Final Expense Insurance: Your Guide to Paying for a Funeral

Wondering how final expense insurance [ECL2] works or how you’re going to pay for a funeral?

Final expense insurance and other types of plans can help pay for a funeral. But there are a lot of options, decisions, questions to answer, and expenses when it’s time for a funeral.

Where do you start?

Here’s what you need to know about final expense insurance and other types of plans to help cover funeral costs: 

How Much Does a Funeral Cost?

The average cost for a burial funeral in the United States is $7,848, according to the National Funeral Directors Association.¹ The average cost for cremation is $6,971.

But this doesn’t include a burial plot for an urn or casket. The average burial plot costs around $1,000 to $4,500, depending on the location, size of the plot and several other factors.²

Funeral with burial costs

Here’s a list of common expenses associated with a funeral with burial:³ 

• Casket: $500 to $10,000
• Basic Services Fee: $2,000
• Cremation Vault: $550
• Embalming: $800
• Facilities/Staff for Ceremony: $2,000
• Facilities/Staff for Viewing: $500
• Hearse: $300
• Removal or Transfer of Remains: $325 

Funeral costs with cremation

Funeral costs with cremation can be slightly less expensive than a casket-burial funeral. The average cost for cremation services is $3,000 and up.³ 

In the United States, around 57% of people choose cremation services over a casket burial, according to the National Funeral Directors Association.⁴ That’s expected to keep rising, and funeral costs are one of the primary factors. 

How will you pay for a funeral? 

The costs can add up quickly. By the time all the decisions are made for a funeral, like: 

• Cremation or burial
• Casket or urn
• Burial plot
• Monument
• Memorial services…

The price tag for a funeral could surpass the national average around $7,400. 

How would you pay for a funeral today? For some people in the midst of grieving the loss of a loved one, a funeral can also become stressful. Most funeral-service providers expect cash up front to pay for a funeral. 

And that could be a problem. One recent survey found that 35% of adults would have difficulty paying for a $400 emergency expense.⁵

Ways for paying for a funeral include using: 

• Cash
• Savings
• Credit card
• Third-party loans
• Borrowing from family and friends
• Crowdsourcing 

However, there’s another way to pay for funeral expenses besides these methods that can help reduce stress and worry about money when it’s time for a funeral: final expense insurance. 

Funeral Insurance: Another Way to Pay for a Funeral

Besides cash, credit cards and loans to pay for a funeral, there are several types of funeral insurance plans that can help cover the costs of a funeral. These include:

• Preneed insurance
• Final expense insurance 

Here’s a quick look at the difference between Preneed Insurance and Final Expense Insurance: 

Let’s take a closer look at Preneed Insurance and Final Expense Insurance. 

Preneed Insurance 

This type of insurance plan is meant to cover costs specifically associated with burial and funeral services. It’s sometimes called a “prepaid funeral plan.” The beneficiary in these policies is usually the funeral home, which means it will receive any benefit payment. 

10 Things to Know About Preneed Plans & Prepaid Funerals

Wondering how preneed plans and prepaid funeral plans work? Check out these 10 tips to see if this type of plan is right for you. 

1. Plan ahead. You can plan your own funeral service, leaving no doubt for your loved ones that it’s what you would have wanted. 
2. Pay up front. It is possible to pay up front without using a payment plan. 
3. Find out what’s covered. There are many funeral expenses that may not be covered by a prepaid plan. For this reason, you’ll need to carefully review any preneed contracts before agreeing to them. You might even want to consider hiring a lawyer to help you. 
4. Get to know your funeral home. It’s not unheard of for funeral homes to mishandle or mismanage the money you pay them for your preneed plan. With that in mind, be sure you trust the company before purchasing a preneed policy. 
5. Understand market changes. Due to market fluctuations, the goods and services you select for your prepaid plan may not be available at the time of your death. 
6. Determine price for goods and services. Similarly, the cost of products and services you select when you purchase your plan may not be set in stone, so it’s important to be clear on whether prices are guaranteed—and if they aren’t, who will be responsible for paying the difference. 
7. Estimated tax. Your loved ones may be responsible for paying taxes on income or interest that accrues on the invested funds. 
8. Identify geographical limits. Because preneed insurance policies are contracts with specific funeral homes, you may be limited to the geographical boundaries of that company’s service area. 
9. If your plans change or you move away from the area where you bought your preneed policy, you may not be covered. Choosing final expense insurance instead will give you and your loved ones more flexibility and guaranteed coverage. 
10. Know your rights. The Federal Trade Commission’s Funeral Rule entitles you to several rights and disclosures, including an itemized list of expenses.⁶ However, you should be aware that some aspects of prepaid contracts fall within the jurisdiction of the state, and the rule does not apply to these parts. Protections vary from state to state. 

