Growing old means paying attention to Medicare, supplemental health insurance, and of course your retirement account. There is also the uncomfortable planning that comes with preparing for end of life. A final expense is one that your family would likely incur upon your passing.
This includes any final medical bills, but typically refers to the cost of funeral, and burial or cremation. Understanding your final expenses is vital to ensure that your family is financially able to perform your funerary rites. Here are some basic guidelines when trying to understand everything that goes into this process:
What are my needs for final expenses?
The cost of your final expenses is largely based on two big factors: location and type of funeral. When it comes to location, having your funeral performed near a metro area can double your expense, if not more. Stamford, CT, one of the more expensive areas of the country for traditional funerals, is over $9,000. Hillsboro, OR? $5000.
However, an investigation by the Consumer Federation of America discovered that prices can vary greatly within a city. In DC for example, the difference between the lowest and highest price for a full service funeral is $10,000.
To make matters even more complicated, due to outdated laws, funeral homes are not required to disclose the full price of a funeral unless you call them. Even then, the CFA was unable to find funeral costs over the web or phone in 16% of cases.
The next factor affecting the cost of your final expenses is the type of funeral you want. Generally speaking, direct cremation is the cheapest option, followed by direct burial. The most expensive option is a full service funeral, which includes embalming, viewing or calling hours, hearse to ceremony, and graveside service.
The best approach to understanding your final expense needs is to call funeral homes or crematorium, explain what you want (and what you don’t), and ask them to quote a price. This may not be the same price your family will end up paying, but it should give you a good idea what to expect.
For those who are not sure what sort of funerary rites they want, or wish to leave such decisions to family members, you can set the cost of final expenses at around $10,000.
How should I prepare for final expenses?
This depends on a number of factors as well. If you have a good estimate of your likely final expenses, you may be able to set aside money in your Will to cover the expenses. If you have life insurance, your beneficiary will be able to use the proceeds to cover your final expenses.
For those who do not have a life insurance policy, there is the option of final expense insurance. Unlike life insurance, where your payout and premiums are usually tied to your income, final expense insurance typically has a fixed payout, tied to your funerary rites. Some policies include clauses to cover the cost of any final medical costs you incur as well, so it may make sense to combine life insurance and final rights insurance.