Does My Life Insurance Pay for My Funeral?

Life insurance policies are meant to be flexible to allow your family to pay for whatever expenses are left at the end of your life. However, one expense that people are often confused about is funeral expenses. It may seem like a simple question – Does my life insurance policy pay for my funeral? 

In reality, many variables affect the answer. These variables include the type of policy, the coverage amount, and the timing of reimbursement. We discuss these variables more below.

Type of Policy: Term vs. Permanent

The type of policy that you purchase is the first variable that affects whether or not your policy will pay for your funeral. There are two main types of life insurance policies: term policies and permanent policies. 

A term policy is a kind of policy designed to provide your family with protection for a specific period of time. When the policy expires, you are no longer covered, and your family does not receive that amount. A permanent policy is a more expensive option, but it provides coverage for your entire life. 

This means that if you have a term policy and your policy expires before your funeral, your family must cover your funeral expenses. If you have a permanent policy, your funeral expenses are generally covered.

Coverage Amount

Another variable that affects whether your life insurance policy will pay for your funeral is the coverage amount, often referred to as the death benefit. Typically, traditional life insurance has a minimum death benefit of at least $50,000 or $100,000. While this is often enough to cover many expenses, some people may have other outstanding debts that the policy is used to cover. For example, someone could have medical debt or outstanding mortgages that use all of the death benefit money. Your loved ones may be liable for all expenses not covered by the death benefit, including the cost of your funeral. 

Timing of Death Benefit Reimbursement

Even if you do have enough coverage for your life insurance policy to pay for your funeral, your family members may still pay for the policy – at least at first. Sometimes, insurance companies may not pay the death benefit right away. It may take them as long as weeks or months to pay out the death claim. This means that your family is expected to pay for the funeral upfront and then reimburse them using death benefits.

How Can I Plan Ahead?

Many people have traditional life insurance and expect it to cover their funeral expenses. In reality, all life insurance policies do not always cover funeral expenses. In particular, term policies that have expired before the person’s death do not cover funeral costs. Additionally, some people may have more debt or costs than their plan can cover, making their loved ones liable for unexpected out-of-pocket expenses. Lastly, some companies may not complete the death claim in a timely manner. Your loved ones are then expected to pay for the funeral upfront using the death benefit later to reimburse themselves. Knowing these factors, you can better anticipate the costs of your funeral for your loved ones.