This may be a difficult question, but do you know how you will pay for your parents’ funeral expenses? Although death is a fundamental part of life, and something we all must face, planning for it is something many of us would rather not think about.
While some financial assistance programs may be available to provide support for funeral costs, they may not always provide enough. Life insurance, on the other hand, could be a practical way to ensure all or part of a parent’s funeral expenses could be paid without having to dip into savings or inheritance.
Rising Funeral Costs
Funerals are not cheap. In fact, funeral costs have been rising relative to other expenses over the last few decades. The Consumer Price Index showed in 2017 that in the previous 30 years, the price of funerals in the United States had risen almost twice as fast as consumer prices for all items. According to 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.
With the median household income in the U.S. at just over $63,000, this means that a traditional funeral could cost, on average, over 10% of a family’s annual income. It should be noted that these figures do not include other important costs, which could also be expensive, such as a burial plot, gravestone, obituary, flowers, or catered reception. Adding these other costs, it would not be uncommon for a family to spend $10,000 in total.
Be aware that as a consumer, there are rules that protect you during this vulnerable time. 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. Even with such protections in place, funerals costs can be expensive.
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Assistance Programs May Be Available
There may be programs available from your city or state government, and even non-profit or religious organizations, that offer financial assistance for funerals. In New York City, for example, residents may qualify for a grant based on certain criteria. Administered by the city’s Human Resources Administration, the grants help 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.
At the federal level, some assistance may be available as well. Social Security provides a one-time death benefit in the amount of $255 for a surviving spouse or child, based on certain criteria — this is separate from any monthly benefits that may be available to a surviving spouse through Social Security. The Veterans Administration also 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.
Currently, there is no federal assistance specific to the pandemic for funeral costs. In May, a bill (H.R. 6828) was introduced in the House of Representatives that would direct the Federal Emergency Management Agency (FEMA) to provide financial assistance to individuals and funeral homes for the funeral expenses of an individual who died of COVID-19 without sufficient insurance to pay for such expenses, through the establishment of a COVID-19 Funeral Assistance Fund. This bill would provide funds up to $10,000 per individual. However, it’s not certain whether this bill will be approved.
Life Insurance Could Provide Peace of Mind
The loss of life and damage to the economy from the pandemic is undeniable. As of September 2020, there have been nearly 200,000 reported deaths, while unemployment has rivaled some of the bleakest years of the Great Depression. This climate of uncertainty has many people anxious, not just about their family’s health, but also their financial well-being. It could be the reason why life insurance applications are on the rise, as more people are looking for peace of mind and security for their families. In fact, AccuQuote, an independent life insurance brokerage firm, saw an uptick of about 35% to 50% more applications this past April.
Given the limitations of financial assistance (for example, the $255 Social Security death benefit would only pay a fraction of the average funeral cost), life insurance for your parents could be an excellent option to cover the entirety of funeral expenses. It could help you get through the grieving process without having to worry about securing thousands of dollars within a matter of days or weeks after a parent passes.
If you don’t already have a plan in place, talk to your parents about purchasing life insurance. Discuss how much coverage will be needed and who will pay the premiums. Depending on their age, health, and resources, some options may be better than others. Let them know you want to protect your family’s finances by ensuring you can pay for any final arrangements should the time come. Having this one difficult conversation with them may be worth it in the long run.