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Financial Planning for Funeral Expenses

As costs rise across nearly every industry, most of us can’t help but wonder about financial planning. Funeral planning is a critical, though often overlooked, aspect of thinking ahead for your finances. Adding this cost into your budget now can help ease burdens on your loved ones later. Experts say there are over 70 details to be decided on in the first 24 hours after death, and those decisions are being made by family and friends who are overwhelmed, exhausted, and mourning. Taking finances off the table by setting money aside now can help take a weight off their shoulders. Let’s explore some ways you can plan to pay for future funeral expenses. 

Pre-Paid Funeral Plans

Pre-paid funeral plans may be a good choice if you’re looking for a simple and straightforward solution. These plans will have you working directly with your chosen funeral home. Together, you and the funeral director will put together a customized package of services, including funeral home services, flowers, casket, transportation, and other needs. Costs typically range between $10,000 to $25,000, depending on your selections. You can then pre-pay for your funeral cost in either one lump sum or payments broken up over 3, 5, or 10 years. Another option in this same vein is to work with a pre-paid contract provider. Much like an insurance broker, these companies work with multiple funeral homes to find the best price for your chosen services. 

For many, a pre-paid funeral plan is a great option, but be aware there are pros and cons. On the positive side, your funeral details are taken care of well in advance, you can choose exact funeral details, and prices are often locked in even as funeral costs continue to rise. However, there are negatives to consider. An issue some have experienced is the funeral home going out of business before their services are required. In that case, the money you’ve paid might be gone, and your family might be left with the bill you were trying to avoid. You may also change your mind about arrangements or move far from your chosen funeral home. In these cases, knowing whether the funeral home will refund your money is important. Be sure to ask these questions and consider all the factors before writing a large check for a pre-paid funeral plan. 

Funeral Insurance Plans

Perhaps a more flexible option for funeral cost planning is a funeral or burial insurance plan. These are commonly purchased alongside life insurance policies, and you will assign a beneficiary to receive funds after you have passed away. With a pre-paid funeral plan, funds can only be used for agreed-upon funeral expenses. With a funeral insurance plan, loved ones can use the money for funeral costs, medical expenses, remaining debt, or other various expenses. Some states allow a funeral home to be used as the beneficiary. In this case, all funds would go toward funeral expenses and bypass family members. These plans provide the benefit of flexibility in both how and where money is used. However, they do not lock in prices. If costs rise, more funds may be needed for end-of-life expenses. 

Which to Choose

While neither funeral insurance plans nor pre-paid funeral plans are perfect, they are great options for many. Insurance plans are perfect for those who value flexibility. Perhaps you aren’t sure whether you’ll stay in the same area or would like the option to be buried in another state. An insurance plan might be perfect for you. On the other hand, if you’re in your forever hometown and place a higher value on planning details for your own service, pre-paid is a safe bet. Insurance plans pay money directly to the beneficiary and allow loved ones to price shop and find lower costs for services. Pre-paid plans take the pressure of making decisions off of family members, knowing things have been taken care of. Take time to consider which of these plans might be right for you.

According to the National Funeral Directors Association, in 2021, the average cost of a funeral in the United States was $9,420. That cost did not include the burial plot or headstone. With costs rising higher each year, it’s important to plan ahead so your loved ones aren’t hit with a large bill after your passing. Whether you choose to open a simple savings account or use a pre-paid or insurance plan, setting aside this money can give both you and your family peace of mind.

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