Can Life Insurance Cover Funeral Costs? Yes, it can, and it’s a terrific tool.

When people think about life insurance, term coverage usually comes to mind. This coverage provides income protection for periods when a family is most vulnerable.

If you have dependents and debt, term life insurance is a no-brainer.

But what about later in life? If you had term coverage and it expired, you would not have a payout to rely on to cover funeral costs and/or the final tax bill.

So, who is going to be financially responsible? Your family is, that’s who.

This is where life insurance for funeral expenses comes in handy. Let’s find out more information now!

Policy Architects Exists to Help Make Your Life Insurance-Buying Decisions Easy!

Before we get into the meat of this article, I want to introduce myself. My name is James Heidebrecht. I am the founder of Policy Architects, where you’ll find the best collection of life insurance reviews and articles anywhere on the internet.

We rigorously vet and review insurance companies, products, and strategies in detail so you can make a confident buying decision.

When I first embarked on my search for life insurance, very little user-friendly information was available. This site is dedicated to helping you make smarter decisions about purchasing life insurance products.

Now Back to Business: Can Life Insurance Cover Funeral Costs?

If you are wondering if life insurance policies cover funeral costs, you are far ahead of the pack. Most people don’t think about death until it’s pretty late in the game, and even fewer look at the available tools. So congratulations. You are thinking about those you love and planning for future generations.

Did you know that funerals are very expensive? Yeah, they sure are. In Canada, the government, through the Canadian Pension Plan (not to be confused with CPP insurance), offers a $2,500 benefit to help with costs.

There are two issues with this. First and foremost, the average funeral in Canada today is $8500 and can even go up to $15,000. Ouch.

What About Cremation Costs? I Heard They are Cheaper

The average cremation cost in Canada today ranges from $3,000 to $5,000. However, a basic cremation can cost as little as $2,000 or less. Keep in mind that most of us aren’t dying today. So, if you think about 10, 20, or 25 years from now, you can see how the costs could increase.

…and neither of these options includes outstanding tax obligations, etc., connected with passing away.

The second issue is the speed of receiving the benefit. This cash will not arrive right away. Where will the money come from when the funeral provider seeks payment?

“How much is it going to cost?” This is, undoubtedly, one of the questions we are most often asked. Unfortunately, there is no simple answer, as funeral costs vary greatly. We did a Google search on the “average cost of a funeral in Canada”; headlines from the first page of search results included the following:

• the average overall cost is $8,500The cost of a funeral can start from $5,000 to a very basic one … on average a funeral cost can be $15,000
• A traditional burial (including a casket, funeral, and cemetery costs) averages around $7,000 to $10,000
• The costs of funerals varies enormously. But on average, burials cost between $5,000 – 10,000.
• Cremations cost considerably less from $2,000 to $5,000.” How much is it going to cost?, InMemory.ca 

The Funeral Bill Has to be Paid

Most people forget this. The bills are attached to your estate and family when you die. 

If your final wishes are to be buried next to your grandparents in a casket, with a small party to celebrate your life – it’s your kids, your wife, or some other person you care about that handles all the details.

For most people, $8,500 is a lot of money. If your daughter has to pick up the bill and she has four kids, this could knock her for a loop.

…or if your widowed husband has to pay all the bills because your paycheck is gone, and now he has to shell out $5 grand, this could make or break his financial situation.

Even if your family is well off, there are many considerations. Settling an estate can easily take six months to a year. Who will cover the funeral costs immediately after your death?

This Is Where Life Insurance Comes In

Can Life Insurance Cover Funeral Costs? Yes, but there are different ways to do this. First, you should know that two types of life insurance are available. The first is term insurance, which covers you for a selected period of years, and the second is permanent insurance, which covers you for life.

If you want to protect your family from final expenses, permanent insurance is the type of coverage you must use. If anyone tries to sell you a term policy to cover burial costs, run as fast as you can in the other direction! That said, there are a couple of different ways to execute this:

Traditional Life Insurance For Funeral Costs

You can use three types of traditional permanent insurance to pay your funeral expenses: Guaranteed Universal Life, Whole Life, or Term to 100 (T100).

