How Does a Final Expense Policy Cover the Funeral Costs

The cost of a funeral isn’t cheap. Although the price may differ from state to state, the average number is between $7,000 and $9,000, with the median being $7,360. If you’re planning for your funeral ahead of time, then it’s a smart choice to make.

If you’re not familiar with how the final expense policy works, read on. You’ll learn how the policies offered by final expense insurance companies work to cover your funeral costs.

1. What Does A Final Expense Policy Cover?

Final expense insurance works as a whole life insurance policy with a small death benefit. This essentially means that the policy remains active as long as you’re alive. The benefits come into play only after your death. In most cases, it’s one of your family members, who receive the lump sum amount. They can use these funds to cover your funeral expenses.

The funeral expenses can be anything from transportation cost to casket to flowers. It depends on how you wish to organize your final rites. The total cost will also determine the monthly premiums.

The way the policy works is simple. Once you sign up for the term plan, you start paying monthly premiums till the maturity date. After you’ve spent all the premiums, you’re now covered for life. No matter when you die, your heirs/beneficiaries will get the financial benefit without obligation.

While life insurance packages offer the same benefit, the main differentiating point is there’s little to no eligibility criteria for final expense policies. Even if you’re suffering from a chronic disease, most insurers will accept you as a policyholder, albeit at a higher rate. But even after this, the policy remains more affordable than life insurance.

2. What is Included in the Funeral Cost?

The insurance company doesn’t plan your funeral cost. It’s you, the policyholder, who determines the price and the company covers the cost.

Planning for your funeral can be complicated. If not planned properly, the cost can quickly go above $10,000.

Depending on your preference, you can expect to pay the following cost:

• Caskets – $2,500
• Funeral home service fees – $2,000
• Vault – $1,400
• Embalming – $725
• Funeral staff cost for the ceremony – $500
• Staff cost for viewing – $450
• Hearse – $350
• Transportation cost – $200
• Printing charges – $150

The above costs are average costs and vary from location to location. You can use the resources offered by FTC to calculate your total funeral cost better.

3. Pre-Need Funeral Expense

When planning for your funeral, you’ll find two options. One is the final expense insurance policy, which is already discussed above, and the other is a pre-need funeral expense policy. This section explains this policy in brief.

Unlike final expense policies, pre-need funeral packages are designed to fund your funeral, even before the need arises. It covers the regular cost like funeral home service fees, merchandise cost, burial service cost, among others. Depending on the particular policy, it may also protect against cost inflation.

But the main difference is the funds go directly to the burial services rather than the beneficiary. If you die, the funds will be transferred directly to an assignee, typically to the funeral home.

They utilize the money to carry out everything from transportation to performing rites to casketing. Your family members won’t have to spend a dime on your funeral.

So when you’re buying a pre-need funeral policy, you’re essentially working directly with the funeral service provider.

When buying a final expense policy, you should read through the agreements and terms and conditions. Most final expense insurance companies are transparent, but some don’t disclose the complication. Thus, they can be misleading, which will create more trouble for your family members once you die. Therefore, only work with trusted agents and companies.