Do you feel like time accelerates with age? The years seem to pass faster as we age, a sentiment that has scientific support. A study entitled "Effects of Age in Perception of Time", published in 2005, showed that the perception of the passage of time really accelerates beyond 40 years. The faster passage of time can also make us feel like we are not financially prepared for the end.
Providing funds for funeral expenses becomes a financial priority for some. Covering funeral expenses is a reason for purchasing life insurance for 30% of adults who are responsible for making financial decisions in their families, according to the 2019 Life Insurance Barometer report from industrial group LIMRA and Life Happens.
For many older consumers, paying for a funeral is the only reason for buying a life insurance policy. Burial insurance is a type of life insurance designed specifically for this purpose. Sometimes called funeral insurance or final expense insurance.
Burial insurance is simply a whole life insurance policy that is only sold in small quantities, such as from $ 5,000 to $ 25,000. These policies are not meant for people who are raising families and who need life insurance to cover larger expenses such as a mortgage, college tuition fees for children and income replacement during the first few years of work. .
The target market for burial insurance tends to be people aged 50 or over with limited budgets and sometimes in poor health and who have no savings or other life insurance that a family could use for funeral expenses.
How does burial insurance work?
Burial and funeral insurance policies generally do not require a medical examination and the application may ask only a few health questions – or no questions. Rates are based primarily on age and gender. Burial insurance is typically one of these whole life insurance varieties:
Life insurance with simplified issuance: the application does not include any medical examination and only some health questions, but a "yes" answer to some of them could disqualify you. For example, questions of simplified problems often ask if you currently live in a nursing home or if you have HIV.
Life insurance with guaranteed issue: there are no health questions or a medical exam to apply for life insurance with guaranteed issue. You can't be rejected.
The downside of these easy applications is that politics will usually have "classified death benefits". If you die within two or three years of purchasing the policy, your beneficiaries will only receive a refund of the premiums you paid, plus some interest, or a small percentage of the policy coverage amount. However, accidental deaths are generally covered in full by the start of the policy, such as a death in a plane crash.
How much does burial insurance cost?
Since claims for burial insurance policy require little or no medical information, the cost of insurance coverage is high. Our research shows that a healthy 50-year-old male can get $ 100,000 life insurance for 30 years at a cost of less than $ 10,000 in burial insurance. Even a 50-year-old male with high blood pressure can get the same life coverage on a term with a burial policy of less than $ 10,000.
The tradeoff with term life insurance is that you could survive the life of the policy, without leaving money for a funeral and other expenses.
Funeral insurance against term life insurance: average rates for a 50 year old male
$ 10,000 in burial insurance for a healthy male with no medical exam and no health problems
$ 46 / month
$ 100,000 term life insurance for 30 years for a healthy male, medical examination required
$ 41 / month
$ 100,000 term life insurance for 30 years for a male with hypertension, medical examination required
$ 44 / month
Methodology: we calculated the average of the three cheapest rates we found online for a male of average height and weight.
Even if you have some health problems, if you don't absolutely need permanent coverage, you will generally find better value with life insurance.
How much does an average funeral cost?
The median national cost of an observation and burial funeral costs $ 7,640 in 2019, according to the National Funeral Directors Association. This price does not include the cost of a vault, which is typically required by a cemetery. The median cost is $ 9,135 when a vault is included.
The national median cost for a cremation without casket and urn was $ 5,150. Typically a cremation chest is required, which brings the total median cost to $ 6,645, including an urn.
Keep in mind that these figures don't include expenses like a monument or a marker, an obituary or flowers.
Distribution of national median funeral costs
Cost for a metal coffin, the cost varies according to the materials chosen.
A fully combustible container can be a traditional casket or a cardboard box, but it cannot contain metal parts.
If the funeral home does not have a crematorium and uses a third party.
Container to hold cremated remains.
Commission required for basic services
It covers the time of the funeral, the conservation of the remains and the general expenses.
Not required by law, but a funeral home can request if you have a vision.
Other body preparation
It can include cosmetic reconstruction, hairstyle and dressing the deceased.
Use of facilities / staff for the funeral ceremony
If you have the funeral ceremony, you can expect to pay this tax.
Transport the remains from the funeral home to the burial site.
Car / van service
Transport the family and guests from the funeral home to the burial site.
Commemorative package and guest book.
Source: National Funeral Directors Association, average costs 2019
How much funeral or funeral insurance should I buy?
If you want a life insurance policy intended solely to cover funeral expenses, be sure to purchase enough insurance to cover the type of funeral you want. The funeral costs can vary considerably depending on the arrangements you want, including flowers and music. Here is a funeral cost calculator provided by New York Life Insurance Co.
What is the difference between life insurance and burial insurance?
Burial insurance is a type of life insurance among many options. It's good to be familiar with the other choices to make sure you're buying the right one.
Term life insurance is the best option to cover a specific financial obligation that has an end, like paying a mortgage or a child's college tuition. You will choose the amount of coverage you want and the length of the term. The length choices are often 5, 10, 15, 20, 25 or 30 years.
Whole life insurance is a life insurance policy that creates cash value and offers life-long coverage. The amount of the death benefit is guaranteed to beneficiaries regardless of death. The cash value grows at a predictable rate and the premiums remain unchanged. Whole life insurance will generally be much more expensive than term life insurance.
Universal life insurance is an option for permanent coverage that can be less expensive than whole life. Not all universal life insurance policies will build cash value, but universal life can be cheaper than whole life insurance.
