Dying Without Life Insurance
On our website, we talk a lot about how you want to make sure you’re insured when you pass away, so your beneficiaries can receive the death benefit to spend how they wish.
What we don’t talk about is what happens if you die without having a life insurance policy in force.
In this article, we will discuss what expenses are due after someone passes away, and what will happen if that person dies without having a life insurance policy.
Here’s what we'll cover in this post:
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Here’s what we'll cover in this post:
We know this isn’t exactly a fun topic to discuss, but it is unfortunately a fairly important topic when it comes to life insurance. When people buy life insurance, many of them buy it so that their beneficiaries can have money to use towards their funeral once they pass away, and not have to pay out of pocket.
In case you’re not familiar, funerals are pretty expensive. As of 2022, the average funeral costs between $8,000-$10,000. That’s a lot of money to drop on someone unexpectedly, especially when they’re already in emotional distress.
A life insurance policy comes with a death benefit, which can be anywhere from $25,000-$2,000,000, depending on the policy. When the policyholder passes away, the beneficiary(ies) chosen will receive this money to do as they please. Many times, they’ll use some of it to pay for the funeral and burial expenses. If no life insurance policy is in place, then your loved ones will have to pay out-of-pocket.
The funeral is definitely a big expense after you pass away, but it’s not the only expense that your family and loved ones have to worry about.
Often times, your survivors don’t all live in the same area. That means they have to travel to wherever your funeral is being located. Whether that’s by plane or by car, that can be another hefty expense to pay, especially if the notice is last minute.
To add to that, losing someone can be very traumatizing. Without receiving a death benefit, any therapy or counseling sessions that take place after your passing will be up to them to pay for. Even if they’re covered under insurance, the copays can add up quickly.
It’s also expected that your loved ones will need to take some time off from work to cope with your loss. This can mean lost wages, as they most likely won’t get more than a few days of paid leave. Some people need weeks, or even months, to cope (which is understandable).
Finally, taxes and debt. After you die, your beneficiaries will be responsible for any debt that you previously had, as well as the taxes that are pending. If you have an estate over $12,060,000 million, any value beyond that is subject to taxation by the government.
What to Do Without Life Insurance
Now, we are not by any means saying that you should choose the options below rather than opt for a life insurance policy, but it’s good to know that there are choices.
The first option is to take out a loan. Just like with anything else when you don’t have the funds, getting a loan from the bank is usually the first move that people make. Unfortunately, it’s important to keep in mind that your survivors will have to pay interest on this loan over time, and it may hurt their credit score.
If said survivors don’t want to take out a loan from the bank, another option is to ask the funeral home for a payment plan. It is similar to taking out a loan in the sense of making regular payments, but they won’t have to worry about the plan affecting their credit score in any way.
If getting a loan isn’t the road your survivors want to go down, another option you have is to release your body to the County Coroner’s Office.
What does that mean, exactly?
Essentially by doing so, your body will be handed over to the government, which from then on will be responsible for deciding what to do with it - whether that be cremating or burying it. For a fee, your survivors may still have the option to receive your ashes. If they decide not to, your ashes then go into a common grave. Definitely not a comforting option, by any means.
Another option that requires some pre-planning before you pass away is in relation to the Social Security Administration. If you have previously collected social security, sometimes the administration will offer assistance to your loved ones after you’re gone.
Similarly to social security, there may be non-profit organizations in your area that provide assistance to survivors. It can be case-dependent, however. It usually depends on the circumstances of your death and life situation before passing. For example, they may be more willing to help out the child of a single parent, dependents of a veteran, etc.
One last option: starting a campaign. I’m sure you’ve heard of websites like GoFundMe or Fundly before. With the wonderful invention of the internet, your survivors can now have people all over the world help them in their time of need. They can donate as little as $5, if multiple people are willing to help, it could definitely add up and cover some of the costs your survivors will endure.
Buying the Right Life Insurance Policy
Now that we’ve discussed what it’s like to deal with a death without life insurance, you can understand why having a policy in place is so important. But which type of life insurance policy do you choose?
Many people buy life insurance specifically for final expenses. To learn more about that, check out our article, "14 Things to Know About Life Insurance for Burial and Final Expenses."
While term life insurance is typically the cheapest option (depending on your current age), it is important to note that this type of policy is temporary. It is only in effect for a certain number of years (the term).
This may work if you buy a term later on in life, but after age 60, 30-year term policies are no longer available. Not to mention the monthly rate by the time your 60 is pretty substantial.
If you are in average health or above and don’t mind taking a medical exam, we suggest opting for a guaranteed universal life (GUL) insurance policy. They’re less expensive than the traditional whole life insurance policy, but are, in a sense, still a permanent policy.
Instead of being in force for a certain number of years like term life, GUL policies go until a certain age, like 90, 95, 100, 105, 110, or even 121. With the average age of an American being 79-years-old, it’s safe to say that you’ll most likely be secured permanent coverage.
If you don’t want to take a medical exam, a whole life insurance policy would be another option. However, these policies typically don’t offer more than $50,000 in coverage, and tend to have very costly monthly premiums.
Lastly, if your health isn’t in good shape and you’ve been declined by all other types of policies, you may want to look into a guaranteed issue life insurance policy. They are available to anyone between the ages of 50 and 80 (sometimes 85), don’t require a medical exam, and can be issued in as little as 15 minutes. Do note though, that these policies have a waiting period of 2 years, meaning that if you pass away before then, they are not obligated to pay the death benefit to your survivors.
Questions? We Can Help!
Looking for more information on what life insurance policy will best fit your needs? We’re here to help!
At JRC Insurance Group, we have helped thousands of families and businesses with their life insurance needs, and we can help you too! Our agency is licensed in all 50 states and we’re independently owned and operated.
As a non-partial, no-fee brokerage, our goal is match our clients with the best life insurance options available by shopping and comparing rates from 63 highly-rated insurers. By having access to dozens of companies and their guidelines, we’re able to save our client’s time and money.
Most importantly, our services as completely free, and there is no cost to apply for coverage. Give us a call toll-free today at 855-247-9555, or you can request a free quote online to compare rates and options from dozens of insurance companies in less than a minute.
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