Life Insurance and Funeral Expenses: Everything You Should Know

Preparing for your funeral expenses could be one of the last gifts you leave your loved ones. Many people seek life insurance as a way to shield their loved ones from their final expenses, allowing them to focus on other financial priorities like day-to-day living expenses. Your final arrangements can be simple or lavish—it’s up to you and your loved ones to decide what feels meaningful to you. It can be helpful to look through different funeral options to put together your idea of what feels emotionally meaningful and affordable.

Using Term Life Insurance for Funeral Costs

If you’ve got loved ones who depend on you financially, term life insurance could be a good way to defray the price tag on your final expenses. Your loved ones can use the death benefit proceeds however they choose, including for your funeral, flowers, burial or whatever else they need. Term life insurance is one of the most affordable types of life insurance and may offer a larger death benefit than you can comfortably save on your own, making it the best choice for some families. If the only reason you want a policy is to cover final expenses, you might choose to opt for a low coverage amount. That said, most people get term life insurance for more than simply funeral costs. A main reason to get life insurance is if you’re a parent or have any financial dependents. Your beneficiary can use a life insurance benefit for anything, including living expenses, debt repayment, college tuition and more.

If you don’t have any financial dependents and want only to cover the costs of your funeral, you may come across a specific kind of insurance called final expense insurance. This kind of policy is designed for funeral and similar costs. Despite the name, life insurance beneficiaries can use the payout for whatever expenses they choose. Final expense insurance is basically another form of term life insurance, with coverage scaled for estimated funeral expenses (policies typically only offer $5,000 to $25,000). Similarly, seniors looking for life insurance may find policies geared toward them in the form of guaranteed issue permanent life insurance (meaning no health exam required and the coverage will last your whole life as long as you keep up with premiums).

Prepaid Funeral Plans

Many funeral homes across the country will let you set up a pre-need arrangement, or a prepaid funeral plan. This is a way to earmark funds for funeral costs by putting them in the funeral director’s hands ahead of time. The benefit is that funds can be available very quickly, since you made the arrangement in advance. As long as the funeral home has a copy of the contract, they can move ahead faster than it typically takes for an insurance company to process and pay a life insurance claim.

Pre-need funds are fast, but limited. This can cause problems if you move or if your loved ones don’t know about the arrangement and contact another funeral home instead. It can be difficult to get refunds, and you can’t use the money for any other purpose. Your loved ones may also still have additional fees to pay the funeral home. In many cases, it is more convenient and better cost value to choose another way to pay for final expenses.

Bank Account to Cover Funeral Expenses

The simplest (although not necessarily easiest) way to pay your final expenses is by “self- insuring” or simply saving up the actual cash in a bank account. If you’re able to save the money in a joint account with a loved one, or designate someone as a payable-on-death (POD) beneficiary of your bank account, then the funds may be available for your loved one immediately or shortly after you pass away. Of course, this depends on your ability to save enough money to cover the full cost of the funeral, casket and related expenses, which can be challenging. If you open a joint account, you’d also have to trust the other account holder not to touch the money.

If you’re the sole owner of the account and don’t name a beneficiary, it can take longer for the bank to authorize your next of kin to access the funds. Your family may need to collect death certificates and other necessary financial documentation before the bank can release the account to them. Your family may even need to wait until they can access the account as part of the probate process to execute your will, which can take months or more. That means your loved ones would probably have to front the costs for final expenses and get paid back later. If you’re looking for options with a faster timeframe, setting up a POD beneficiary or exploring options like a life insurance policy may help get funds to your family in a timely fashion.

How Much Are The Typical Funeral Expenses?

Similar to a happier event like a wedding, funeral expenses depend on how elaborate your plans are. The National Funeral Directors Association estimated a median cost of a funeral with a viewing and burial to be $8,300 in 2023. If your cemetery requires a vault, that figure rises to nearly $10,000. By comparison, a typical cremation costs $6,280. Final arrangements are a personal choice, subject to tradition, religion, cost and more. Cremation is an increasingly popular option, with rates reaching 60% in 2023, but burial also remains popular—and expensive. If you’d like a traditional funeral and burial, expenses might break down like this (all figures accessed November 2024):

• $2,495: Basic services fee, which covers meetings, overhead, filing for certificates and other administrative tasks; several states legally require the bereaved to hire a funeral director to handle certain aspects of the funeral

• $395: Transfer to funeral home

• $845: Embalming

• $295: Other preparations of the body

• $475: Use of facility for viewing

• $550: Use of facility for funeral service

• $375: Hearse

• $175: Service car or van

• $195: Basic memorial package

• $2,500: Metal casket

• $1,695: Burial vault

The grave plot itself adds another cost, which may range from roughly $1,000-4,000 depending on where you live. Other costs may increase the total price as well, including flowers, officiant and musician’s fees, the grave marker, grave opening and closing fee and extra copies of the death certificate.

If a traditional funeral sounds most meaningful but cost is an issue, you can take steps to minimize expenses. Skipping embalming or other unnecessary steps is an option, as is asking funeral directors for written price lists, since there may be cheaper vaults or caskets available than the models on display.

You’re also legally entitled to purchase your own casket elsewhere. Finally, opting for cremation with a traditional-style memorial service is less expensive than funeral with burial.

Planning for Your Wishes

Your last wishes can be a personal, highly sensitive matter. Your religious, emotional or environmental convictions may lead you to consider non-traditional avenues for final arrangements. Whether you have a funeral (service with your body present), memorial (service without a body) or neither of those things is up to you.

Here are some examples of alternative wishes you might outline and leave for your loved ones alongside your last will and testament:

A green burial, which minimizes environmental impact, is often a cheaper option than traditional burial because it eliminates many steps, like embalming or purchasing a vault. If you want to be buried in a designated “green cemetery,” it may be helpful to figure out the details yourself so your loved ones aren’t paralyzed by research when the time comes.

Burial at your home is allowed in most of the United States (some states require a funeral director to complete certain tasks or disallow home burial in most circumstances). Your property may have to meet a minimum acreage, and you may need to discuss certain aspects of your plan (like where on the property you’ll be buried) with city planners. Consider who will handle this and when.

If you’re interested in alternative methods of handling your remains, like having your ashes mixed into a memorial reef or made into a diamond, make those instructions clear.

Music, Memorials and More: Choosing Your Funeral Program

Including your wishes in your will is smart, but your will shouldn’t be the only document expressing those desires. If your family doesn’t read the will until after your funeral, they’ll miss all your instructions.

(When you create a will with Fabric, we ask you about your wishes for your ceremony, and then deliver it to you as a separate document you can share with a religious officiant, funeral director or anyone else who should know about your plans.)

A document outlining your final wishes should include your preferences for:

• Particular wishes for your funeral program

• Burial vs. cremation vs. donating your body to science, or anything else

• Memorial preferences (where you want it, any particular guests you’d like to have

  invited, music, etc.)

• Do you want your guests to donate to charity instead of bringing flowers or gifts for your

  family?

• Anything special you’d like interred with you

• Where you want to be buried (or how you’d like your ashes disposed of or stored)

Leave copies of this document alongside your will and at your chosen funeral home, where your next of kin can find it. One way to keep your family members in the loop—if you’ve created a will with Fabric, at least—is to designate a trusted contact, or a person who can access your will and last wishes electronically.

Whether you go for life insurance or another means of funding your own final expenses, a loss is a uniquely painful event for a family to go through. While you can’t shoulder the emotional load for your loved ones, lessening the financial burden can be a way to care for your family as long as you possibly can.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

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