How to Pay for a Funeral With Life Insurance: Step-By-Step

Updated

We can all agree that losing a loved one is painful—and as many say, funerals are for the living. In order to honor our beloved family members, it’s common to plan a celebration to memorialize the deceased. If this is your first time planning a funeral, the sticker prices can come as a bit of a shock.

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According to the National Funeral Directors Association (NFDA), the average cost of a funeral with viewing and cremation is $5,150. Deciding to go with a funeral with viewing and burial can cost double. NFDA reports that funerals with burials typically cost $9,135.

Life insurance is the key to easily paying for a special goodbye for the dearly departed. That’s because you can apply the life insurance payout directly towards the funeral bill. 

Can You Pay for a Funeral or Memorial With Life Insurance?

In a nutshell: yes. Life insurance is something your loved one leaves behind to help absorb any lingering financial burdens. You can use the life insurance payout to cover the memorial or funeral, as well as leftover medical bills, mortgage payments, taxes, and other related costs.  

The life insurance beneficiary has to file a death claim as soon as possible. Typically, life insurance carriers review the claim before issuing funds. The insurer does this to make sure there’s no fraud involved in the claim request.

Claims processing can usually take anywhere from 30 to 60 days. State regulators keep an eye on these turnaround times to make sure beneficiaries receive their death benefits as soon as possible. 

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Steps for Paying for a Funeral With a Life Insurance Payout

The leading reason for Americans to buy life insurance coverage is the high cost of remembrance ceremonies. In fact, it’s been reported that 84 percent of the 266 million U.S. life insurance policyholders actually purchased their protection for this specific reason, according to Statista.

Beneficiaries that want to pay for a funeral with life insurance will need to file a death claim timely. The longer you wait to contact the insurance company, the longer it will take to get the funeral funds. Below are the primary steps you can follow to file your claim. 

1. Locate the life insurance policy

Despite your sadness and grief, you’ll still need to take the time to locate your loved one’s life insurance paperwork. Once you have the policy in hand, then you can notify the life insurer about your family member’s passing. You’ll want to do this as soon as possible so that you are able to pay the funeral home timely.  

Should you be unable to find your loved one’s life insurance file, go to the National Association of Insurance Commissioners (NAIC) website. NAIC makes it easy for beneficiaries to locate missing life insurance plans by using the policy lookup tool on their website. The search feature on the NAIC web page can be used for both life insurance policies and annuity contracts. 

2. Coordinate with the funeral home

Once you know the value of the life insurance plan, you’ll be better able to set a budget for your family member’s celebration of life. For example, if the policy has a face value of $100,000 and the estimated memorial fees will total about $10,000, then you can move forward in terms of planning the ceremony. 

Now you can make an appointment with the funeral home director to get started. It’s best to bring the life insurance policy with you to the planning meeting. The funeral director will want to see if the life insurance policy benefits are “assignable.” This means the death benefits can be issued directly to a third party (like the funeral home) that’s chosen by the named beneficiary.  

Funeral homes usually accept assignable life insurance coverage as payment. So, you can begin selecting caskets, flowers, and headstones while the funeral director works on filing the life insurance claim.  

As an aside, mortuaries aren’t able to accept 401(k) or retirement benefits as payment since they aren’t “assignable.” This is yet another reason that life insurance protection is so beneficial. It’s truly the best way to give your loved one an amazing celebration of life.

3. File a life insurance claim

Should you decide to file the life insurance claim on your own, you’ll need to reach out to the life insurance carrier via phone or online through the company’s website. When in doubt, read through the policy paperwork for instructions on how best to file your death claim. The quicker you file, the faster your payout will arrive.  

Expect the life insurance company to ask for these details about your loved one:

  • Full legal name 
  • Date of birth and date of death
  • Social Security number
  • Life insurance policy number
  • Cause of death 
  • State of residence

The claim will also require a certified copy of the death certificate, which can be obtained from the funeral director, the office of vital records in your county of residence, or the coroner if necessary. In addition, you should expect the insurance company may also request more details about you so they can confirm you are, in fact, the beneficiary.  

