Funeral Insurance: How It Works, Costs and Alternatives

Funeral insurance, also called burial or final expense insurance, is a small life insurance policy meant to pay for a funeral. Washington's insurance regulator says the benefit typically runs from $5,000 to $25,000, it is easier to qualify for than most life insurance, and there are few or no health questions. The trade-off is cost. The same regulator warns that what you pay in premiums may cost more than your funeral.

What is funeral insurance and how does it work?

You pay a monthly or yearly premium. When you die, the insurer pays the benefit, as long as the policy is in force. You choose a beneficiary, usually a family member, who files a claim with a death certificate.

There are two kinds, according to Washington's insurance regulator:

• Standard funeral insurance pays your beneficiary, who can use the money in any way, including the funeral, medical bills, legal costs or debts.
• Pre-need funeral insurance pays the funeral provider you picked. It can protect you from inflation by setting your funeral and burial costs at today's prices, and it helps pay for things like funeral home services, merchandise and burial services.

Most funeral insurance is a whole life policy. The Texas Department of Insurance says whole life premiums are higher than term life at first but usually don't go up, so the price you lock in is the price you keep.

What types of funeral insurance are there?

NerdWallet's review of burial insurance describes three main types. The right one depends mostly on your health.

If you die during a waiting period, NerdWallet says the insurer refunds premiums rather than paying the full death benefit. Terms differ between insurers, including whether interest is added and whether an accident is paid in full. Our guide to the funeral insurance waiting period explains the options. If you have a health condition, see funeral insurance with pre-existing conditions and no medical exam policies.

How much does funeral insurance cost?

There is no standard price. Premiums depend on your age, your health, the amount of cover and the type of policy. Washington's regulator points out that there are no discounts for good health, and that funeral insurance offers lower benefits than most life insurance.

Check what you would pay in total. This example is hypothetical. If you paid $60 a month from age 60 until you died at 85, you would pay $18,000 for a $10,000 benefit. If you died at 65, your family would get more than you paid in. That is the bet in any life insurance policy, and it is why the Funeral Consumers Alliance says you will usually pay as much or more in premiums than the policy pays out.

For a rough starting point, use the calculator below. To see what a funeral may cost, our funeral cost calculator breaks it down by type of service.

What does funeral insurance cover?

Standard funeral insurance does not have to be spent on the funeral. NerdWallet says burial insurance benefits can pay for the funeral service, burial or cremation, medical bills and other debts, and probate costs. Pre-need insurance is more restricted. It pays the funeral provider you picked.

Whichever you choose, the benefit has to match your plans. Ask the funeral home for its General Price List, which the FTC's Funeral Rule requires it to give you to keep, and add cemetery and other outside costs. See funeral insurance vs life insurance and how much funeral insurance you need for more on sizing a policy.

How do you choose a policy?

1. Start with a level policy quote. If you are accepted, you avoid the waiting period. Move to graded or guaranteed issue only if you are declined or the price is too high.
2. Compare several insurers. NerdWallet's review shows insurers differ on age limits and coverage. It reports minimum ages starting at 45, maximum ages up to 85 (more restrictive in New York) and amounts from $2,000 to $100,000, so check each company's limits.
3. Read the waiting period and refund terms. Ask what happens if you die in the first two years.
4. Use the free look period. Texas gives at least 10 to 20 days and Washington gives 10 days to cancel for a refund. Use it to read the policy in full.
5. Add up the premiums. Compare the total with the benefit and with simply saving the money.
6. Answer every health question accurately. Texas says that during the first two years a company may deny payment for wrong information on the application, even if it was unrelated to the cause of death. See what to do if a funeral insurance claim is denied.

When should you buy? Health changes can push you toward a more restrictive policy, and waiting makes the premium higher. Our guide to the best age to buy funeral insurance covers the trade-off.

How do you check a funeral insurance policy you already have?

Policies need an occasional review, because the premium, the beneficiary and the cost of a funeral can all change. A yearly check takes a few minutes:

• Is it in force? Confirm that premiums are up to date. Texas says a policy lapses if you miss a premium and the 31-day grace period ends, and then your beneficiaries won't get the death benefit. See lapsed funeral insurance.
• Is the beneficiary right? Washington says an ex-spouse cannot stay a beneficiary after a divorce unless a court orders it or you file a new form naming them. Use our beneficiary update checklist after any marriage, divorce or death.
• Is the benefit still enough? Compare it with a current General Price List. If it falls short, you can plan for the gap or look at extra cover.
• Can your family find it? Keep the insurer name, policy number and a copy where the person who will arrange your funeral can find it.
• Is there an old policy you forgot? Ask your state insurance department how to search for a lost policy, and search state unclaimed property databases, which are free (unclaimed.org lists them). Never pay a company to do it for you.

How does your family claim the money?

The beneficiary contacts the insurer, completes a claim form and sends a certified copy of the death certificate. Washington's regulator says each beneficiary files a separate form. Our guides cover the documents you need and how long payment takes.

Funeral homes often want payment at or before the service, so ask about an assignment of benefits before you sign.

What are the alternatives to funeral insurance?

Funeral insurance is one of several ways to set money aside. Each has trade-offs.

• Savings or a payable-on-death bank account. You keep control of the money and it stays yours if you never need it. Ask your bank how quickly a named beneficiary can get the money after a death.
• A prepaid funeral plan. It can lock in prices, but check the provider, what happens if you move and whether you get a refund. See prepaid plan vs funeral insurance.
• Ordinary life insurance. Washington says funeral insurance premiums are usually higher than life insurance and its benefits lower, so it is worth getting a quote for ordinary life insurance if you can qualify.
• Doing nothing. Your family pays from their own money or from the estate, so it helps if someone has agreed a plan.

The Funeral Consumers Alliance cautions against burial insurance and pre-need insurance specifically, saying you will usually pay as much or more in premiums than the policy pays out. That is general advice, and not every family can set aside a lump sum, so weigh your own situation or talk to a licensed adviser.

What to do next

1. Decide roughly what kind of funeral you want, and get a General Price List for it.
2. Compare a level policy, if you can qualify, with saving the money yourself.
3. If you already have a policy, check that it is in force and the beneficiary is correct.
4. Write down where the policy is and tell the person most likely to arrange your funeral.