The Preneed Plan Checklist: 10 Questions to Ask

If you’re looking for a preneed funeral plan or trying to determine if it’s right for you, chances are pretty good you’ve got questions about how this type of funeral insurance works. Check out the answers to these commonly-asked questions about preneed funeral plans to help you decide. 

1. What are the legal requirements? 

The Funeral Rule mandates that a funeral home provide you with written explanations of services that are required by law. 

• This information is important because laws surrounding things such as embalming and cremation vary from state to state.
• Embalming for delayed burials is required in some states, while others leave it up to you, and no states require the use of a casket (often the most expensive part of a funeral) for cremations. 

2. How do I know if I’m getting the best value? 

The Federal Trade Commission recommends you approach funeral purchases the way you would treat any other large purchase—by shopping around.⁷ Compare prices between at least two funeral homes. 

3. Can I buy some products or services separately? 

You are not obligated to buy a funeral package that includes goods or services you do not want or need. 

• In fact, you aren’t even obligated to buy everything for your funeral through your preneed provider.
• For example, embalming, caskets, and the memorial service itself can be bought separately if you find a better price through a different vendor. 

4. Are package options available? 

While it’s true you may find a better value by shopping around, you might find it more convenient and less stressful to get everything you need in one place. You might even find the best price this way, so ask what your package options are. 

5. Are any of the listed costs estimates?

Cash advance fees that your funeral provider pays for you to a third party might be estimates. Be sure to ask which fees are set prices and which may be subject to change. 

6. Does the cemetery I’ve chosen have associated requirements and fees? 

Before purchasing a plot at a specific cemetery, be sure you’re aware of burial requirements or unexpected fees you might be charged. 

• Some cemeteries require an outer burial container—even if one is not required by law.
• They may also charge perpetual care fees, and if you use a mausoleum or columbarium, it will likely have its own fee.
• In most instances, the Funeral Rule does not usually apply to cemeteries, and charges from them can add hundreds of dollars to your funeral bill. 

7. May I see a full itemized list of casket and burial container prices? 

Often, casket prices are not listed on a general price list. But funeral homes are required by law to show you a document with the full list of caskets available and their prices. 

• Because industry studies indicate that consumers are more likely to buy one of the first three caskets they are shown, sellers have an interest in pitching more expensive caskets first.⁸
• Don’t make choices based on these sorts of sales tactics. Ask for all your options. 

8. Are there optional goods or services we haven’t discussed yet? 

There may be optional goods and services that you’ll want your prepaid plan to cover, such as transportation of your body or staffing fees associated with a graveside service. 

• If these sorts of optional fees are not included in your preneed policy, your loved ones might have to pay the difference. 

9. Is this an independent, locally owned funeral home? 

Many people want to support locally owned businesses, but sometimes what appears to be an independent neighborhood establishment is actually owned by a large corporation. The only way to be certain that a funeral home is independently and locally owned is to ask. 

10. What happens if I move, want to cancel my contract, or this funeral home goes out of business? 

Find out how your plan will change if circumstances change. 

• State laws vary widely when it comes to protections associated with contract cancellation, moving, or your provider going out of business.
• Before you sign anything, make sure whatever plan you choose will cover you in these situations.

Final Expense Insurance 

Final expense insurance (sometimes called “burial insurance”) covers the cost of funeral expenses, in addition to benefits similar to life insurance. In addition to covering the cost of funeral expenses, a final insurance plan can also help cover: 

• Outstanding debts
• Probate fees
• Other remaining expenses 

Here are a few other ways final expense insurance is different from prepaid or preneed funeral plans. 