All these policies require full medical underwriting, assuming you’re a senior. Whole Life is your best bet if you’re looking for a policy that will grow in value. Cash accumulates in your whole life policy, and when you die, the nest egg (plus interest) is paid out to your loved ones.

A Guaranteed universal life or term-to-100 policy is similar in that you only pay for the pure cost of insurance. There is no cash value in either of these plans. As such, the rates are more affordable than a traditional whole-life policy.

Benefits from any of these options may be used to pay off all the expenses associated with your death, from taxes to burial costs. The good part (or bad, depending on your situation) is that your beneficiary has free reign to do what they want with the money.

What Are the Pros?

Traditional life insurance for funeral expenses is slightly more affordable and has better guarantees. What does that mean? These policies offer higher guaranteed cash values and paid-up insurance amounts. A complete medical exam is the gold standard for underwriting, so your coverage is very secure.

 What are the Cons?

If you have any moderate health issues, as many seniors do, you won’t qualify for the best rates, if you qualify at all. Also, these traditional plans have minimum coverage between $25,000 and $50,000. So, if you’re only looking for $5,000 to cover a cremation, you’re out of luck.

No Medical Life Insurance For Funeral Costs

In Canada, there’s a fast-growing niche of no-medical life insurance companies that sell small, whole-life policies that primarily cover funeral costs. As the name suggests, these plans do NOT require a medical exam to qualify. However, you do have to answer several simple, straightforward health questions.

These simplified-issue life insurance plans are affordable, easy to qualify for, and can be purchased in face amounts of $5,000 and up. They are ideal for seniors on fixed incomes.

The only funeral insurance plans we recommend at Policy Architects have the following guarantees:

• The monthly cost or premium is locked in for life and can never increase
• The death benefit amount can never decrease
• The benefit is paid out tax-free to your loved ones
• The policy cannot expire at any age

A Closer Look at The Carriers You Should Consider

There are 10-15 carriers in Canada that sell simplified or no-medical life insurance policies. One of the best and most well-known companies is Canada Protection Plan. Other simplified-issue life insurance companies include Assumption Life, Industrial Alliance, Specialty Life, and Wawanesa Life.

You can also purchase final expense pre-need plans through your local funeral home. Canada Purple Shield, or Assurant Life of Canada, underwrites almost all of the plans available through funeral providers across Canada.  Because of this near-monopoly, Assurant’s programs tend to be less competitive price-wise.

Don’t worry—even with serious health issues, you can qualify for a guaranteed-issue life insurance plan. So, nobody can be denied funeral insurance.

Always Use an Independent Agent to Purchase Life Insurance for Funeral Expenses

So now you’re considering using an insurance policy to cover funeral expenses. That’s great but talk to an independent life insurance agent with experience in the funeral insurance niche.

If you have been reading my blog, you know that all insurance carriers are different. This is especially true when it comes to non-medical life insurance companies. Canada Protection Plan may be right for you if you’ve been cancer-free for three years, but it may not be for you if you have mild COPD. It would be best if you found the final expense carrier that will be most lenient regarding your health issues. 

At Policy Architects, we know these companies inside and out. For example, if you’re a smoker with a larger build, we know that Wawanesa Life will likely have the most affordable rates.

We shop with multiple carriers for the most affordable burial insurance plan.

If You’re Googling: Can Life Insurance Cover Funeral Costs?

Call Us TODAY!

Final expense planning is essential. My wife and I want to ensure the kids don’t have to deal with anything when we move on.

Saying goodbye to loved ones is already difficult; adding financial pressure and administrative burdens only makes it harder.

If you’re dealing with all these details, please contact us. We can assist you in reviewing the available options to determine the best course of action for your situation. Different approaches work for different people.

Get in touch with Policy Architects Today!