Does a beneficiary have to use life insurance payment for a funeral?
While burial and funeral insurance is usually intended to cover the final costs such as the cost of a funeral, the life insurance beneficiary is not required to use the insurance money on the life for that. The beneficiary may decide to use the payment to cover debts and bills or go on vacation.
What is a pre-need plan?
Pre-need insurance is another way of paying for a funeral, but the payment typically goes directly to the funeral home rather than to your beneficiary (like your spouse). Typically you will choose your funeral and then purchase the pre-need insurance in an amount that covers your choices. Typically, this also closes the prices in the funeral home.
Pre-need plans are good for people who want to select their own funeral arrests and don't have to worry about their loved ones negotiating the payment, which can help alleviate guesswork and stress.
A major disadvantage of pre-need insurance is the loss of flexibility. If your family's financial needs change over time, it may be difficult to make changes when you're stuck in a contract. For example, if you move to another state, not all pre-necessity plans will move with you. Some pre-necessity plans offer "portability", which means that politics will move with you.
Pre-need plans are typically subject to the Federal Trade Commission (FTC) "3-day cooling rule". This allows you to cancel the contract within three business days. Some states provide a "free view" period which is longer than the three day FTC period and allows buyers to cancel pre-need insurance and get a full refund. However, the times for cancellation vary by state. For example, in Massachusetts, you can get a full refund if you cancel within 10 days of signing the contract. In Florida, you can get a full refund in the first 30 days.
How much does social security pay for a funeral?
Social security pays a small lump sum of $ 255 to a surviving spouse if he lived with you. If the surviving spouse did not live with you, he or she may be eligible if he or she received certain social security benefits in your registry. If you do not have a surviving spouse, payment can be made to an eligible child.
Check with the Social Security Administration for eligibility requirements.
What are some other ways I can pay for a funeral?
If burial insurance isn't right for you, here are some other options.
Death Payable Account (POD): A POD account allows you to set aside money for a funeral and to name who can access the money when you die. A POD account is a good way to avoid having funeral funds tied up on probation. Your payee cannot access the money while you are alive, but you can withdraw (or add) money to the account at any time. POD accounts are also called "Totten Trusts".
Funeral Trusts: This is an agreement where you can set aside money for a funeral and appoint a trustee. The trustee can withdraw from the account to pay for the funeral after death.
Trust: in this agreement, a trust owns the life insurance policy. When you die, the trustee makes the claim and the money is distributed according to the wishes you have indicated in the trust documents.
Savings account: You can use a regular savings account to pay for a funeral, but the money could be tied up on probation (unlike a POD account). You may be able to avoid this problem by adding a payee to a joint savings account, but keep in mind that they will have full access to the account while you are alive.
What happens if a family cannot afford a funeral?
Federal Government Assistance: If you cannot afford a funeral or burial, you may be able to obtain assistance from a federal program such as:
Benefits for Veterans: If you are a veteran, you can be buried in one of 141 national cemeteries for free. Veteran spouses and children may also qualify. Veterans could also qualify for a burial allowance of up to $ 2,000 for veterans who died September 11, 2001 or later and $ 1,500 for veterans who died before September 11, 2001. Check with the United States Department of Veterans Affairs for eligibility requirements.
Federal Emergency Management Agency (FEMA): For deaths following an event that has been declared a major disaster or emergency, you may be entitled to FEMA funeral assistance to help with expenses such as a coffin or urn, burial or cremation and the cost of a maker or gravestone.
State Government Assistance: Many states have programs to help if you can't afford a funeral or burial. In states that have programs, you will need to request assistance at the county or municipal level. Here is a list of programs by state, compiled by Funeralwise.
Compensation Programs for Crime Victims: Some states have funds to help pay funerals for victims of violent crime. Here is a list of state programs of the National Association of Crime Victims Compensation Boards.
Personal Loans: If you can't afford funeral expenses, you can apply for a personal loan through your bank, credit union or other lenders. While this is sometimes called a "funeral loan", it is truly a personal loan that you can spend as you please. Personal loans are typically "unsecured" in the sense that they don't require collateral (like a lien on your car) and tend to incur high interest rates, which could range between 16% and 35%, according to ; AARP.
Crowdfunding: also called "crowdsourcing", crowdfunding generally refers to fundraising through donations from the general public. Many people raised funds for the funeral on sites like GoFundMe, as well as through donations from churches and other organizations.
Tips for saving on burial and funeral costs
Funerals can be expensive, but you can look around. Costs may vary for the same type of service in the same city. A 2017 NPR survey found that a funeral home charged more than twice as much cremation as another funeral home, even though both funeral homes used the same offsite facility. A 2015 survey conducted by the Funeral Consumers Alliance and Consumer Federation of America found that costs can range from $ 2,580 to $ 13,800 for a full-service funeral.
Here are some tips for saving money:
Get pricing information over the phone. Under FTC rules, funeral directors are required to give you prices over the phone if you ask for it. Here is a checklist of funeral costs and FTC prices.
Buy only what you want. Under federal funeral law, you have the right to purchase goods and services separately, such as a coffin, a memorial service, and a burial. You don't have to accept a funeral home package that has services you don't want.
Don't buy a coffin. If you plan to do a cremation or use an alternative like a green burial, you may not need a coffin. If you want to keep a vision, you may be able to rent a coffin from the funeral home.
Ask a friend or family member to help you negotiate prices. It is a good idea to have someone you trust to speak on your behalf during a stressful and time sensitive situation.