How to Financially Plan for Death

Death might be one of the worst parts of life. Beyond the terrible hole left by the departed, there can be enormous costs as well. While it might seem inappropriate to think about the financial aspect of death, it's much better to plan for it in advance. Or else when the day does come, it'll be even worse, as you or your family will have to face major financial hardship in addition to the emotional hardships.

Thankfully, there are steps you can take to prepare for the inevitable. And we spoke to the experts to find out what those steps are.

The earlier you purchase life insurance, the better. 

No one likes to think about their own mortality or the mortality of their family members. But it’s going to happen one day. And that means you should start preparing, even if it’s a bummer.

Unfortunately, many people don’t make a plan in time.

“Death is one of the costliest events that everyone will experience at some point, but no one actually wants to think about,” explained Kelsey Allan, an insurance specialist with TermLife2Go. “In fact, about one-third of people who haven't bought life insurance have not done so because they don't think about death. Unfortunately, putting something out of mind cannot prevent the inevitable, so the wise thing to do for your loved ones is to invest in life insurance.

“Here are some striking facts about the costs of death, and how to prepare for it:

• 70% of US households would not be able to keep up with living expenses if the primary wage earner passed away.
• Average funeral costs range between $7,000 and $10,000—and that's not even considering your loved one's living expenses after the funeral.
• The younger you are, the more affordable life insurance will be.
• You can purchase either term insurance to cover you for a specified period of time, or whole-life insurance to cover you as long as you pay your premiums. Term life insurance tends to be cheaper but must also be renewed, often at an increased cost.”

Burial insurance can help cover funeral costs.

But traditional life insurance isn’t the only insurance to consider when it comes to mortality.

“One issue individuals often overlook is having an insurance policy, to address final expenses, and funeral costs,” warned Matt Schmidt, CEO of Burial Insurance Pro. “Traditional life insurance policies may take weeks or months to pay out the death benefit, and this would not help your family out with the immediate need to pay for final expenses. Or if a person has money put aside in, let’s say, a savings account, the family may not be able to legally touch this account until the estate is settled. A basic burial insurance policy is designed to pay out in 48 hours, and to address these concerns.”

Life insurance isn't just for parents either.

Finally, there’s one of the worst tragedies a parent can imagine: the death of a child. Psychologically, it can feel like taking precautions for that possibility makes it more likely to happen, but that’s not the case. When it comes to life insurance, the earlier the better, as Lisa Ryerson, regional vice-president of Appreciation Financial, outlined for us:

“I truly believe that once a newborn gets his or her social security number then their parents should get them a life insurance policy. It will set the child up for college funds, retirement, living benefits, and life insurance for the future. It is so inexpensive for babies to get life insurance. The cost of life insurance increases as we get older and our health declines as well, making it more challenging and in some cases the person can be considered uninsurable.

Some life insurance policies can benefit the living.

“I have met many families and never once have I met someone that was upset with owning life insurance when a family member dies," said Ryerson. "Unfortunately, the opposite is also true and I have met too many families that did not have life insurance and some of their stories are heartbreaking such as losing their home, financial stress (especially during the grieving process), and overall the complete financial ruin that can come with the loss of a loved one.

“Life insurance products have improved so much over the years and it's much more than just a death benefit. There are living benefits that truly help people so they don't have to die to access some of the benefits and address some of the real basic needs that people have. The fact remains that we are living longer than ever before but with that comes challenges with health and other costs. Our products help make sure people don't put themselves in a financial bind.

When it comes to death, America is underinsured.

According to Ryerson, "Far too many people do not have life insurance. America is grossly underinsured." She also shared these astounding statistics: "According to a life insurance survey, 64% of Americans do not have life insurance at all. The majority of life insurance in this country is owned by the top 10% of income earners, and as they pass their heirs reap the rewards. We want to reverse that trend, not to make people rich through life insurance but rather to ensure that families don't become poor because they didn't have it in place.

“Without life insurance, your family could end up homeless because they won't be able to pay the mortgage. Children could end up ‘losing’ both parents when one parent dies because the surviving parent will need to focus on bringing in an income and will not be able to be present with their children. Survivors will be left with a lot of debt. One of the worst and yet best parts of my job is delivering a death benefit, because although families are going through great a pain after death, it pales in comparison to families that are grieving and financially struggling at the same time. Death is a part of life and by being prepared you can be sure that your heirs will be taken care of.

Decide your beneficiaries and plan for specific expenses.

“Figure out who and what you would like to be covered if something were to happen to you," advised Ryerson. "Mortgage, children's college expenses, burial expenses, debt, etc. It's important to remember that when someone passes away there is a grieving period which typically means time away from work. There are also additional expenses that come with death so it's a ‘double whammy’ because income is lost and additional expenses are taken on. I would shoot for 10 times your income as a good rule of thumb when it comes to insurance. That gives your family a 10-year buffer to either pay down debt or have income accessible to them for that time period.”

No one wants to think about the worst parts of life. But if you prepare now, things will be a lot better if and when they do happen. You can't stop death forever. But you can, and should, prepare for it.

Kelsey Allan is the outreach manager for TermLife2Go (@TermLife2Go), specializing in life insurance, personal and family finance, and related subjects. She has been featured in Reader's Digest and HowStuffWorks as well as other media outlets.

Lisa Ryerson is a co-founder of Women of Wealth  (WOW) and a Regional Vice President at Appreciation Financial. She has been in the financial industry for 4 ½ years. She founded WOW because she really wanted to empower and lift other females to achieve their goals. The legacy that she is committed to leaving is philanthropy. She was rookie of the year at Appreciation Financial in 2015 and the first female to be inducted into the $50k/month club. Her future goal is to fundraise 2-million dollars for cancer research. Lisa is married with two amazing sons. She loves to laugh, travel, and give back.

Matt Schmidt is the owner of Burial Insurance Pro. Burial Insurance Pros helps families all across the United States obtain affordable burial and final expense insurance policies that would assist their families at the time of death.