• Choose your beneficiary. Final expense insurance plans also allow you to choose the beneficiary. While a preneed plan is usually payable to the funeral home, a final expense benefit goes straight to the beneficiary you choose.
• Term or whole life. Final expense insurance can be purchased as either a term or whole life policy. Depending on your coverage needs, it can last for the duration of a term or until the whole life policy ends at age 100. 

10 Things to Know About Final Expense Insurance

Wondering how final expense insurance plans work? Check out these 10 tips to see if this type of plan is right for you. 

1. Know the value. This type of policy can increase in value over time. It works like a savings account, with the balance going up as you pay in. 
2. Premium based on age. The price of your initial premium will be higher the older you are. But your premium’s amount will not go up as you age. 
3. Choose your beneficiary. Final expense insurance policies allow you to select a beneficiary. You can choose an agent who’s legally responsible for the allocation of benefits. Or you can designate a partner or relative to act as a beneficiary to ensure instructions are followed and funds are properly distributed. 
4. No medical exam required. You won’t be required to take a medical exam to receive coverage, and your policy won’t be canceled due to changes in health. Final expense insurance is available to those in poor health with graded benefits, meaning only a portion of your policy will be available for the first few years of coverage. 
5. Accidental death benefits. Additional benefits can be awarded in the case of an accidental death. 
6. Payment options. Your entire policy does not have to be paid all at once. Term policy payments can be arranged to be paid monthly or yearly. 
7. Cover funeral costs and other expenses. Final expense insurance can cover a number of costs. This allows loved ones to use the benefits for the expenses they need to pay, as opposed to just covering burial costs. This coverage includes common final costs, such as medical bills, probate or legal fees, and other expenses other policy types don’t cover. 
8. Choose your funeral service providers. The flexibility of final expense insurance also extends to your choice of service providers. This means you can allocate funds without being tied to a certain provider, geographic area, or plan. Final expense insurance leaves your options open, a great benefit given the length of time that may pass between choosing and using a policy. 
9. You can borrow against the tax-deferred dividend value of your final expense policy. This means that in addition to preparing for your family’s financial future, you’ll also have an accessible line of credit in case of emergency. 
10. Reduce financial stress. Given its flexibility, final expense insurance mitigates some of the worry preneed or prepaid plans may leave unresolved. Many of the concerns and limitations of those plans don’t apply to final expense. 

Final Expense Insurance: Answers to 3 Common Questions About 

Final expense insurance can help cover funeral costs and other expenses.

If you’re looking for final expense insurance, here’s the answers to a few common questions about this type of funeral insurance.

Who should my beneficiary be?

Final expense insurance allows you to choose your beneficiary and leave instructions for how your benefits are allocated, but the final say is theirs. 

• While this freedom can be a benefit in the event of unexpected expenses, there’s still the chance that your wishes may not be followed to the letter.
• For this reason, your beneficiary should be someone trusted enough to make the best decision for you and your family. Many people decide to appoint a relative or spouse.
• More importantly, you should choose someone who has an insurable interest. In other words, you want a person who derives some benefit, financial or otherwise, from the continued existence of the insured party. 

What’s the benefit of cash value? 

A life insurance policy with cash value simply means that a portion of your premium goes toward your policy’s cash value amount. The remainder of your premium goes toward the insurance company’s operating costs and the actual cost of your insurance itself. 

• As you continue to pay your premiums, your policy will continue to grow in value. Over time, you will gain the ability to take a partial loan against your policy because of this feature.
• Taking a loan against your policy comes with some advantages over getting a loan from a bank or other institution. Loans of this nature do not require you to go through a credit check or an application process, and typically, these loans will not show up on your credit report.
• You also won’t have to pay back a loan against your cash value on a set timetable. However, the most important benefit these loans offer is a lower interest rate in general than you would get at other financial institutions. 

Is there a waiting period? 

In most cases, final expense insurance policies can immediately provide full death benefits, starting from your first day of coverage. 

• All you need to do is have the application approved and pay the first premium to secure coverage.
• You should also receive paperwork that displays the policy effective date.
• If your policy has a graded benefit, you’ll only have access to partial benefits at the start of the policy effective date. Full access to benefits will be available after a set period of time.

 4 Steps to Choose Final Expense Insurance Coverage Amount

How much final expense insurance coverage should you buy for your funeral? 

