Life Insurance – Covering a Parent’s Funeral Costs

Financial security seems more important than ever during these uncertain times. With a global pandemic raising the issue of our own mortality, how we deal with death on a financial level has taken on a new urgency. What kind of planning should we be doing to ensure we could cover the costs for the unexpected death of a parent?

Funeral costs are not cheap, and although some financial assistance programs may be available, they may not always provide enough support. Buying life insurance could help ensure all or part of a parent’s funeral expenses could be paid without reaching into inheritance or savings.

Financial Assistance Programs
Financial assistance programs may be available from your city or state government, and even non-profit or religious organizations, to help pay for funeral costs. In New York City, for example, residents may qualify for a grant from the city’s Human Resources Administration that helps low-income residents pay funeral expenses for a friend or relative who has died. As a direct response to the pandemic, the maximum amount of money available through these grants in NYC was increased from $900 to $1,700.[1]

Federal assistance may be available as well. Social Security offers a one-time death benefit of $255 for a surviving spouse or child, based on certain criteria. The Veterans Administration provides burial assistance for veterans by paying a cash allowance of up to $300 for a non-service related death and $2,000 for a death related to military service.

Although no federal assistance is specifically available for funeral costs related to the pandemic, a bill (H.R. 6828) was recently introduced that would establish a COVID-19 Funeral Assistance Fund and provide assistance to individuals and funeral homes for the funeral expenses of an individual who died of COVID-19 (i.e., coronavirus disease 2019) without sufficient insurance to pay for such expenses.[2] This bill would provide up to $10,000 per individual, but it has yet to be approved.

Funeral Costs on the Rise

Financial assistance, even if available, may not be sufficient to cover what is needed for a parent’s burial. This is concerning, as funeral costs have increased relative to other expenses over the last few decades. The U.S. Bureau of Labor Statistics found that from 1986 to 2017, the price of funerals in the United States had risen almost twice as fast as consumer prices for all items. Currently, based on a recent study by the National Funeral Directors Association (NFDA), the median cost of a funeral is $7,640 and the median cost of a funeral with cremation is $5,150.[3] These figures do not take into account other costs, such as a burial plot, obituary, gravestone, flowers, or reception, which could push a parent’s burial well over $10,000. Given the median household income in the United States is just over $63,000,[4] a traditional funeral could present a significant financial burden for your family.

Be aware that, as a consumer, there are rules that protect you from overpaying during a vulnerable time in your life. For example, the Funeral Rule, enforced by the Federal Trade Commission (FTC), lets you choose only those goods and services you want or need and to pay only for those you select, whether you are making arrangements when a death occurs or in advance.[5] Even with such protections, funerals costs could still be expensive.

Planning Ahead with Life Insurance

The alarming loss of life[6] and mass unemployment from the pandemic[7] has created a climate of uncertainty. It could be why the number of life insurance applications have increased, as more people are looking for security for their families. In fact, AccuQuote, an independent life insurance brokerage firm, noted a surge of about 35% to 50% more applications this past April.[8]

Given the limitations of financial assistance — for example, a $255 Social Security death benefit would only pay a fraction of the average funeral cost — getting life insurance for your parents could be an excellent way to cover more funeral expenses. It could help protect you from having to worry about raising thousands of dollars in only a few days or weeks after a parent’s passing.

If you haven’t already planned ahead, talk to your parents about purchasing life insurance. Discuss who will pay the premiums and how much coverage will be needed for final arrangements. Some options may be better than others and will depend on their age, health, and resources. Let them know you want to protect your family’s finances by ensuring you will be able to pay for funeral expenses should the time come. Having this difficult conversation with them may help provide you and your family peace of mind in the long run.