When a loved one passes away, families immediately concern themselves with how to cover the costs of the funeral. Funeral expenses can be overwhelming, and during such an emotional time, financial stress is the last thing families need. Luckily, the life insurance assignment process provides a way for families to use a loved one’s life insurance policy to cover funeral costs quickly and easily.
If you’re unfamiliar with the process, don’t worry. We’ve put together this step-by-step guide to help you understand how life insurance assignments work, what to expect, and how funeral directors can assist you along the way.
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What Is a Life Insurance Assignment Process?
A life insurance assignment is a way for the beneficiary of a life insurance policy to assign a portion of the benefits to a funeral home or a funeral funding company. This enables the funeral home to receive payment directly from the life insurance payout, allowing families to avoid any upfront costs.
Step-by-Step Guide to Life Insurance Assignments
Here’s how the process typically works:
1. Contact the Funeral Home
After the passing of a loved one, the first step is to contact a funeral home to begin the planning process. During this time, the funeral director may ask if you’re interested in using a life insurance assignment to cover the funeral costs. If so, they will guide you through the next steps.
2. Provide Life Insurance Policy Details
Once you decide to use the life insurance assignment, the funeral home will need the details of your loved one’s life insurance policy. This typically includes the policy number, the name of the insurance company, and the contact information for the insurance provider.
3. Funeral Home or Funding Company Verifies the Policy
The funeral home, or a third-party funeral funding company, will then verify the life insurance policy to ensure that it is active and that there are sufficient funds to cover the funeral costs. They’ll work directly with the insurance provider on your behalf, saving you from having to make those calls yourself.
4. Sign the Assignment Agreement
Once the policy is verified, the beneficiary of the life insurance policy will need to sign an assignment agreement. This agreement allows the insurance company to pay the funeral home or funding company directly from the life insurance benefits. Note that the signed assignment may be necessary before the insurance company can verify information with the funding company.
5. Funeral Home Receives Payment
Once the assignment is in place, the funeral home or funding company will receive payment directly from the insurance provider. This ensures that funeral costs are covered without any delay or out-of-pocket expenses for the family.
6. Remaining Insurance Payout
After the funeral costs are paid, any remaining life insurance benefits will go to the designated beneficiaries. The life insurance assignment only covers the funeral expenses, so the rest of the policy is yours to use as needed.
Common Questions and Concerns Families May Have About the Life Insurance Assignment Process
Understandably, families may have questions or concerns about the life insurance assignment process. Let’s address a few of the most common ones:
1. How long does it take for the funeral home to get paid?
Once the funeral funding companies verify the life insurance policy and sign the assignment, they usually complete the payment process quickly. These companies are experienced in working with insurance providers and can often expedite the process. Typically, they make the payment within a few days.
2. Will I have to pay anything upfront?
No, one of the main benefits of a life insurance assignment is that it allows the funeral home to be paid directly from the insurance policy. This means there are no upfront costs for the family, easing financial stress during a difficult time.
3. What if there’s a delay in the insurance payout?
In the rare case of a delay, funeral funding companies can often advance the necessary funds to the funeral home so that the services can proceed as planned, even if the insurance payout hasn’t come through yet.
4. Is this the same as using the entire life insurance policy?
No. The life insurance assignment only covers the funeral expenses. The rest of the life insurance benefits will still go to the beneficiaries as outlined in the policy.
5. Can any life insurance policy be used for an assignment?
You can assign most traditional life insurance policies, but some, like certain types of group life insurance or those with very low payouts, may have limitations. Your funeral director or a funeral funding company can help verify whether the policy qualifies.
How Funeral Directors Facilitate the Life Insurance Assignment Process
Funeral directors play a key role in making the life insurance assignment process smooth and stress-free for families. Here’s how they help:
1. Guiding the Family
From the moment you start planning the funeral, the funeral director is there to guide you. They’ll ask if you’d like to use a life insurance assignment to cover the costs and explain how the process works. They can also answer any questions you have and make sure you understand each step.
2. Handling the Paperwork
Dealing with paperwork is the last thing families want to do when they’re grieving. Funding companies take this responsibility off your plate by handling the necessary forms and working directly with the insurance provider to verify the policy and initiate the assignment.
3. Working with Funeral Funding Companies
In some cases, funeral directors partner with third-party funeral funding companies to expedite the process. These companies specialize in life insurance assignments, allowing them to speed up verification and payment, ensuring that everything is taken care of as quickly as possible.
4. Coordinating Payment
Once the life insurance assignment is established, funding companies ensure direct payment from the insurance provider. They manage this process behind the scenes, so you don’t have to worry about it. You can rest assured that the costs will be covered, and you won’t be faced with any surprise bills.
Final Thoughts
The life insurance assignment process provides families with a practical way to cover funeral expenses without the burden of upfront payments. You can read real stories of families who benefited from life insurance assignments here. By assigning a portion of your loved one’s life insurance benefits to the funeral home, you can focus on honoring them and spending time with family. With assistance from a funeral director and possibly a funeral funding company, the process is streamlined and designed to offer relief during a difficult time.
If you find yourself in this situation, don’t hesitate to ask your funeral director about life insurance assignments—they’re there to help you.