To determine the amount of final expense coverage you will require, you will first need to try and estimate your total final expenses. Follow these four steps:

Step 1: Estimate Household Expenses

Estimating family expenses is done by taking the total amount of a typical month’s expenses (including house payments, utilities, car expenses, food and transportation costs, insurance fees, etc.) and multiplying by 3. 

This will roughly be the amount your family needs to survive for 3 months. So if your total monthly expenses are $2,500, then your number for family expenses will be $7,500. ($2,500 x 3 = $7,500.) 

Step 2: Factor in Funeral Expenses 

Funeral expenses are determined by what kind of services you end up choosing. See above (How Much Does a Funeral Cost?) for a sample of commonly incurred funeral-related expenses that should help you come to an accurate estimate. For now, let’s say your expenses will be the average of $10,000. 

Step 3: Add to Find Total Final Expenses 

To get your total final expenses, add the above figures together, which in this case are $7,500 for family expenses and $10,000 for funeral expenses. This amount, $17,500, would be the minimum coverage required to account for both funeral and family expenses. 

Step 4: Take Inflation into Account 

According to the National Funeral Directors Association, over the last five years funeral costs have increased by an average of 6.6% and cremation costs have increased by 11.3%. 

Multiply the total you arrived at in Step 3 by the inflation rate for a casket-burial funeral or cremation:⁹

• Funerals: 6.6%
• Cremation: 11.3%

This gives you an estimated cost for your funeral expenses based on current inflation rates. 

How Does Final Expense Insurance Work? 

If you’re looking for a final expense insurance plan or trying to determine if it’s right for you, chances are pretty good you’ve got questions about how this type of plan works.

Check out the answers to these commonly-asked questions about final expense insurance plans to help you decide.

What’s the difference between final expense insurance and using savings?

While simply saving money to be used for your final expenses may seem like a good idea, there is no way to know whether you will be forced to dip into that money before you die. 

• Consider this: One of the leading causes of bankruptcy in the U.S. is medical debt.¹⁰ Disease, illness, and injury are unpredictable, and a single stint in the hospital could wipe out a lifetime of savings.
• By paying into a final expense insurance policy, you can avoid the uncertainty that comes with relying on personal savings. 

Do I need final expense insurance if I’m a veteran? 

Burial benefits for veterans max out at $2,000 for a service-related death and as little as $300 otherwise.¹¹ Veterans also qualify for free burial in national cemeteries. 

• Even if you do qualify for these benefits, it is likely there will still be a large financial sum not accounted for. Final expense insurance is flexible enough to fill in the gaps. 

Won’t the provisions set aside in my will be enough? 

Making arrangements for your funeral through a will can lack results.

• Why? Wills are often read after the funeral takes place. They also have to go through probate court before provisions can be executed. The process can take several months, even in best-case scenarios.
• While it’s possible that the person who ends up paying for the funeral will be reimbursed once the will makes it through court and other bills are paid off, it is unlikely that it will provide any immediate relief when it comes to your final expenses.

What if I have Medicaid or receive Social Security benefits? 

Unfortunately, Medicaid and Social Security benefits only scratch the surface in terms of covering final expenses. 

• You can only set aside up to $1,500 to be applied toward funeral expenses.¹²
• Social Security provides just $255 to a surviving child or spouse to be used for the same purpose.¹³

Does it make sense to purchase final expense insurance or burial insurance if I have or preneed insurance? 

The limitations and uncertainties associated with preneed insurance can make buying an additional final expense insurance policy a logical choice. 

• Remember that a prepaid plan will typically only cover the cost of the funeral. If you leave behind medical bills, attorney’s fees, taxes, or any other debt when you die, preneed insurance will not cover those expenses. 

Is there any reason to buy final expense insurance if I already have a regular life insurance policy?

While final expense insurance is itself a form of life insurance, some people choose to purchase it to accompany an existing life insurance policy. 

Having a separate policy dedicated solely to funeral and burial expenses will protect the policyholder’s beneficiaries from having to take money out of the general life insurance policy to cover final expenses. 

Looking for Funeral Insurance?

There’s a lot of options to consider to cover the costs of a funeral. Got questions about preneed insurance or final expense insurance? We can help.

Call a licensed insurance agent at (800) 827-9990 or find an agent in your area to get your questions about funeral insurance answered.