Discussing your end-of-life wishes and plans with the people you love can be difficult. However, having those challenging conversations now, and making financial preparations like purchasing life insurance, can help your loved ones respect your end-of-life wishes without struggling financially. That way, you can take solace in knowing you’re prepared for the future so that you and your family can focus on spending time together.

Even if you don’t have to worry about replacing your income or paying off a significant expense like a mortgage, funeral insurance can allow you to protect your family from unexpected expenses when you’re gone. You have various coverage options based on your wishes, needs, and budget. Read on to learn how you and your family can use life insurance for funeral expenses.

How can you use life insurance to pay for a funeral?

When you purchase a life insurance policy, you identify a beneficiary who will receive a fixed lump sum, called a death benefit, after you pass away. Your beneficiary or beneficiaries have complete discretion over the funds, meaning they can always apply the death benefit to your end-of-life expenses, or use it to replace income, cover debts, or fulfill another financial need.

Funeral life insurance, also known as final expense or burial insurance, is a type of permanent policy, which means you’ll have coverage through the end of your life as long as you pay premiums. Your premiums contribute to the death benefit and the policy’s cash value, which grows over time. Then, you can access the cash value if needed to cover emergency expenses during your life.

Most permanent life insurance policies have relatively high premiums compared to term life insurance, but larger coverage amounts are often necessary to replace your income after you pass away. However, you may not need that much coverage if you don’t have any dependents. Funeral insurance provides more modest coverage than many other permanent life insurance policies, with payouts of up to $40,000 to cover funerals and other end-of-life expenses.

Types of funeral insurance

Everyone has different end-of-life wishes that depend on their families, beliefs, lifestyles, and more. Likewise, you can choose from many funeral insurance policies and coverage amounts to accommodate those needs. As you decide on the right funeral insurance plan for you and your family, you may want to consider factors like your age, overall health, and budget, in addition to your end-of-life wishes. You can always speak with a licensed insurance agent at Fidelity Life if you have questions or need extra guidance.

Simplified issue life insurance

Simplified issue funeral insurance policies provide coverage quickly with a streamlined application process. Fidelity Life offers people between 50 and 85 up to $40,000 in simplified issue funeral insurance.

You don’t need perfect health to qualify. Instead of undergoing a medical examination, applicants for simplified issue life insurance answer a few  questions about their health history. Insurance companies use that information and data from public databases to determine eligibility and premium costs. The evaluation process typically takes only a few days, and coverage begins as soon as you’re approved.

Guaranteed issue life insurance

Suppose you have a history of severe health complications that could disqualify you from other life insurance, but you still want to secure funeral coverage. In that case, a guaranteed issue life insurance policy could help. Fidelity Life’s RAPIDecision® Guaranteed Issue funeral insurance can provide up to $25,000 in coverage for funerals, remaining debts, and other end-of-life costs.

Like simplified issue funeral insurance, guaranteed issue policies have a streamlined application process. The key difference between the two is that guaranteed issue life insurance has no health requirements at all. Applicants don’t need to undergo medical exams or disclose any medical information.

As long as you fall into policy age requirements, approval is guaranteed. Policyholders have partial coverage for the first three years that the policy is active, so if they pass away in that time, beneficiaries receive a reduced death benefit. At year four, full coverage begins.

Guaranteed issue policies usually cost more than policies with exams or medical questionnaires, but they could be a fit if you have health issues that disqualify you from other types of policies.

Pre-need or prepaid insurance

You could also use prepaid or pre-need insurance to cover funeral expenses. With prepaid or pre-need insurance, you work with a funeral home to determine the cost of your desired end-of-life arrangements. Then, you designate the funeral home as the beneficiary of your life insurance policy. When you pass away, the funeral home receives your death benefit and applies it to your funeral and burial, so your loved ones don’t have to handle the arrangements.

While pre-need insurance offers convenience, it has some notable pitfalls, including:

• No cash value: Unlike funeral insurance, prepaid insurance does not accumulate cash value.
• Risk of non-payment if the funeral home closes: If your funeral home changes owners or closes, your policy might not transfer to another funeral home.
• Payment must go toward funeral costs: Pre-need insurance does not account for your changing financial needs. If you accrue large medical bills or credit card debts before passing away, your funeral life insurance policy can safeguard your family from inheriting the burden. Pre-need insurance, on the other hand, remains tied to your funeral expenses. While it protects your loved ones from struggling to cover the cost of your funeral, they can’t necessarily count on it for other financial needs.

What does funeral insurance cover?

Funeral insurance covers the growing cost of funeral services, as the name suggests. However, several other expenses can emerge when someone passes away, and funeral insurance can help your loved ones cover any of them. Some of those costs include the following:

• Cremation, burial, and internment.
• Preparation of the body.
• Celebrations of life, wakes, memorial services, or other traditions.
• A casket or an urn.
• Flowers.
• Printed materials like prayer cards.
• Religious ceremonies and services.
• Travel for loved ones who want to attend your services but live far away.
• A donation to an organization that’s meaningful to you.
• Remaining medical bills.
• Remaining debts that others might inherit.
• A financial legacy for your loved ones.

Your beneficiaries can decide how to use the death benefit they receive; if you or your family have financial needs not mentioned on this list, a funeral insurance policy can still address them.

How much life insurance do you need to pay for a funeral?

In the United States, the average funeral costs around $9000, but no two funerals are the same. Your funeral expenses depend on diverse factors, including your religious and cultural background, family traditions, and, most importantly, your wishes. Make sure you speak with your beneficiaries about your specific end-of-life desires and plans before you purchase life insurance for funeral expenses. That challenging conversation helps you determine your coverage needs and lets your loved ones know how best to honor your wishes after you pass away.

To calculate your exact funeral insurance needs and find the best policy for you, you can go online to get a quote or call to receive expert guidance from a licensed life insurance agent today.