How To Pay for a Funeral on an Installment Plan
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Aug 10, 2024
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Three years ago, Larry Refsland, who works at a marketing company in
Northern Minnesota, experienced the deaths of both his mother and mother-in-law
in the same year. Since their passing, Larry has reflected a lot on the
differences between the two funeral experiences. “After my mother-in-law's
funeral, we owed $9,000," he says. “After my mother's, we owed
nothing."
While both women had lived in the same rent-controlled housing and were on
the same fixed monthly income, Larry's mother made monthly funeral payments on
prearranged services. Larry's mother-in-law, on the other hand, had no such
plans, and her family had to cover the bill for her funeral expenses on the
spot.
Choosing a prepaid funeral plan and making monthly payments can ensure
your family and loved ones don't find themselves in a similar situation.
In this article, you will learn:
The different ways to
pay for your own funeral, cemetery or cremation expenses in advance
How prepaid funeral
plans work
How much prepaid funeral
plans cost
What prepaid funeral
plans cover
What happens if you miss
prepaid funeral payments
If prepaid funeral plan
payments affect your ability to qualify for Medicaid
How to pay for a funeral or cremation
According to the National Funeral Directors Association, the median
funeral cost in the United States in 2019 ranged from $6,645 for a cremation
with a viewing and memorial service to $9,135 for a funeral with a viewing,
service and vault. When cemetery costs are factored in, the total median cost
of a funeral can exceed $10,000. Even simple cremations with no service can
exceed the savings a family has on hand. (Read our full coverage on funeral,
cemetery and cremation costs here.)
Especially when coupled with the grief of losing a loved one, it's
important for each one of us to document and fund funeral plans in advance to
relieve the financial and emotional burden as much as possible.
The bottom line: When you pass away, your family is responsible for
your funeral, cremation and cemetery costs. Besides paying with cash on hand,
there are just a few options available to pay for these expenses: prepaid
funeral plans, life insurance, veterans benefits, or a few last resort options
at the time of need.
Paying for funeral expenses with prepaid funeral plans
Because funeral homes, cremation providers and cemeteries don't typically
offer payment plans at the time of need, most offer monthly payment plans in
advance in the form of prepaid funeral and cemetery arrangements (also called
pre-need funeral plans). Prepaid funeral and cemetery plans take the financial
burden and emotional guesswork out of a difficult time in life. Plus:
- You get a price guarantee that
protects against rising costs and inflation. Prices for products and
services can be locked in at today's rates. When needed at the time of
death, your loved ones won't pay extra.
- You remove a financial and
emotional burden from your loved ones. Families tell us that funeral
planning can be incredibly overwhelming when grieving, and that having a
plan to follow makes a huge difference.
- Affordable monthly payment
plans make it easy to budget for final expenses that are incurred by
all of us. Payment amounts differ based on terms, funeral wishes and age.
- Peace of mind. When your
wishes are in writing, and your product and service selections have
already been made, you give your loved ones the gift of saying goodbye
without the extra stress of trying to guess what you would have wanted.
There are no rushed decisions and you can learn about your options in a
relaxed environment.
- Relocation flexibility. With Dignity
Memorial providers, prepaid funeral and cemetery plans can be
transferred to other Dignity Memorial funeral homes or cemeteries if
you move more than 75 miles away, although some restrictions apply.
Typical objections to prepaid funeral plans:
- Funeral homes, cremation
providers and even cemeteries can go out of business. State governments
will protect families in these unfortunate situations. However, when
selecting a Dignity Memorial provider, your money is kept safe by a third
party (an insurance company or a trustee, not the funeral home) until the
time of your funeral. Then it is given to the funeral provider at the
time of death to cover your funeral expenses.
- There isn't flexibility when
relocating. Although this may be true for most funeral providers, when
buying from a Dignity Memorial provider, prepaid funeral and cemetery
plans are easily transferred between one of our 1,900+ locations in 47
U.S. states, Canada and Puerto Rico when you move more than 75 miles
away.
- You can earn more money in a
different investment. While the stock market or other investments can
potentially offer better returns, it's too risky for most people who
count on these funds to be there when they need them. Plus, access to the
deceased's bank accounts and investment funds isn't a sure bet
immediately upon death. With a prepaid funeral plan, the money is secured
by an insurance plan or trust and is made available immediately upon
death.
Paying for funeral expenses with a
life insurance policy
If you carry life insurance, it may cover some or all of your funeral and
the burial costs. The downside is that life insurance can take a month or
longer to pay out, while you will be billed before the funeral takes place. It
also does nothing to make your final wishes known to your loved ones, and
leaves them with the difficulty of selecting a provider and making detailed
arrangements during a time of grief.
Also, families often misunderstand their life insurance policies, and can
be disappointed when they have expired or don't provide the coverage they
expected for final expenses.
Term life insurance is a temporary insurance policy with an
expiration date, usually between five and 30 years. If you die during the term
of the insurance, your beneficiaries receive a pay out. It is most often
carried by adults in the prime of life with dependent children or mortgages.
