Does Life Insurance Cover Funeral Expenses?

final expense is a type of life insurance designed to pay funeral costs

Life insurance encompasses several types of insurance, and this can also translate to the extent of what their death benefits may cover.

How Final Expense Relates

It is important to realize final expense insurance is a type of life insurance. It’s often left out of the discussion, but it must be covered in order to have a perspective on traditional life insurance. 

Final expense insurance is a “may, may not, or will” when it comes to complete funeral expense coverage. The “may not” part comes from the bare minimum death benefit of $2,000. This amount will not cover an average funeral cost, not even at the low end. Funeral costs range anywhere from $7,000 to $10,000.

The “may” part of final expense coverage comes into play when purchasing a policy with a death benefit that equals out to funeral costs. If your policy has a death benefit of $7,000 or $10,000, then it may cover the entire funeral expense – but then again, that’s assuming unexpected costs won’t arise.

But in the case of the highest death benefits, then it absolutely will. Keep in mind, $50,000 policies do exist. This can without a doubt cover every possible funeral expense imaginable.

Traditional Life Insurance

Traditional life insurance policies can have death benefits that surpass final expense coverage by a huge margin. As long as you pay your premiums, some life insurance policies could have a death benefit of $500,000. While that is an extreme figure, it does illustrate the extent of which it can cover. Even with a funeral cost of $10,000, a life insurance policy like this would be enough to cover that funeral 50 times over.

So not only can a life insurance policy cover one funeral, it could theoretically cover multiple funerals. This leads to situations involving couples. Whether it’s final expense or any other form of life insurance, it would be advantageous to purchase a policy with a higher death benefit. This can work in both ways: the person who purchases a policy can list his or her spouse as a beneficiary. If that person who purchases the policy dies first, then the funeral is paid for using the death benefit. If that person’s spouse dies first, then that person can borrow against his or her own policy to pay for the spouse’s funeral.

Term Life Insurance Can Go Either Way

Term life insurance can be like other insurance policies, in that there is a death benefit provided as long as premiums are paid. The difference, however, is that the policies are only effective for a certain period of time. This is a term. A term could be 10 years. A term could be 30 years. At some point, after that period is over, that death benefit is no longer existent. Nothing will go to your loved ones. You paid your premiums only to get nothing in return.

But on the positive side of this, these plans can be renewed. Just make sure you renew as soon as possible if your term expires. And in relating this to the previous example of how a couple may be able to make use of a single life insurance policy, this cannot be used in both cases of which spouse passes away first. If the spouse with the policy passes away within the term, then the other spouse can receive the death benefit, and then use those funds to pay the funeral costs. However – if the surviving spouse is the policyholder, then the payment will have to come from somewhere else. Term life insurance can be a disadvantage since it is not a policy one can borrow against.

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