The Ultimate Guide to Financing Your Funeral

Your first car. College tuition. A wedding. The down payment on your first home. Most of us are aware of—and prepared for—life’s financial milestones. Although these purchases come at different times in different people’s lives, they mark major life changes. They also tend to be happy major life changes, which makes paying for them not quite so burdensome. After all, college tuition or a new family home is an investment in the future.

Funerals are another major financial milestone, but they’re one few of us look forward to reaching. The average cost of a funeral in the United States ranges anywhere from $7,000 to $10,000, making it equal to many of the other items listed above. However, because death isn’t an event most people are looking forward to reaching, few of us have a special savings account set aside for these purposes.

That’s why funeral financing should always be part of your long-term financial plans. It might not be the most exciting plan you make for the future, and it might not benefit you directly, but it’s one of the best things you can do for your loved ones.

Funeral Financing Options

There is no wrong way to plan a funeral. You might want to keep things as simple and low-cost as possible with a direct cremation. You might have a large, traditional burial at the family plot in mind, coming to rest among the countless generations that have come before you. Either option (as well as the huge spectrum in between) is going to cost several thousand dollars—several thousand dollars that someone in your family is going to be expected to pay.

Funeral financing can take almost as many forms as the funeral itself. Which one you choose depends on your financial situation and how far in advance you’re making your funeral plans.

  • Life Insurance: One of the more common ways to finance a funeral is with a life insurance policy that pays out at the time of your death. The money is paid to a beneficiary, usually a spouse or child, who is then free to use the funds as needed. Funeral expenses are often a part of this, especially if the deceased had specific wishes related to the funeral.
  • Burial Insurance: Life insurance policies can sometimes take a few months to be paid out, which is why burial insurance is another popular option. These policies are much less restricted and easy to get, and can be taken out in the exact amount of money needed to pay for the funeral from start to finish.
  • Funeral Pre-Plans: If you’re already making retirement plans and investing your money for the future, it might be worth looking into a funeral pre-plan package. These options allow you to choose a funeral package well in advance of your death. You can then break down the cost for everything from the casket to the gravesite into manageable monthly payments. When added to your other financial planning efforts, this process can be quite streamlined.
  • Funeral Loans: If you don’t make advance funeral financing plans, there are options for your family after your death. Special loans provided through funeral homes allow your loved ones to receive a large sum to cover the funeral costs that they must then pay back over a pre-determined number of years and at a pre-determined interest rate. These tend to act much like any other kind of unsecured loan in terms of payment options.
  • Home Equity/Estate Funds: If you’ll be leaving behind a substantial estate when you die, your loved ones may be able to cover the funeral costs this way. Your estate includes any property you own, your home, your vehicles, your savings account, and any other funds you might have invested. The main drawback on relying on this type of money for funeral costs is that they’re rarely accessible right away.
  • Government Assistance: It’s rare that there will be any government assistance for burial costs. Social Security will pay out a one-time $255 death benefit, but Medicare and Medicaid don’t offer any kind of payout. Most private Health Savings Accounts also restrict their funds for costs incurred during an illness—not afterward. Some veteran’s benefits may help members of the military, but you typically have to apply for these.
  • Crowdsourcing: Although unheard of until recent years, it’s becoming more and more common for families to turn to crowdsourcing to help them defray many of the medical and funeral costs associated with a sudden loss. Funding sites allow you to post a request for monetary assistance that then is spread through social media. In certain situations, this approach can cover all the funeral costs (and then some), but for most families, it’s not a reliable stream of income.

Like retirement planning or saving for that down payment, funeral financing can take on many different forms. Also like retirement planning or saving for that down payment, it’s also a good idea to start early. By taking care of all the costs ahead of time, you can ensure that your death won’t be a burden on those you love.