Assignment of Benefits for a Funeral: How to Use Life Insurance to Pay the Funeral Home

An assignment of benefits lets a life insurance beneficiary tell the insurer to pay part of the death benefit directly to the funeral home. The family can then hold the funeral without paying the whole bill up front while the claim is processed. Not every funeral home offers it and not every policy allows it, so ask the funeral home and the insurer before you sign anything.

What is an assignment of benefits for a funeral?

An assignment is a general legal idea: one party, the assignor, passes a right to another, the assignee. Here, the beneficiary of a life insurance policy passes the right to some of the death benefit to the funeral home. The insurer then pays that amount to the funeral home, and the rest, if any, to the beneficiary.

Families use it because life insurance rarely pays quickly. Texas, for example, requires insurers to pay within two months after proof of death and a verified beneficiary, and the Funeral Consumers Alliance says most funeral homes expect payment in full up front. An assignment fills that gap.

It isn't the same thing as a pre-need plan. With pre-need insurance, a person buys a policy in advance, often through a funeral home, to pay for their own funeral. The Funeral Consumers Alliance cautions against it because premiums often equal or exceed the payout. See pre-paid funeral plans if you are comparing those.

Does the funeral home have to accept one?

No. The FTC says plainly that its Funeral Rule "does not address the manner or timing of payment." That is between you and the funeral home. Some accept assignments, some use an outside company to handle them, and some want payment before the service. Ask when you first call, before you choose a home.

If you are comparing homes, you still have the Funeral Rule rights that do apply, including prices by phone, the General Price List, and an itemized statement of what you chose. See our General Price List guide.

How do you assign life insurance to a funeral home?

1. Find the policy and the insurer. Check papers, email and bank statements. If you can't find it, the NAIC's Life Insurance Policy Locator is a free tool for searching.
2. Confirm you are the beneficiary. Each beneficiary files their own claim, according to the Washington Office of the Insurance Commissioner.
3. Ask the insurer whether assignment is allowed and what form or notice it needs. Policies and group plans can set their own rules, so don't assume.
4. Ask the funeral home if it accepts an assignment. Get the itemized statement of goods and services first, so you know the exact total.
5. Decide how much to assign. Assign no more than the funeral bill, so the insurer pays the rest to you.
6. Read the assignment form before you sign it, and ask about fees and recourse (see below). Keep copies.
7. File the claim. You'll usually need a claim form and a certified copy of the death certificate. Washington's insurance regulator says that when there are several beneficiaries, each completes their own claim form.

What documents do you need?

• the policy number and the name of the insurer
• a certified copy of the death certificate
• the insurer's claim form, completed by you
• your photo ID
• the funeral home's itemized statement of what you selected
• the signed assignment form
• if the beneficiary is a minor or a trust, guardianship or trust papers

Ask the funeral home how many certified death certificates to order. You'll need them for other accounts too. Our guide to claiming life insurance goes through the claim itself, and funeral insurance claim documents has a longer checklist.

What can go wrong?

• The policy pays less than you expect. The NAIC says any outstanding policy loans, plus interest, are subtracted from the death benefit. If the policy had a loan, the payout could be smaller than the funeral bill you assigned.
• The claim is delayed or denied. The Washington regulator says insurers may investigate during the first two years, and policies can exclude certain deaths. If your claim is denied, find out in advance whether the funeral home can still look to you for payment. See funeral insurance claim denied.
• Fees you didn't expect. Some funeral homes use a third-party funding company that pays the home first and is repaid by the insurer. That company may charge a fee, and it may have terms about what happens if the claim fails. Ask for both in writing.
• Group or employer policies. These can have different rules from individual policies, so ask the plan administrator or insurer what's allowed and how long it takes.
• A minor beneficiary. The NAIC notes most insurers won't pay benefits directly to a minor. That can slow an assignment down.
• Signing too fast. If you're unsure what the form says, ask for time, or ask a lawyer or the insurer to explain it before you sign.

What are the alternatives?

If the funeral home doesn't accept assignments, or the policy won't allow one, you still have options:

• Pay with savings or a credit card, and be repaid when the insurer pays. Keep every receipt.
• Ask whether the funeral home will agree to an installment plan. See funeral payment installments.
• Ask the bank whether it will release money to the funeral home from the person's account.
• Look at other sources, such as VA burial benefits, state or county help, and the person's estate. See how to pay for a funeral.

If you're not sure how long the insurer will take, see funeral insurance payout time.

What to do next

1. Find the policy and call the insurer to ask whether assignment is allowed.
2. Ask the funeral home if it accepts assignments, how, and what fees apply.
3. Get the itemized statement and assign only the amount you need.
4. Order certified death certificates, and file your claim as soon as you can.