Most older adults either do not qualify for term life insurance due to medical
exam requirements, or the premiums are too expensive. If you believe your final
expenses will be covered by a term life insurance policy, please check your
policy to ensure that the premiums are current and it is not expired.
Whole life insurance is designed to cover income replacement and
end-of life expenses like funeral costs and medical bills. As long as the
premiums are paid, it covers you until you die. Premiums are typically higher
than term life insurance, while the fixed pay-out amounts are usually lower.
Health conditions can still prevent some older adults from qualifying, but
instead of a medical exam it just requires medical questions to be completed
during the application process.
Final expense insurance is a specific type of whole life insurance,
also called burial insurance or funeral insurance, which pays a lump sum upon
death and is specifically designed to cover funeral costs. It isn't intended
for income replacement like other life insurance products. If you don't know
what you want for your funeral, or can't bring yourself to discuss your wishes
with a funeral provider, it is a good alternative to buying a prepaid funeral
plan. But it doesn't lock in prices like a prepaid funeral plan does, nor does
it help your family make the funeral arrangement process easier. Families
sometimes find themselves with an insurance pay out that doesn't cover the
complete funeral expenses.
None of the above will pay out in time to pay a funeral home bill. A
family would need to pay the bill another way and wait for one of these plans
to pay out and then reimburse themselves.
Paying for burial expenses with U.S.
veterans benefits
For U.S. veterans in 2020, the U.S. Department of Veterans Affairs will
pay a $300 burial allowance and $780 for a plot (for a nonservice-related death
outside a VA hospital) or a $796 burial allowance and $796 for a plot (for a
nonservice-related death at a VA hospital). However, these benefits are not
automatic and they apply only when the veteran is being buried in a national
cemetery. Even then, these allowances are usually not enough to cover all
expenses, so veterans benefits usually need to be combined with cash or another
type of coverage plan.
Last-resort options for paying for
funeral expenses
The remaining alternatives for paying for funeral expenses are usually a
last resort when death has occurred and there is no cash on hand.
A credit card. High interest rates make this not a great solution,
but some families do take this route.
A bank loan. If you have good credit and are comfortable with taking
on debt, you can apply for financing at a bank or credit union. This can take
time when time is of the essence.
A family pool. Family members can come together and pool their money
to help with funeral costs. Some families turn to crowdfunding sites like
GoFundMe to make this process easier.
Frequently asked questions about the
prepaid funeral cost breakdown
Understanding prepaid funeral costs doesn't have to be difficult. Here we
answer a few questions.
How much do prepaid funeral plans cost?
Because prepaid funeral, cemetery or cremation plans set aside funds for
specific products and services, the amount of the plan doesn't exceed the
actual planned cost of the funeral. Unlike insurance plans, you stop paying
your monthly payments when the plan has been fully funded. Prepaid funeral
plans usually start in the low thousands and range up from there, depending on
your wishes. They are usually payable over 3 to 10 years.
What do prepaid funeral plans cover?
A prepaid funeral plan is created by you, so it covers the things you
decide are important. You can plan a simple gathering or a grand event. For
traditionalists, it can include embalming, a premium casket, flowers and
catering, and cemetery property. Or you could elect for a simple cremation and
a mausoleum niche for your ashes. When you meet with a pre-planning
professional, you'll learn about all of your options. Make an appointment.
What happens if you miss a prepaid funeral payment?
A prepaid funeral plan is similar to car insurance in that if you miss a
payment, you receive a lapse warning. After 90 days of nonpayment, your plan
may be cancelled. If that happens, you would still be able to use that money to
fund future arrangements, but you would lose any price protection.
Do prepaid funeral plan payments affect your ability to qualify for
Medicaid?
When you buy a prepaid funeral plan, it is generally excludable for the
Medicaid spend-down process. Unlike traditional insurance, it won’t affect your
ability to qualify for Medicaid. However, many states limit the amount you can
put into a funeral plan to between $5,000 and $15,000. Please discuss any
concerns with your pre-planning professional and your Medicaid
caseworker to make sure your needs are met.
What happens if my prepaid funeral,
cemetery or cremation provider goes out of business?
At Dignity Memorial, your money is kept safe by a third party (an
insurance company or a trustee, not the funeral home) until the time of your
funeral. Then it is given to the funeral provider to cover your funeral
expenses at the time of need.
What happens if I move?
When buying from a Dignity Memorial provider, prepaid funeral and cemetery plans are easily transferred between one of our 1,900+ locations in 47 U.S. states, Canada and Puerto Rico when you move more than 75 miles away.
Planning a funeral ahead of time
We recognize that funeral arrangements and associated expenses can be
overwhelming. By preparing in advance, you provide a sense of relief, peace of
mind and comfort for your loved ones while ensuring your wishes are met and
your budget is maintained. When you pre-plan a funeral you honor both yourself
and your family.
- To view the original version of this article visit www.dignitymemorial.com/pre-planning/funeral-costs/payment-plan
- Seniors Blue Book was not involved in the creation of this content.
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