Whether funeral and final expense insurance is a good thing or not, is based on your personal preferences. I will help uncover some ideas to help you decide if you should look at it purchasing some.
What is the cost of a funeral?
The cost of a funeral varies depending on if you are going to have a cremation and keep it to a minimum cost. A cremation can cost as low as $1,500.00. On the other end of the spectrum, some funerals can be in excess of $50,000.00. Funeral costs will depend on your personal preferences, your values, and your culture.The average cost of a funeral is from $6,000 to $8,000.
Many families won't have this discussion and the family will have to figure it all out. There are other costs that come in to play.
What are other costs associated with Final Expenses?
The cost of someone dying goes beyond the cost of burial. Some other additional costs are things such as:
- Additional medical costs of care leading up to the death.
- Professional and accounting fees on finishing the final tax and estate plan.
- Any legal fees that might come up if the will is probated or if there is no will.
- Final tax bill coming on RRSP's if there is no spouse to roll over to.
- Final bills like phone and utility bills or final credit card bill.
- Payments outstanding such as vehicle loans or leases, rent or mortgage payments.
- Costs to cleaning property if no family member is able to do.
As you can see the additional costs can ad up.
For example:
If someone has $500,000 in RRPS's and doesn't have a spouse to roll over tax free to on death. In this case the total amount of RRSP's will come in as income for the final tax filing. The entire $500,000 is fully taxed at the highest personal tax rate. In Alberta this would be about $209,000.00 of taxes. Yes that much. In this type of case it is best to speak with an life insurance agent and discuss all your options.
What options are there to pay for funeral and final expenses?
1. From Savings Account.
Some people have decided early on and have saved money in a personal savings account to for Funeral and Final Expenses. If the money is in a personal bank account or financial institution it could get tied up in probate. Or the funds won't be accessible at death. If this is your choice, it is best to have the account set up within an insurance company. An investment with an insurance company can have a designated beneficiary. This will allow the funds to go to the beneficiary and bypass the estate on death and have no delays.
2. From Family Members.
What if there is no money available? Family members will typically step in with the help of the executor of the estate and pay for the funeral and other associated expenses. This can create many issues. What if the family doesn't want to pay for the funeral? Or, they can't decide who should pay for the funeral and final expenses? What if the family isn't in a good financial position to come up with the funds?
Don't leave your funeral and final expenses on the shoulders of your family.
3. From Canada Pension Plan Death Benefit.
The CPP Death Benefit is $2,500.00 for 2019. Is $2,500.00 enough to cover all the costs? You won't know until the time comes. You will have to complete the submission and wait for the funds to arrive.
4. From a Funeral and Final Expense Life Insurance Policy.
A life insurance policy can be set up long before you die. We never know when our time will come, but we do know it will. Once you decide on how much coverage you want to have in place, you then have a licensed agent process an application for you. Once the policy is in place a beneficiary is designated. At death the full amount will go to the beneficiary to pay for all costs associated with your funeral and final expenses. A life policy will solve many issues and won't leave your family left to deal with.
There are a variety of life insurance policies available. Even if you have some medical concerns or were declined life insurance in the past. The premiums will be lower if you are younger and healthier.
What is the life expectancy?
Life expectancy charts help determine at what age we are expected to live to. This is an average. With averages there are many people that die earlier in life and many that die later in life. One thing for sure is that we all will die at some point. Below is a chart to see what your life expectancy is at your current age.
What is your life expectancy for funeral and final expense insurance?
In the chart above, chose your current age and look at the age at death to determine your life expectancy. Life expectancy varies depending on your health and lifestyle.
Types of Life Insurance:
- Guaranteed life insurance with no medical. This type has reduced questions and requires no medical. There are companies that offer a progressive life insurance application. This allows you to answer more health questions. The further you are able to go in the application, the lower the premium is. Ask us how.
- Fully underwritten life insurance. If you feel you are healthy and don't mind doing a medical and answering health questions this might be your best plan.
Either way it is something we can discuss and determine which insurance program would best suit your situation. Life insurance is a effective way to cover all costs associated when someone passes away.
My Families Solution.
After the passing of my father, the discussion of life insurance and funeral came up with my mom. She wanted to give me and my sister $50,000.00 each to cover all aspects of her funeral and other expenses that could arise. What we decided was that she should keep her money to live and enjoy the rest of her years. I put a life insurance policy in place to cover everything, including last tax bill, for less than $100.00 per month.
Feel Free to share this article to those you love. Should you have any questions on funeral and final expense insurance or would like us to run some options for you please contact us.
