Your web browser is not a supported version and may not be fully compatible with this website

Understand how life insurance works

Helping to Cover Funeral Costs with Life Insurance

A middle-aged couple are sitting at a desk together looking at a computer screen.

Planning a loved one’s funeral is one of the most emotionally stressful tasks imaginable. And if there’s not a financial plan in place to cover funeral costs, not to mention other expenses and debt that may remain, the experience can feel crippling.

In 2017, the median cost of a funeral with viewing, burial and a burial vault (a vault is typically required by a cemetery) was $8,755.* This large and often sudden expense can be a difficult financial obstacle for some families to take on.

“Life insurance is a simple way to ensure that you don’t leave a financial burden behind for your loved ones,” says Amy Lesch, senior licensed insurance agent with Mutual of Omaha. “It’s a way to responsibly plan ahead so when the time comes, your family can focus on grief and healing, instead of worrying about paying for things.”

There are two common types of life insurance, each suited for different stages of life or levels of risk tolerance.

  • Term life insurance is purchased to provide coverage for a specific period of time. This type of coverage may be used to cover needs like mortgage payments or other debts, providing an emergency fund, or helping pay for a child’s education in the event of your death.
  • Permanent life insurance, such as a whole life insurance policy, provides protection that lasts a lifetime or for the life of the policy. It may be used to cover long- term needs, such as paying for final expenses and other debts, or providing financial support for your family. Whole life can be a popular policy for those whose primary concern is covering funeral costs.

“Make sure you buy a policy that’s structured for what you intend to use it for,” advises Lesch. “Some policies are structured to have a limit on how long they’re good for — they sometimes seem like a good deal because they have a high death benefit for a low cost. Those policies usually don’t have access to cash value nor do they provide permanent protection. For example, some policies are structured to have a really high death benefit for a more affordable cost. Those policies usually don’t have a lot of access to cash value, nor do they provide permanent protection. They’re good for certain situations, but may not give the coverage you need in others.”

In addition to the type of the life insurance policy you purchase, you’ll also want to consider its value. Here are two terms you’ll come across often.

  • Death benefit: Simply put, what your beneficiaries get after you’re gone.
  • Cash value: The amount that may be available through loans or withdrawals while you’re still alive.

As an example, let’s say you have a $25,000 whole life insurance policy and your car breaks down. You can use the cash value of the policy to pay the repair costs for the car while maintaining your life insurance coverage.

The death benefit can be used for more than just funeral costs; it can also help with debts or financial obligations, securing a financial future for your children or grandchildren through a trust, or funding long-term care for your surviving spouse.

By planning ahead and purchasing life insurance with an appropriate death benefit, you can help ensure not only that your funeral expenses will be covered, but your family will be taken care of as well. As you plan for the future, do so with your family’s needs and goals in mind.

“If you are uncertain what you need,” says Lesch, “the best thing you can do is find a trusted insurance agent from a reputable company who understands how life insurance works and will help you find a product that fits your needs.”

Want to start researching policies on your own? You can read more here to learn about the basics of life insurance.


*Source: National Funeral Directors Association.
*This life insurance does not specifically cover funeral goods or services, and may not cover the entire cost of your funeral at the time of your death. The beneficiary of this life insurance may use the proceeds for any purpose, unless otherwise directed.