Americans will pay almost $8,000 for their funeral, according to the National Funeral Directors Association. Do you have the money ready to pay for funeral services? Many people worry about financing a funeral in the untimely death of a loved one.
There are several ways to pay for a funeral, including insurance policies, loans, or prepaid plans. Funerals are stressful enough, without having to worry about funeral expenses.
Here’s the process of financing a funeral.
Financing a Funeral Begins With Insurance Policies
Life insurance policies are one of the many ways people pay for a funeral, whether it’s a traditional burial service or to cover cremation costs. Upon death, you receive a lump-sum payment from the insurance company for a set amount. While you can use this money for various things, including mortgage payments, college tuition, or to pay off bills, you can use it for funeral expenses.
The process of buying life insurance begins when you are young. You consider how much you’ll need to cover any expenses, then pay the premium each month. The higher the amount of money you want your family members to receive upon death, the larger premium you will pay.
You may also consider burial insurance as a separate policy.
For just a few dollars a week, you can get a policy for up $25,000. Some funeral homes also sell burial insurance policies. Many employers also offer insurance policies, which they deduct right from your paycheck.
Some insurance policies require a medical exam or questionnaire, and others don’t. It’s best to check with your insurance agent before signing any paperwork.
Loans
When a loved one dies unexpectedly, you might have to take a loan to cover the cost of funeral services. Funeral loans come in several forms. The interest rate will vary depending on your credit score.
Personal Loan
Funeral loans, or personal loans, are available from banks, credit unions, online lenders, and even credit card companies. Talk with the lender about how much you need, and then you pay it back after the funeral services over a set period.
Banks consider many personal loans as unsecured debt so that you may pay a higher interest rate.
Home Equity Loan
You can use the equity in your home to cover funeral expenses. If your home is worth $250,000 and you owe, but you owe $200,000, you have $50,000 in equity to pay for funeral expenses.
Interest rates are lower for a home equity loan because you use your house as collateral.
Credit Cards
Sometimes, a credit card could be a good answer to financing a funeral. For example, if you are splitting the funeral home costs with other family members. You might only owe a small portion, and you could take a loan on your credit cards.
Check with the credit card company about your financing options. You could score points, which may benefit you in the long run.
Prepaid Funerals
Many funeral homes sell prepaid funeral plans. You can pre-pay the cost of your funeral in advance of your death.
It’s best to find out what the prepaid plan will cover. For example, if you live in one state but want your final resting place in another, that might bring an additional cost.
You can also lock in prices on many things. If the costs rise, you won’t be responsible.
Many people find this option most desirable. A prepaid funeral means you won’t burden your family or loved ones with worrying about burial costs. You can also pick out all of your final arrangments so that nothing is left for discussion.
There will be no arguments or disagreements with your family about your decision. Upon your death, your family can focus on grieving and healing rather than worrying about the funeral.
Payable-On-Death Account
A payable-on-death account is an account you set up with a bank or credit union. When you die, the money goes to your beneficiaries.
As long as you live, it’s your money. Your beneficiary will have no control over the money until you die.
Should you choose to spend the money differently before you pass away, you are free to do so without penalty.
Pay With Cash
If you have the money available, it’s best to pay the money upfront to the funeral home. When the funeral director doesn’t have to deal with banks, credit unions, insurance companies, or other sources of income, they may give you a better rate.
Paying with cash saves you interest and hassle and can quickly settle your debt. You can write a check to the funeral and be on your way.
Crowdfunding
When someone dies at a young age, their death is not something you typically expect. Family members often struggle to come up with the money for funeral expenses.
Crowdfunding is an online fundraiser. All you have to do is set up an account, post a few pictures, and then tell the story of your loved one. You can explain your situation and ask for a donation.
Thanks to social media coverage with likes and shares, you can quickly raise money. People can donate with their credit cards, and donations can come from all over the country.
Some truly tragic events can also garner traditional media coverage on local television and newspapers. You can reach people who do not use social media.
You can also use any extra money from the crowdfunding site to help pay for medical bills you may incur.
Your Guide To Financing a Funeral
Financing a funeral can be done using insurance policies, loans, or prepayment. You can also set up a payable-on-death account, use cash, or set up a crowdfunding site online.
Don’t stress over the payment for the funeral of a loved one. As you can see, there are several options at your disposal for all income types.
If you want to read about covering the costs of a funeral or options to streamline a funeral, find more on our website.