The Insurance Assignment

insurance1When the death of a loved one occurs, some families are very surprised at the expense incurred for final disposition.  One element of the process that is particularly surprising is that the expenses need to be covered before burial can occur.  The monies, in case you didn’t know, need to be paid before the service can begin.

As has been discussed in a previous post, one method of payment that families employ when there is an insurance policy available is called an insurance assignment.  The insurance assignment is defined as assigning the death benefit or a portion thereof to a third party for payment of services.  Doing this enables the funeral to occur without having to wait for the death benefit to be paid.  And payment on the death benefit depends on, among other factors, the generation of a death certificate which can sometimes, depending on the circumstances surrounding the death, take a period of several days to several weeks.  It is safe to say that payment of the death benefit can take a period of a month or two which is too long a period to delay the service.

One drawback of depending on an insurance policy to pay for burial is that many times, the death benefit is needed to settle other matters of the estate.  For instance, if the death follows a period of illness requiring a hospital stay, the money needed for that bill can deplete a death benefit in very little time.  So it may be possible that there would be no funds for burial expense.

Another drawback of dependence on an insurance policy is that the proceeds will be paying for the expenses at the current cost.  If the expenses are paid in advance with you making the payment rather than waiting until you die and your family will have to, you freeze the cost at today’s cost.  I remember a recent case where a person paid their burial expenses in 1973 at a total charge of $359.28.  When they were buried in 2014, there was no additional cost.  If they would have had to purchase the same burial at current prices, the charge would have been $1,655.00.  In this case, insurance was not needed but if it had been I would guess that the family would have been glad to have $1655 more available to settle the estate.

In closing, I will leave it up to your decision to pay your expenses in advance, or let the insurance policy pay for them when needed.  In many cases it makes sense to plan in advance, but there are many factors affecting an estate, and you are more familiar with your situation than I am.
What are your thoughts on paying for final expenses?  I would enjoy hearing your comments below.

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