The short answer
Final expense insurance pays a cash benefit to the person you name, and that money can help cover a funeral, burial or cremation, final medical bills, small debts, family travel and estate costs. The beneficiary can generally use the money any way they choose. The policy does not pay a funeral home directly unless an assignment is set up.
Key takeaways
- Final expense insurance pays cash to your beneficiary, not a bill-by-bill list of covered services.
- Common uses include the funeral, burial or cremation, final medical bills, small debts, travel and probate costs.
- Your beneficiary can generally spend the money any way they choose, so naming someone you trust matters.
- A beneficiary can often assign part of the payout to a funeral home, which then gets paid directly by the insurer.
- Preneed insurance is different: it is tied to one funeral home and the funeral you chose.
What are final expenses?
Final expenses are the costs that come up at the end of life and right after a death. Some are paid to a funeral home or cemetery. Others are bills the person left behind, or costs the family takes on while settling things. Final expense insurance, also called burial insurance, is a small whole life insurance policy meant to help pay these costs.
Unlike health insurance, a final expense policy does not have a list of covered services. It pays a set dollar amount, the face amount, to the beneficiary after the insured dies. What that money covers is up to the beneficiary.
Itemized list: what final expense insurance can help cover
| Expense | What it includes | Learn more |
|---|---|---|
| Funeral home services | Basic services fee, transport, embalming or other preparation, viewing, the service itself | Funeral cost breakdown |
| Burial | Casket, cemetery plot, opening and closing the grave, burial vault or liner, headstone or marker | Funeral costs |
| Cremation | Cremation fee, container, urn, and any memorial service or niche | Cremation cost |
| Final medical bills | Hospital, hospice, nursing care or other bills owed at death | Medicare and funeral expenses |
| Debts | Credit cards, small loans and other bills the estate must settle | See the section on debts below |
| Travel | Flights, hotels and meals for family attending the service | Funeral planning checklist |
| Probate and estate costs | Court fees, legal help, certified death certificates | End-of-life planning checklist |
| Other costs | Flowers, obituary, reception, clothing, lost wages for a family member taking time off | Funeral cost calculator |
The FTC Funeral Rule gives you the right to an itemized price list from a funeral home, so you can choose only the goods and services you want. See our guide to the FTC Funeral Rule.
How much does it cost to die?
There is no single number. The total depends on burial or cremation, the funeral home and region, the choices the family makes, and whether there are medical bills or debts. Funeral home prices also vary widely within the same city.
For current national figures, see average funeral costs. To estimate your own total, use the funeral cost calculator, then the coverage calculator to think about how much coverage to ask about.
Can the beneficiary use the money for anything?
Generally, yes. A final expense policy pays the named beneficiary, who can generally use the money for the funeral, for bills, or for something else. The policy does not require the money to be spent on a funeral.
- Name someone you trust and talk with them about what you want the money used for.
- Write down your wishes so the family knows your plans. Our funeral planning checklist can help.
- Name a backup beneficiary in case the first one dies before you.
- Keep the policy where family can find it. If a relative may have had a policy you cannot find, see how to find a lost life insurance policy.
Life insurance proceeds paid to a beneficiary because of the insured's death are generally not taxable income, according to the IRS. Interest paid on the proceeds can be taxable.
What about debts?
According to the FTC, debts are generally owed by and paid from the deceased person's estate. Family members usually do not have to pay them from their own money. There are exceptions, such as a debt you cosigned or certain spouse rules in some states.
Because a policy with a living named beneficiary pays that person rather than the estate, the payout is generally not used to pay the deceased person's debts unless the beneficiary chooses to. If the estate is the beneficiary, or no beneficiary is living, the money may go through the estate. A probate attorney in your state can explain how this works where you live.
Paying the funeral home: policy payout vs. assignment
There are two common ways the money reaches the funeral home:
| Beneficiary is paid, then pays | Assignment to the funeral home | |
|---|---|---|
| How it works | The insurer pays the beneficiary, who then pays the funeral bill | The beneficiary signs a form telling the insurer to pay part of the benefit directly to the funeral home |
| When the funeral home is paid | After the claim is paid | When the insurer pays the claim; some funeral homes may proceed once the assignment is accepted |
| What happens to leftover money | Stays with the beneficiary | The rest goes to the beneficiary |
| Things to check | Whether the funeral home wants payment before the service | Whether the funeral home accepts assignments and whether there is a fee |
Only assign the amount of the funeral bill, and ask for the itemized statement first. More detail is in life insurance for funeral costs and how a life insurance payout works after a death.
Final expense insurance vs. preneed insurance
Preneed insurance is sold through a funeral home and is tied to a funeral you plan with that funeral home. When you die, it pays the funeral home for the goods and services in your contract. Final expense insurance pays your beneficiary instead, who can use it for the funeral or any other final expense.
Not sure which fits? See types of burial insurance, prepaid funeral plans, or talk with a Licensed Insurance Agent.
Common questions
What does final expense insurance cover?
It pays a cash benefit to your beneficiary, who can use it to help cover the funeral, burial or cremation, final medical bills, small debts, family travel and probate costs. There is no list of covered services. The beneficiary can generally spend the money any way they choose.
What does burial insurance cover?
Burial insurance is another name for final expense insurance, so it works the same way. It pays a set amount to your beneficiary, which can help pay for a burial or cremation, the funeral service, and other final bills. See what is final expense insurance.
Does final expense insurance pay the funeral home directly?
Not on its own. It pays the beneficiary. The beneficiary can often sign an assignment that tells the insurer to pay part of the benefit to the funeral home. Not every funeral home accepts assignments, and some charge a fee, so ask first.
Does final expense insurance cover cremation?
Yes, in the sense that the payout can be used for cremation. The policy pays the beneficiary, who can use it for cremation, a memorial service or anything else. See cremation insurance and cremation cost.
Does the beneficiary have to use the money for the funeral?
Generally, no. The beneficiary can use the money as they choose. That is why it helps to name someone you trust and to tell them your wishes. A preneed policy or a funeral trust ties the money to one funeral home instead.
Can final expense insurance pay off credit card debt?
The beneficiary can choose to use the money that way. The FTC says debts are generally paid from the deceased person's estate, and family members usually do not have to pay them from their own money, with some exceptions. A probate attorney can explain your state's rules.
Is the final expense payout taxable?
According to the IRS, life insurance proceeds received because of the insured's death are generally not taxable income. Any interest paid on top of the proceeds can be taxable. A tax professional can answer questions about a specific situation.
Does Medicare or Social Security cover final expenses?
Medicare does not pay for funerals. Social Security pays a one-time $255 death payment to an eligible surviving spouse or child. Veterans may have burial benefits. See Medicare and funeral expenses and burial assistance programs.