How to Pay for a Funeral: Financial Tips

The loss of a family member or loved one is devastating, to say the least. Unfortunately, the financial burden can be devastating as well, with funerals and associated costs averaging thousands of dollars.¹

While grieving the loss of a loved one, it can be extremely difficult to plan and decipher the costs that follow these unexpected life events. So whether you’re seeking clarity amidst a period of grief or you’re preparing proactively, here is a simple guide to understanding how to pay for funeral expenses. 

Understanding Funeral Costs

It’s important to know that most funeral homes will require cash or credit in hand to pay for funeral services—meaning you won’t be able to cover the cost later on or pay over time. 

So, how much is the average funeral cost, exactly? On average, Americans spend $7,848 on a funeral with burial and $6,970 with cremation.² 

Budgeting for a Funeral: Tips and Tricks

One of the most helpful aspects to remember is that you do have legal protections as a grieving family member. Knowing those legal rights is an essential first step. 

Read through the FTC Funeral Rule that funeral homes are required to follow in recognition of grieving family members’ vulnerability as consumers.³ 

Consider these steps to avoid unnecessary spending on funeral arrangements: 

• Talk to loved ones and come up with a plan ahead of time
• Consult a trusted friend who may not be as heavily grief-struck
• Opt for direct cremation services with the ashes returned to the family
• Don’t let grief or guilt lead you to mistake overspending for proof of affection
• Remember that some services might be frills, rather than needs
• Ask for help from your support network for reception food and other tasks

Burial or Funeral Insurance: Is It Worth It?

Burial insurance (or “final expense insurance”) is a limited whole-life insurance policy designed to cover funeral and end-of-life medical and related costs. Typical coverage ranges from $1,000 to $25,000 and is available only to applicants age 50 and older. 

Deciding if funeral insurance is worth it depends largely on your preferences. Consider the pros and cons. 

Pros: 

• Removes the stress of funeral arrangement financing from your family
• Unlike a term life policy, you can get a funeral policy without a medical exam 
• Beneficiaries can use the funds however they want (could be either a pro or a con)

Cons: 

• Premiums are often higher than for general life insurance policies
• Most policies have a two-year waiting period for payout³
• Policies that don’t require medical exams have higher premiums
• If you apply for a simplified issue policy with a medical exam, you may be denied

Prepaid Funerals

The terms “funeral insurance” and “pre-need insurance” are also used to prepay arrangements directly with a specific funeral home. Rather than a sum that goes to beneficiaries, pre-need insurance is paid directly to the funeral home you’ve preselected. 

Instead of an insurance agency, these policies and plans are sold by funeral directors when you meet to preplan a funeral service, burial, or cremation. These can be beneficial as: 

• They can be planned in advance, so your family isn’t faced with difficult decisions regarding funeral planning
• Some plans lock in prices so costs are covered regardless of future price inflation
• Most don’t contain an age limit or medical exam requirement 

With a prepaid funeral plan, remember that your plan will be locked and limited to the specific funeral home you choose. If the funeral provider goes bankrupt or you change your mind about your plans, you won’t be able to make changes. Experts recommend prepayment plans only for those who don’t qualify for term or burial insurance and value making arrangements in advance.⁴ Having an open discussion with a funeral director early on can help you decide if this is the best option for your situation. 

Government and Community Assistance for Funeral Expenses

If funds are tight—or nonexistent—you’ll need to know how to get help paying for a funeral. Multiple agencies and programs can offer financial assistance to cover funeral and burial costs, including: 

• Veterans and eligible family members can receive a free burial and headstone 
• Some employers offer benefits to help with funeral and burial expenses
• Some Victim Compensation Programs offer support for homicide and accident victims
• Social Security provides a small sum ($225) to eligible family members⁵
• Current recipients of need-based benefits may receive a small sum from: 
• Medicaid
• Supplemental Security Income (SSI)
• Social Security Disability Income (SSDI)
• States and/or county social services departments 

Additional Sources to Cover Funeral Expenses

There are also a few ways to raise funds separate from funeral-specific programs and benefits. Consider these quick pathways for funeral assistance: 

• Savings with a POD (payable-on-death) beneficiary 
• Credit card with a zero-interest introductory period
• Personal loan

Alternatives that can help repay upfront costs in the weeks following a funeral include: 

• Setting aside a portion of a will for a funeral fund
• Crowdfunding
• Fundraising events and activities through a church or community 
• Sale-leaseback
• Equity leveraging such as home equity loans, lines of credit, and cash-out refinancing

Convert Your Equity to Cash with a Sale-Leaseback

Repaying funeral costs can be an overwhelming task. A sale-leaseback could help ease some of the stress and provide you with resources to support you in your time of need. 

Truehold's sale-leaseback allows you the flexibility to continue living in your home as a renter after a sale that unlocks your home equity, debt-free. 

This means you can use the equity you’ve earned within your home to pay for unexpected expenses such as funeral costs and other emergencies. 

Ready to learn more? Reach out to a Truehold Advisor to find out if a sale-leaseback is the right fit for your needs. 

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Sources: 

1. Investopedia. How to Pay for a Funeral. https://www.investopedia.com/how-to-pay-for-a-funeral-7108073‍
2. Federal Trade Commission Consumer Advice. The FTC Funeral Rule. https://consumer.ftc.gov/articles/ftc-funeral-rule‍
3. Investopedia. How to Use Burial Insurance to Pay for Final Expenses. https://www.nerdwallet.com/article/insurance/is-burial-insurance-worth-it‍
4. Policygenius. What is pre-need life insurance & how does it work? https://www.policygenius.com/life-insurance/pre-need-life-insurance/‍
5. Lincoln Heritage Life Insurance. How Much Does a Funeral Cost? https://www.lhlic.com/consumer-resources/average-funeral-cost/