Many who die without life insurance leave behind significant final expenses and debt that can be difficult for their loved ones to manage.
Friends, spiritual leaders and professional and social groups often assist the deceased’s family members with finding life insurance policies for them.
After someone dies, their estate will be divided among their loved ones and heirs.
1. Your family will have to pay for your funeral and burial
Funerals can be costly affairs; on average, funeral expenses average more than $7,000. Without life insurance or assets to cover these final expenses, your loved ones will have to shoulder those burdens alone; they may need counseling services or other forms of emotional support as well.
Your family will also have to cover funeral and estate tax costs as well as any debts left by you after death, which could total tens of thousands of dollars – without being rich, this means working hard to settle these bills.
If you lack life insurance or enough assets to cover funeral costs, the government may help. Many states and counties offer what is known as an indigent burial assistance program that assists those unable to afford funerals by offering pauper’s burials in designated sections of cemeteries or offering direct cremation as more cost-effective options.
Your family may also receive assistance from local charities and community organizations that provide financial assistance, though these programs often fall short in covering all expenses.
If you want to spare your loved ones from incurring additional financial strain after you pass, then purchasing life insurance or pre-planning funeral arrangements could be the way forward. Options exist including final expense coverage that pays for funeral and general expenses or traditional whole life policies which provide a lump sum payout which beneficiaries can use towards covering such costs as well as burial.
2. Your heirs will have to pay off your debts
Of the three, mortgage loans and credit card bills typically account for the greatest share. Should their estate still owe debt when they die, creditors’ claims against their estate will have to be settled; but life insurance provides an immediate safety net for loved ones upon death.
However, there are exceptions to this rule that can make things confusing for those unfamiliar with state and federal law pertaining to the death of loved ones and their debts. For instance, if they had a joint account cosigned by you as co-signer then likely that debt falls upon both of you equally as an obligation. And any cosigned student loan will also become part of your responsibility upon their demise.
Keep in mind that many states have laws regarding “filial responsibility,” which means if you’re serving as executor for someone’s estate, it is your duty to pay their debts before dispersing money to other heirs. Consult a legal expert before making decisions related to estate settlement.
Even if your plans do not include leaving behind significant sums of money, life insurance is still worthwhile to obtain as savings may not meet all of your family’s future financial needs; and investments and other assets tied to savings may make liquidating assets difficult or impossible.
Without life insurance, your savings and assets could be used to pay off debts, leaving nothing behind for your heirs. By taking the time and effort to purchase life insurance now, it can save your family many headaches in the future and be significantly cheaper than many alternative investment strategies – so get your free life insurance quote now! AARP members have access to an array of products, services, discounts, and offers when purchasing life insurance; for more information click here.
3. Your loved ones will have to pay for your funeral and burial
Without life insurance, your loved ones will have to bear the financial strain associated with paying for your funeral and burial costs themselves, which may create undue financial strain at an already difficult time for them. That’s why it’s essential that people purchase life coverage as soon as possible.
If your loved ones are struggling to cover your funeral and burial costs, they can apply for temporary assistance from the government; however, these payments won’t cover all your funeral costs; additionally, eligibility requirements apply before receiving this aid from government sources.
Outside of government-funded assistance, there are other private organizations that may assist with funeral expenses, including churches, funeral homes and social groups. Some even offer pre-paid plans; these policies typically cost more than traditional life insurance policies.
Saving for your funeral with a savings account can help keep funeral costs manageable, though you must select an account that will give someone else immediate access to these funds (ie: spouse, executor of will or trusted individual). Another alternative would be a payable on death account that allows beneficiaries to access them quickly after your passing without going through probate court.
Though many may view life insurance as too costly, purchasing it now will save money when the time comes and premiums may even be lower when purchased earlier on in life.
Life insurance policies can be denied for many reasons, such as diabetes and obesity, dangerous hobbies and activities, criminal records and certain companies/professions providing free or low-cost life insurance as a benefit for their employees or members.
If you’re shopping around for life insurance, make sure that you consult an experienced agent and compare options before making your choice. Some agents will try to sell an overpriced policy that has an expiration date too soon while others might find one with better rates for you.
4. Your heirs will have to pay for your funeral and burial expenses
Unless your loved ones have life insurance, when you die without coverage your funeral and burial costs must come out of their own pockets – potentially creating a large financial strain for those left behind, especially if they were your main source of support. The median funeral expense in the United States stands at $7,848.
Your spouse may also have to cover your final medical bills and estate taxes after your death, which can add up quickly. They may not be able to afford them; if you were a stay-at-home parent, this could force them back into work or force them into taking additional part-time work to make ends meet; this strain on their relationship could even cause tension over managing finances in general.
As part of your funeral and burial costs, your heirs will also have to cover any outstanding debts from you – which may put undue financial strain on them and force them into selling their home or incurring credit card debt.
As you make the decision whether or not to buy life insurance, it’s essential that you carefully consider all relevant issues. While it may seem like purchasing life insurance is far off in time, other competing needs like paying school tuition or saving for retirement could preclude purchasing coverage sooner; life insurance provides your loved ones with security upon your death and can ease some of the grief that accompanies death.
Your loved ones can benefit greatly from both term life insurance and whole life insurance policies, with both options offering great peace of mind after you are gone. However, it is wise to avoid “guaranteed issue” policies that do not require medical examination or have low coverage limits since these can often be more expensive and may not provide sufficient protection.
When purchasing life insurance policies, it’s crucial that you speak to an experienced agent. They can assist in selecting the appropriate type of coverage based on your unique circumstances and needs as well as finding something within your budget.
