Funerals can be costly. The national median cost of a funeral with a casket, vault and viewing was $8,755, according to the most recent data from the National Funeral Directors Association. Fortunately, there are potentially several ways to pay for a funeral. Here’s a look at some of the most common ways.
Options if you’re able to plan ahead
Planning to have funeral funds can help alleviate financial stress and other burdens on a grieving family.
How to pay for a funeral with life insurance
Life insurance is a common way to pay for a funeral and it may be more affordable than you think.
Term life insurance is good for people who want to cover a specific financial obligation, like paying off a mortgage. You pick the amount of coverage you want and the length of the term. For example, you might choose a $500,000 policy for a 20-year term. If you die within the term, your beneficiary will receive the face value of your policy. This money can be used by the beneficiary to pay for a funeral. But keep in mind, if you outlive the term there is no death benefit paid out.
Whole life insurance is a policy that builds cash value at a predictable rate, the premiums stay the same and the amount of the death benefit is guaranteed to your beneficiaries.
For example, if you choose a $500,000 whole life policy, your beneficiary will receive that amount when you die. Whole life insurance is typically among the more expensive forms of life insurance.
Burial insurance:This generally refers to a whole life insurance policy that’s meant to cover funeral expenses. Burial insurance is also called “funeral insurance,” “final expense insurance” and “end of life insurance.” It’s typically purchased with coverage in the range of $5,000 to $20,000.
Pre-need plan: Pre-need plans typically come in two forms -- life insurance policies or pre-need contracts with funeral homes that use a trust for funeral expenses. Generally, you’ll work with a funeral home to lock-in the prices for arrangements you want, like the casket, flowers and funeral service. The pre-need plan payout goes directly to the funeral home, not your family. Pre-need plans can be a good choice for people who know the exact funeral arrangements they prefer, and want a way to pay for them.
How to pay for a funeral using other options
If there’s no funeral insurance, the estate of the person who died typically pays for funeral expenses. The money could come from a checking or savings account, investment accounts, or from sale of personal property. The executor of the will is responsible for releasing the funds to pay the funeral home.
If the estate doesn’t have enough money to cover a funeral, the person who signs the funeral contract is responsible. For example, if the funeral cost $8,000 but the estate only has $5,000, the person who signed the funeral contract needs to pay $3,000.
Here are some other ways to pay for funeral expenses.
Payable on death (POD) account: A POD account is typically set up with a bank or credit union and your beneficiaries receive the money only after you die. Your beneficiary cannot access the money while you’re alive, but you can add or withdraw from the account at any time. PODs are sometimes called a “Totten Trust.”
Funeral trusts: A funeral trust typically refers to an agreement where you set aside funds for a funeral and name a trustee. After you die, the trustee will withdraw the funds to pay for the funeral.
Irrevocable trusts: An irrevocable trust can be set up to pay for funeral expenses and won’t be counted as an asset toward Medicaid eligibility. An irrevocable trust can reduce your Medicaid-eligible assets up to $15,000 ($30,000 for married couples).
Savings accounts: You can pay for a funeral with a regular savings account, but keep in mind that the money could be tied up in probate. (A “payable on death” account, explained above, will avoid probate.) You could set up a joint savings account with the person who will handle funeral arrangements and give them rights of survivorship on the account. Keep in mind, this person will have access to the money while you’re alive, too.
Veterans benefits: If you are a veteran, you can be buried in a national cemetery for free. Spouses and children of veterans may also qualify. Contact the Department of Veterans Affairs for more information.
How to pay for a funeral when there’s no money
If someone did not set aside funds for a funeral, or you’re short on funds, here are options.
Social Security: A one-time lump sum payment of $255 is paid to a surviving spouse if they were living with you. If the spouse was living apart from you, they may still be eligible. Check with the Social Security Administration for eligibility rules. If you do not have a surviving spouse, the payment can be made to a child.
Government assistance: If you cannot afford funeral expenses, you may be eligible for government assistance. Your state may offer burial and funeral assistance at the county or municipal level. Funeralwise has a list of programs by state.
Loans: You could potentially get a loan from a bank, credit union and other lender. Funeral loans are typically personal loans that do not require collateral, such as a lien on a car. However, they tend to carry high interest rates.
Victim compensation fund for violent crimes: Some states have compensation funds to help pay the funeral costs and other expenses for victims of violent crimes. The National Association of Crime Victim Compensation Boards has a directory of each state’s crime victim compensation program.
Crowdfunding: Crowdfunding (also called crowdsourcing) typically refers to raising money by getting donations from the general public. You might seek donations from churches or other organizations, or through an online fundraising campaign. Many people have raised money on sites like GoFundMe to help pay for funerals.
Is it cheaper to be cremated or buried?
It’s generally cheaper to be cremated. The national median cost for cremation with a viewing costs $6,260, versus $7,360 for a burial with a viewing, according to the latest data from the National Funeral Directors Association.
Can I rent a coffin?
You can rent a coffin. If you’re planning for a cremation or want to use a less expensive coffin for the burial, but would like a fancier coffin for a viewing, you may be able to rent one from the funeral home.