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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?

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    @PeteB. That account too would have to go through the processes of getting distributed to the heir. If OP is really concerned about covering funeral costs, a joint account would be better? – stannius Mar 14 at 15:46
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    @stannius for many institutions, the only that is needed is a death certificate. Funeral homes will float payment for such things. Having a joint account means that the heir could withdraw money at anytime including when the person is alive. – Pete B. Mar 14 at 16:14
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    I don't recommend a joint account. No matter how much you trust someone. It can be too tempting to the non majority account holder to access it. I know someone who did something similar for estate planning purposes. The person who was supposed to be the beneficiary (joint owner) drained it of over 6 figures. – Heather Mar 14 at 16:50
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    You might consider avoiding the problem entirely by donating your corpse (or whatever's left after useful organs have been salvaged) to a local medical school. – jamesqf Mar 14 at 17:30
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    @jamesqf The family might reasonably still want to have a funeral (or at least a wake) even if the body itself is not present. Funerals aren't just about getting rid of the corpse. – Steve-O Mar 14 at 18:48
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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.

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    New life insurance policies become more expensive as one ages. It would be cheaper for someone in their late-20s to get life insurance than someone in their mid-30s. So even if the OP isn't married now, if marriage/children are things that might happen in the next 5-10 years, it may be worth it to lock in a term life insurance premium now. – Daniel Mar 14 at 14:03
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    Depending on the policy, the premiums can increase with age anyway to reflect the greater likelihood of the policy being used. – chepner Mar 14 at 14:27
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    @Daniel The question is "Do I need life insurance". Yes it might make things easier and might be slightly cheaper in the long run, but it is not needed (meaning no one will go bankrupt) at this point. – D Stanley Mar 14 at 15:09
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    @Daniel The "increase with age" scales with, well, the age you need it; getting it early either (a) ends it earlier, or (b) spends money on a period of time you don't need it. More important than that, insurance policies scale with danger; suppose you discover you have a heart condition, then fall in love with someone and want to have kids. "Too early" insurance is, in a sense, insurance against needing insurance. ;) – Yakk Mar 14 at 18:46
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    @NickEdwards True, but generally married couples with two incomes have a lifestyle that is supported by two incomes. If one income goes away the life insurance would replace that lost income without a lifestyle change. Certainly kids make it even more important. – D Stanley Mar 14 at 19:56
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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.

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    What if the funeral company OP pays the money to goes bankrupt before OP dies, though? Setting some money aside to cover the funeral when the moment comes seems like a better approach to me. – Gweddry Mar 15 at 9:25
  • Some pre-paid funeral plans have provisions for that -- some sort of insurance or membership in a group so that some other funeral parlor will take over. Certainly something to think about when you get a prepaid funeral plan. – Jay Mar 15 at 18:20
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    This would make sense if you already have one foot in the grave, but unless the OP is into parachute-less skydiving, for a 20-something there are probably much better things to toss money at than a funeral prepayment. – whatsisname Mar 15 at 20:57
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    I wouldn't recommend that a single (and healthy) 20-year old pre-pay funeral arrangements, he may end up paying for a burial in his home town, but may prefer to be buried next to his future wife near their future home. – Johnny Mar 17 at 4:35
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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.

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    You make it sound like the life insurance is paid out days after the event and isn't delayed by an investigation about its validity etc. Do you have any grounds for this? AFAIK they can wait 30 days and possibly more. – pipe Mar 14 at 15:21
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    Nope. At least in England and Wales. Banks etc will happily pay funeral director's bills long before you get probate (this is because "Funeral Expenses" are the first call on the estate - so the bank cannot possibly be sued by another creditor who should have got that money.) Other jurisdictions may or may not have similar rules (and it's the sort of thing that is quite likely to vary between US states). – Martin Bonner Mar 14 at 15:22
  • @pipe I know the Dutch situation where there's special insurance policies for funerals, which pay out on showing a death certificate. Usually (in all cases I've sadly had to deal with funerals) you hand over the policy and death certificate to the funeral home and they'll use it to cover all the costs of the funeral and associated things (flower arrangements for example), then either bill you any shortfalls or compensate you the remainder. Those policies are there expressly to allow for funds for the funeral as the bank accounts of the deceased may be locked for months after their death. – jwenting Mar 15 at 4:48
  • I think estate planning is the ultimate answer here. Setting aside enough money to pay for funeral expenses, AND specifying any parts of it that you have preferences about, would be one thing to take care of. Trusts for younger relatives, and a will defining who gets what. Depending on how well off, if you don't specify who gets what, they will argue over it, and those arguments can ruin relationships, sometimes permanently. At the very least @steve should have a will and an executor. Most states allow/require the executor to pay the funeral expenses first. – Xalorous Mar 15 at 13:17
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    "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." is a key part of this answer not present in others. The younger you are, the cheaper you can lock in life insurance. Not that you definitely need to, but this shouldn't be overlooked. – Grade 'Eh' Bacon Mar 15 at 16:25
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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.

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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.

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    I'm guessing you're not from the U.S.; few places (if any) have any such dedicated taxes to support funeral expenses. There's generally some form of indigent burial support, but it varies wildly by state and even county; it's usually means-tested, and the definition of "poor" is often too strict. And it's bare bones; you're not going to have a special reception and viewing "ceremony". If the OP's folks are okay with that, so be it, but most people want more, and "more" costs thousands of dollars. Newspaper obits are quite cheap by contrast, topping out in the hundreds of dollars. – ShadowRanger Mar 15 at 21:59
  • And in many localities/countries indigent funeral support means cremation and burial of the cremains in a shared grave or scattered out at sea. This may not align with you or your family's wishes. – user71659 Mar 18 at 2:57
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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.

  • What, exactly, is a segregated fund? – JoeTaxpayer Mar 16 at 3:43
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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.

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protected by JoeTaxpayer Mar 16 at 3:44

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