When a loved one passes away, the last thing anyone wants to worry about is how to finance a funeral. However, funerals are a business like any other and, in 2012, the U.S. Census Bureau reported that the funeral industry generated over $16 billion in revenue and employs over 141,000 people. In fact, funerals with a viewing and burial in 2021 cost around $7,848 on average while funerals with cremation cost approximately $6,971 on average. With funeral costs continuing to rise, a life insurance policy will become more important than ever as it provides a way to help cover the costs of a funeral and can be purchased in advance so your family can focus on grieving. Understanding the costs associated with a funeral can help you decide how much life insurance you might need to ensure your family is not unnecessarily burdened after your passing.
- According to the National Funeral Directors Association, the average cost of a funeral ranges from $6,971 to $7,848 as of 2021.
- Funeral homes employ over 141,000 people and serve an average of 113 families each per year.
- Life insurance could provide your family with financial security and the money needed to pay for your funeral.
Funeral costs to consider
There are many fees associated with a funeral:
- Basic service fee: This is a standard service fee that is associated with a funeral. This covers the cost of planning fees, including any permit and administrative fees.
- Service and merchandise fees: These cover things like transporting, preparing and embalming the body, as well as funeral home fees for the viewing or memorial and any equipment or services required for the graveside service. You will also need to pay for a casket or burial container or the required services needed for cremation or interment.
- Cash advances: There are some services that your funeral may handle for you, such as funeral flowers, clergy and organists. You may pay an added service fee or marked-up prices to account for the funeral home’s efforts, but per the Funeral Rule, these extra fees must be disclosed to you in writing.
The average metal casket costs about $2,500, while premium caskets made of mahogany, fiberglass, wood and plastic can all cost as much as $10,000.
Some buyers purchase a casket independently, to avoid third-party markups. However, you will be responsible for shipping the casket to the funeral home, which may be expensive. If you choose cremation, you can avoid the cost of a new casket. Most funeral homes will rent you a casket to use if you plan on holding a viewing or for the funeral as a more cost-effective option if you have other burial plans.
These are some of the average costs you may incur for a funeral, according to 2021 data from the National Funeral Directors Association (NFDA).
- Funeral service fee: $2,300
- Funeral home rental: $450
- Funeral home staff for viewing: $450
- Funeral home staff for ceremony: $515
- Vault: $1,572
- Cremation casket: $1,310
- Embalming: $775
- Urn: $295
- Cosmetic services: $275
- Hearse: $350
- Transportation of remains: $350
- Transportation for the family: $150
- Pamphlets and materials: $183
The Federal Trade Commission provides a funeral pricing checklist to help you navigate the process.
Average funeral costs by state
Every year, the NFDA publishes its General Price List Survey. These are the results of their latest 2021 report:
2021 NFDA average funeral costs by state
No matter where you live, cremation is cheaper than a burial, although some areas are certainly cheaper than others. If you live in states like Colorado or Oklahoma, you will pay significantly less than those who live in Kansas or North Dakota.
How to prepare for funeral expenses
For many, death comes without warning, and while loved ones are mourning, they also must face the question of how to pay for such an enormous unexpected expense. That is why financial planning is so important before you die. As you are considering the best way to give your family a peace of mind, you may be asking, “Does life insurance cover funeral costs?” Along with life insurance, there are a number of ways to prepare for funeral expenses.
Life insurance policy
A life insurance policy is an easy way for you to contribute to your funeral expenses while you are still alive. Though it sounds morbid, we all die. A life insurance policy can be a way to help your loved ones after you are gone by prepaying your funeral costs through your monthly premiums.
The benefit of a life insurance policy is that you will pay a monthly premium and your beneficiaries will receive a death benefit at the end. The benefit can help cover any debt you may have and also help to pay funeral expenses so that it can relieve them from the burden. Additionally, most beneficiaries will be able to access the benefit within one or two weeks after the insurance carrier reviews the claim and finds that everything is accurate.
There are different types of life insurance policies to help you plan for end-of-life expenses. Term life insurance provides coverage for a limited time period at a fixed premium rate. Whole life insurance guarantees insurance for your entire life given the fact that premiums are paid to the maturity date. It also offers additional savings components to beneficiaries. If you want lifelong coverage and a diverse portfolio, whole life insurance may be good for you. However, it can be pricey and a big commitment.
Final expense insurance
Final expense insurance can also be used to cover funeral expenses. Beneficiaries can also use the benefits for other costs as well such as medical and legal fees. Elderly individuals may find final expense insurance most attractive to offset the funeral expenses as this type of insurance is typically more readily available to older people. However, it does cost more for the benefit received since a payout is much more likely, and coverage limits are typically capped at a relatively low number.
Traditional savings account
You can use a traditional savings account for funeral costs. The advantage of a savings account is that the money will be kept safe and generally accessible. However, probate can cause delays, so whoever is paying for the funeral may have to pay for the funeral through another means until the deceased’s assets are evaluated.
Payable-on-death (POD) account
A payable-on-death (POD) account can be a better bet than a traditional savings account. This allows you to set up a special funeral savings account. You appoint the person you want to control the funds after you die, and that person can then access those funds simply by showing a valid death certificate. Funds can be accessed immediately as soon as the beneficiary shows the death certificate, and the account does not need to go through probate.
Military burial benefits
Military members are eligible for special burial benefits, while others may opt for a bank loan or prepaid plan through their chosen funeral home.
You can also look into military benefits such as the death gratuity program. This program costs up to $100,000, which is tax-free, for those who die on active duty or while serving certain statuses on reserve.
There is also a burial allowance benefit for death that is not related to service which is $300 and $2,000 for a service-connected death.
No one knows what will happen to them and death is not something that is foreseeable. However, you can make funeral arrangements in advance to help plan for the future.
A will is one way to prepare. The will can designate how your funeral should be conducted and information about how to pay for funeral services. The will can also designate certain assets that you may leave behind so your assets go to the right people.
Advanced funeral planning can make it easier to plan financially for you and your loved ones. For example, if you have a large number of assets, you can state in your will that you would like to have one of your assets sold by a specific person in your family to pay for your funeral expenses. You can also provide details about what you want your funeral to be like.
How to keep funeral costs affordable
Even if you have undergone financial planning or purchased life insurance to cover your funeral costs, it is important to still consider what expenses are worth the price. If you feel that there are other expenses that will take priority over an extravagant memorial service once you are gone, you may want to consider how to keep these expenses low and let your family know about your wishes. Luckily, there are a few steps you can take to make sure you are keeping funeral costs for yourself or a loved one affordable.
- Shop around for the best price. Just like with anything else in life, shopping around for the most affordable funeral expenses can help you save money in the long run because not all funeral homes will be the same.
- Choose cremation and provide your own urn. Although cremation costs are typically cheaper than embalming and burial and are therefore a great cost-saving alternative, purchasing or obtaining a container to use as an urn ahead of time can save you a few hundred dollars.
- Consider donating your body. In the name of advancing healthcare technology and scientific research, some medical schools will cover expenses related to acquiring your body after you die for the use of medical research — a great way to help scientists understand the impact of various diseases and other conditions on the human body.