Be aware that filing a life insurance claim without the proper documents can result in a processing delay. It’s best to give the insurer all the details they require upfront so as to avoid dragging out the claims review.

Frequently Asked Questions: Paying for a Funeral With Life Insurance

Read on to clarify any lingering questions about paying for a funeral with life insurance.

Does the beneficiary of a life insurance policy have to pay for the deceased’s funeral costs?

Here’s the bottom line: no family member can be forced to pay for memorial or funeral costs. This is true even if you’re the beneficiary of your loved one’s life insurance plan. You can only be held legally responsible for payment if you sign the funeral home’s service contract.  

Listed below are different ways to pay for the deceased’s funeral costs besides using life insurance proceeds: 

The estate pays

Legally speaking, the memorial or funeral bill can be paid by the deceased person’s estate. Any assets the departed person had, like property and bank accounts, should be liquidated and the proceeds paid towards the funeral costs. 

You pay

Or the funeral home may ask you to make a down payment towards the total cost as a good faith gesture. Once the life insurance benefits are paid, you can be reimbursed in kind. Another option would be to make payment arrangements with the funeral home. 

Crowdfunding pays

In situations where the deceased has no assets, the funeral costs are assigned to the estate’s administrator or executor. The executor is assigned per the departed’s will or by the probate court when there’s no will. Normally the closest living relative will be put in this role.  

Again, the executor can’t be forced to pay for the funeral out of their own pocket. Rather, the executor may raise money through crowdfunding or by asking other relatives. The executor also has the option of selling some of their loved one’s assets, if available. 

Advanced funding company pays

As you know, memorial services are usually held within a week or two of a loved one passing away. Life insurance companies usually take a little longer than that to issue death benefits. So, the funeral parlor may recommend you use an advanced funding company to cover the costs while waiting on the life insurance payment. 

If you opt to use an advanced funding company, you’ll file an assignment request with the company and they will verify the life coverage is valid. Once the advanced funding company confirms there are no liens or other setbacks, you’ll receive a payment towards the funeral bill. Generally, the process will take a few days. 

How long does it typically take for a life insurance company to pay a funeral home?

State insurance regulators expect life insurers to process and pay claims within 60 days of filing. However, many insurance carriers process uncomplicated death claims within 6 to 8 weeks. There may be a few situations that will trigger a deeper investigation by the insurer, thus slowing down the payout. 

These are the type of scenarios that may cause a lag in payment: 

  • Beneficiary dispute: Named beneficiary is a minor child, ex-spouse, deceased, or recently added to coverage.
  • Cause of death: Homicide, suicide, death by a high-risk activity or illegal activity.
  • Missing documents: No original certified death certificate, or an incomplete claim form. 
  • Contestability clause: Insured passes away within two years of the policy becoming effective.

Will funeral homes or funeral directors typically wait for life insurance payments?

Funeral parlors tend to wait for the insurer to issue payment if the policy is “assignable” to their organization. Although waiting is a common practice, it’s a good idea to confirm with the funeral home regarding this practice. Funeral homes that won’t wait on life insurance typically ask at minimum for a down payment on the memorial services or will offer a short-term payment plan. Don’t be afraid to ask the funeral director for guidance.   

Paying for a Funeral With Life Insurance

It’s tough to juggle overwhelming grief while planning a memorial or funeral. Worrying about the financial impact of losing your loved one can make you feel even more intense. The fact is that life insurance coverage can make paying for a departed’s celebration of life much easier.


Sources: 
  1. “Leading reasons for owning life insurance in the United States in 2020.” Statista.com, 24 June 2020, statista.com/statistics/381073/reasons-for-owning-life-insurance-usa.
  2. “Statistics.” NFDA.org, 18 July 2019, nfda.org/news/statistics.
  3. “Total number of life insurance policies in force in the United States from 2008 to 2018.” Statista.com, 5 November 2020, statista.com/statistics/207651/us-life-insurance-policies-in-force.

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