burial benefits at a local or national veteran cemetery for free.
Half the challenge of planning a funeral is knowing what you or your loved one would have wanted. To help your family avoid having to make costly and emotional decisions at the time of need, taking a few minutes to preplan and document your wishes makes it crystal clear to your family and removes decision-making and/or financial burdens.
Going one-step further to secure or set aside funds for the funeral is the icing on the cake!
Start your pre-plan now, either on your own via the SIMPLICITY Pre-Plan or with the help of one of our independent advisors via the LIFETIME and FOREVER Pre-Plans.