— But life insurance can cover that and much more

By Lina Roby

• The average family will spend $17,199 on funeral and legal costs before estates are settled.
• The higher your income, the longer it will take to settle your estate.
• Even a small guaranteed-issue life insurance plan can counterbalance end-of-life costs.

According to a cost of dying report from, creators of the Empathy mobile app, which is designed to guide families through the grieving and post-death process, the average beneficiary in the US spends $17,199 on things like court costs, funerals, and more. The average estate is not settled for months or even years due to court filings, disputes, and other largely administrative aspects.

What does this mean for loved ones? In short, you’ll need to come out of pocket with $17,199 or more when the the median bank account balance of the average American is just $5,300 according to the Federal Reserve’s most recent Survey of Consumer Finances. This is where having an adequate life insurance policy can make all the difference.

Preparation means communication

Above all else, Empathy co-founder and CEO Ron Gura recommends communication, even over-communication, before death. He says regardless of age, health, or current income, “you need to put your last wishes in place, have sensible conversations with your loved ones, have a guardianship document, advanced directives, etc.”

Free online services allow anybody to create a will. Hospitals will file advanced directives for you. But it starts with communication. We have to talk about death in a way we’ve traditionally avoided in virtually every culture. For many, this also means talking about life insurance and buying a policy that makes sense for you.

How does life insurance protect your loved ones?

A common mantra of experienced life insurance agents and financial planners is also incredibly discouraging for the average consumer: “The most motivated client I have is the one for whom it’s already too late.”

It’s easy to be denied life insurance if you wait too long. Conditions like diabetes, cancer, and sleep apnea affect aging adults without warning, and you may not have as much time as you think. The increase in rates of type 2 diabetes starts at just 45, according to the CDC.

The average figure of $17,199 for costs that must be paid almost immediately after death puts pressure on families already struggling with grief. Even if you’re only interested in a cheap funeral life insurance policy, the price is inevitably lower when you buy early.

When I asked Gura about life insurance in the early days after death, he said, “Whole life and universal life insurance used in planning is very, very impactful. Policies have been around for hundreds of years, and people who have those have one layer less to worry about.”

When I consulted Patricia Stallworth, CFP and financial advisor at The Moneywise Woman, about small funeral policies, she said, “Small policies are a good option if there is nothing else, but they tend to be very costly. If funeral costs are the only concern, I recommend self-insuring if possible. Just setting the money aside in a separate fund – preferably one that is earning interest.”

In short, if you find yourself without savings at a later age, a funeral policy can help your loved ones. However, an interest-bearing fund opened early is best if funeral costs are your only concern. For larger goals like building generational wealth, starting early would be your best option regardless.

Protect loved ones from predatory loans with life insurance

While the average short-term costs after death come in at nearly $20,000, the average American may have just $5,300. Unfortunately, a funeral home has to collect payment at the time of the service to keep its doors open, leaving grieving families stuck in the middle.

It’s unsurprising that, as Gura has found, “25% of people are taking out a loan. Some of the loans are not exactly taken from JPMorgan. They’re taken from predatory lenders at a very vulnerable moment in time.”

Beneficiaries could spend years, even the rest of their lives, buried under the debt of these loan sharks or other predatory loans. The original $17,199 paid will quadruple with interest charges.

Even a $25,000 life insurance policy can pay short-term costs without interest or loan repayment. Ironically, the more money you have, the more beneficiaries pay. As such, life insurance should be proportional to your current income.

Going beyond end-of-life costs 

The lack of financial preparation and communication can financially and otherwise devastate families, especially those already struggling financially. A small funeral policy covering short-term costs can help stabilize loved ones after a loss, but a more extensive policy can build generational wealth.

For example, let’s look at a modest $300,000 whole life insurance policy. Premiums are likely very affordable for young buyers. By the time everything is settled, families might spend around $20,000 to $30,000 to settle a single estate if things go smoothly, leaving loved ones $270,000-$280,000 in tax-free life insurance benefits.

Even if you’re not ready to have the discussion about end-of-life arrangements, life insurance is also made for the living. Many large policies have other withdrawal options built in. More specifically, policyholders can take early withdrawals and life insurance loans.

If you want to see what this means for you, first schedule an appointment with an experienced financial advisor with knowledge of life insurance options. Based on her experience as a seasoned CFP, Stallworth says, “In preparing to help loved ones – depending on the situation, a financial advisor can either work with the estate attorney or go through a checklist of things that need to be reviewed such as wills, the titling of various assets, beneficiaries on various accounts and whether a trust might be appropriate.”

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