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How to Use Life Insurance to Pay for Funeral Expenses

Life insurance is a wonderful financial cushion for your family after you die.

It helps them not think about the monetary ramifications of your death, which is especially comforting if they are depending on you for financial security.

A lot of people might have a vague idea that a life insurance policy helps your family pay for your funeral expenses.

But, exactly how?

Explaining the Purpose of Life Insurance

Life insurance is meant to give financial coverage upon your death (though some policies allow you access to the funds while you are still living).

The life insurance company pays a lump sum to your chosen beneficiaries. Your beneficiaries can use the money for anything they wish for, including your funeral expenses.

If the beneficiaries choose to use the death benefit of your life insurance policy to pay for your funeral, they have to look for a viable funeral home and settle the costs themselves.

There are methods, however, that will save your loved ones the trouble of looking for a funeral home, and calculating and paying the costs while they are grieving.

The Policyholder Assigns the Payments

If you choose life insurance to pay for your funeral, you can assign benefits directly to the funeral home.

As a policyholder, you have the option to assign a funeral home as the primary beneficiary of your policy.

Most funeral homes accept life insurance policies as payment. But before you make arrangements with a funeral home, it’s best to verify the terms of your policy assignments with the insurance company.

When you assign benefits directly to a funeral home, the costs of your funeral are prepared. This method leaves your family little to no responsibility to take care of the funeral costs concerns.

If this is the method you use, the remaining proceeds will be targeted for other beneficiaries you name on the policy.

As the policyholder, you assign beneficiaries through the life insurance carrier.

The Beneficiary Assigns the Death Benefit

If for some reason, the policyholder didn’t assign a funeral home as the main beneficiary of his policy, the beneficiaries can do it.

A life insurance policy beneficiary can fill out an assignment form directing the death benefit towards the funeral home.

The remaining benefit is given back to the actual beneficiaries once the funeral expenses are settled.

The forms needed for a beneficiary assignment are available through both the insurance company and the funeral home.

The beneficiary can directly approach a funeral home, settle the funeral costs, and ask for a beneficiary assignment form.

If this is impossible, the beneficiary can reach out to their life insurance agent to provide the necessary documents.

The Beneficiary Meets with a Funeral Home

Another method a beneficiary can use is to bring the policy documents and information when meeting with the funeral provider.

The funeral provider can handle all the necessary paperwork to claim the death benefit on the beneficiary’s behalf.

The funeral provider settles the expenses and the rest of the benefit is returned to the grieving family.

Advance Funding is an Option

If you are the beneficiary but didn’t manage to assign a funeral home as the primary beneficiary, you have another option: advance funding companies.

Advance funding companies offer the policy beneficiaries an advance on the death benefit.

Why is advance funding a great option to pay for funeral expenses? Payouts of a death benefit take time to process.

Once a claim is filed, the insurance provider has to review the death certificate and investigate the request.

They have to check their records if the claim is valid, or how many beneficiaries are named so they can distribute the benefit accordingly. This process can take time, sometimes even weeks or months.

When dealing with a funeral home, you need to have cash on hand as most funeral providers expect payment upfront.

An advance funding company is helpful if the family needs the money quickly after the death of the policyholder.

The beneficiary files an assignment request with the advance funding company. The company then validates the policy’s effect and makes sure that there are no complications.

As soon as the verification process is complete, the beneficiary receives the needed cash to pay the funeral home.

Know Your Options, Speak with Your Life Insurance Agent

When planning something as significant as a funeral, it’s important to be well-informed of your options.

Speaking to your life insurance agent is an effective way to know what the beneficiaries can do with your policy benefits.

By knowing all your options, you can lessen your family’s grief by taking care of the financial strains a funeral puts on grieving loved ones.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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