Final Wishes - Using Term Life Insurance to Cover Funeral Expenses
Planning ahead for your own death is a good financial move. A funeral can be expensive and you don't want the burden of its expense to fall on your loved ones. There are a number of options when it comes to paying for your funeral, including the use of term life insurance.
According to the Insurance Information Institute, term life insurance is the simplest form of life insurance. It pays out if a death occurs during the term of the policy, which typically runs from one to 30 years.
The death benefit of a term life policy can be used to meet a number of financial obligations, such as mortgage payments or college tuition, or to cover expenses, like the cost of a funeral.
Term life and funeral costs
According to the National Funeral Directors Association, the average cost of a funeral is $6560. This figure does not include a plot, marker or flowers, which often puts the total cost over $10,000.
Here are two ways you can use term life insurance to pay funeral costs:
- Beneficiary. Discuss your funeral plans with your beneficiary, and state that you would like a portion of the death benefit to cover the cost of your funeral. It is wise to name a contingent beneficiary in the event your primary beneficiary passes away. If your situation changes, it is important to update your beneficiaries.
- Funeral Trust. A funeral trust is a legal document that makes your funeral director the beneficiary of a certain portion of your life insurance death benefit, which will be used to cover funeral expenses. The trust legally requires the funeral home to use the money for your funeral expenses.
Paying for your funeral does not have to create a financial hardship for your family. Proper planning and a term life insurance policy can help cover this expense.
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