Do I need life insurance if I can cover my own funeral costs?

Question

I'm fairly well off and could cover the cost of a funeral out of personal savings and investments. I'm also single, in my late 20s, and live alone. Unfortunately, my family (parents and siblings) aren't as well off as myself. They will receive all of my assets in the event that something happens to me. Does it make sense to get life insurance if I already have the funds to pay for the funeral? Just to clarify, I don't plan to make any arraignments with a funeral beforehand. I'm just asking if my surviving family would be able to use my estate to pay funeral costs? Could they access my accounts fast enough?

Answer 1

Life insurance should be used to replace your income for someone that depends on it. Since that is not the case, and you have enough in your estate to cover funeral costs, it sounds like you do not need life insurance. It's a "nice to have" at this point.

I'm just asking if my surviving family would be able to use my estate to pay funeral costs? Could they access my accounts fast enough?

Sure. At worst, they'd have to pay for the funeral out of pocket and pay themselves back from the estate. That said, having some cash in your estate and a clear will that will make the probate process smooth will be a big help in this situation.

Obviously, if you decide to get married or have someone that depends on your income, things will change.

Answer 2

No, you do not need life insurance.

Better than Life Insurance: If you are well enough off to pay for your own funeral, you can pay the costs now and avoid any form of probate delays. Burial and funeral services can certainly be paid in advance of your death in most cases.

Answer 3

Does it make sense to get life insurance if I already have the funds to pay for the funeral?

Yes, because funerals happen fast, and estates take time to wind through probate.

Do I need life insurance if I can cover my own funeral costs?

Your circumstances (spouse, children, etc) will almost certainly change, so getting a longish term life policy while you're young and healthy and the premiums are low is probably a good idea.

Depending on how well off is "well off", some early estate planning might not hurt, either.

Answer 4

One point not addressed so far is that you say "my family (parents and siblings) aren't as well off as myself".

Depending on your personal beliefs and culture, it's possible your parents, or in cultures with mandated support for family, even your siblings, may be, consciously or not, expecting support from you of some kind; for your parents it may be support with retirement expenses, for your siblings it may be just a financial backstop in case of an emergency, to assist with college expenses for your nieces or nephews, etc.

If that's not part of your culture, and/or you don't feel that sort of obligation, then sure, skip the life insurance. Most funeral homes will float grieving families while your estate winds up; you could always get a trivial amount of coverage if you don't trust that, but they should be fine.

But if it is an obligation you personally feel you would be responsible for, get more. Group term life insurance through an employer is usually pretty cheap for 20-somethings. Where I work, it's 50 cents a week per $50K in coverage, so getting $300K in personal coverage would run you $156 per year; the price doubles to $1 a week at 31, and to $1.50 a week from 41 to 50, but even then that's only $468/year for a $300K payout to your folks that would dramatically simplify their retirement planning. Yes, the rates for group term life insurance tend to skyrocket at 51 and up, but by then you'd hope to have enough assets to ensure your folks are taken care of (and/or your folks have died and no longer need support).

Worst case, you reach the age of 50 still alive and well, still don't have any direct dependents that need the insurance, and you drop the insurance, having sunk nearly $10K into it over the course of 30 years. I can think of worse uses of $10K over 30 years than piece of mind for yourself that you'll ensure your parents and/or siblings aren't left in dire financial straits you might have helped with.

I'll also note that many life insurance policies come with accidental death and dismemberment coverage; the former just means larger payouts in the event of an accidental (as opposed to disease, age, or congenital defect caused deaths) death, but the latter can actually benefit you; on the plan I'm in, for each limb that I lose function in (hand, foot), including limbs rendered non-functional by paralysis, not just direct damage, I'd get 25% of the insurance amount; for each eye, 50%, if both ears lose function, 50%, 1% per month if I'm left in a coma, etc. It's not a lot, and it's unlikely you'll use it, but it's additional protection for your own finances, not just your family.

Answer 5

In most places I have lived funeral and graveyard costs are paid on tax bill. Something like mandatory 0.2 % of income and it is separate from church tax.

If you want advertisement in newspaper of your passing that will cost (quite expensive) and if you want some extra fancy tombstone you will most probably have to pay for it yourself and I guess that also is very expensive.

I don't know much about how fast the people in your will will get access to your property afterwards, though.

Answer 6

If you put your investments in an segregated fund they will bi-pass probate and go to the beneficiary like any life insurance policy. Therefore in his case if he did this I would agree he doesn't need life insurance to cover funeral costs.

Answer 7

The purpose of life insurance is to make provision for people who depend on you financially. Usually this means a wife and/or minor children. It could also mean anyone else you are supporting -- a handicapped relative, elderly parents, etc.

If you are not supporting anyone financially, then you don't need life insurance.

Paying for a funeral is a relatively minor expense. Sure, it makes sense to put away some money for it, or to pre-pay for a funeral. If the people who would be responsible for burying you just don't have the money handy to pay for it and you would be putting a real burden on them, you might consider putting money into some sort of account that they could get immediately on your death rather than having to wait for your will to go through the courts. Like open a joint account with someone you reasonably expect to outlive you, etc.

You could also get a small life insurance policy that would be just enough to cover funeral expenses. When my kids were young I had several hundred thousand dollars in life insurance, but now that they're all out of school and I have a fair amount of money in my retirement fund, I cancelled that policy.