What Happens If Someone Dies & Has No Life Insurance?

Life insurance is offered to help relieve the financial burden death brings. When a family is mourning the loss of a loved one, money is the last thing they want to worry about. Unfortunately, families that can't afford the cost of a funeral or unpaid debt can't help but worry. Without life insurance, the family and estate are responsible for paying funeral expenses and debt.

TL;DR (Too Long; Didn't Read)

When someone dies without life insurance, either their estate or their family members will have to incur the costs of the funeral and burial.

Funeral Expenses

Life insurance policies typically are taken out to help cover the cost of funeral expenses. Without insurance, families are left to pay the expenses. For a family that is struggling financially, it can be a big burden. There is limited financial assistance available for funeral and burial costs. According to the National Funeral Directors Association, the average cost of a traditional funeral with viewing and burial is $7,360, but that does not include the cost of a vault, which a cemetery usually requires. Add in the cost of a vault, and the average rises to $8,508. That amount does not include a headstone or any other type of monument or marker. These additions may drive funeral costs beyond $10,000. Cremation is a less expensive alternative than burial, with an average cost as of 2018 of $1,100. However, that amount does not include a funeral service.

Responsibility for Debt

When a person dies, the estate is responsible for unpaid bills. If a person has assets that aren't protected, such as investment properties or bank accounts without a beneficiary, the assets become subject to probate. Creditors can submit a claim to the probate court for the amount of debt. Before any assets are divided, the debt is paid. Any remaining assets are inherited as declared in a will or specified by state law.

Reimbursement from the Estate

If a person dies without naming beneficiaries on bank accounts, the family may not have access to those funds until the estate goes through the probate process. In some states, probate can take years. A family member can pay for funeral expenses and submit a claim for reimbursement when the estate is probated. Most states consider funeral expenses a top priority.

Assistance from the Social Security Administration

Along with funeral expenses and debt obligations, a family left behind may have a difficult time making ends meet without life insurance money. The Social Security Administration provides the surviving spouse or child a one-time death benefit. As of 2019, the death benefit is $255. When a person leaves behind a spouse, divorced spouse or dependent children, they may be entitled to receive recurring monthly benefits. Survivor benefits are based on the person's earnings prior to death. Anyone who works at least 10 years and pays Social Security taxes is eligible.

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