There are many options, but the best use of the money is different for each widow and her unique circumstances.
The loss of a spouse is one of the most stressful events a person can experience. With it comes a whole host of emotions that can be overwhelming for the bereaved. Hopefully, life insurance is one thing that was put in place to allow those remaining to process their loss without fretting over their finances.
The lump-sum life insurance offers can cover immediate significant expenses as well as long-term costs that might be hard to afford because of lost income. Life insurance is also typically one of the first assets transferred to the beneficiary after a death.
According to Robert Steele, partner and head of the Trusts & Estates Department at Schwartz Sladkus Reich Greenberg Atlas LLP: “Life insurance death benefits can be paid within 30 days after you submit a claim. In order to submit a claim, you will need a certified death certificate, which is generally issued in less than a week by the funeral home.” Steele advises widows to order plenty of copies — while it varies, consider 15 as a ballpark — because ordering extras later can take much longer.
On occasion, Mr. Steele has seen death benefit claims paid in as little as two to three weeks. Steele advises, “The secret is to file the claim with the insurance company in a timely manner. Submitting a certified death certificate and double-checking to make sure the claim form is both complete and error-free is also key.”
Once the life insurance proceeds are received, a new question may arise. How should one use the funds? There are many options, but the best use of the money is different for each widow and her unique circumstances.
Funeral Costs
In 2021, the average funeral cost ranges from $9,500 to $12,500, according to the National Funeral Directors Association. However, standard funeral rates are increasing, and many can reach prices of $30,000 or more. Using life insurance money to cover these costs can significantly decrease the financial strain on you.
Ongoing Expenses
When your spouse dies, your living expenses do not stop, and often your income is reduced. According to the Women’s Institute for a Secure Retirement, after the death of a spouse, household income generally declines by about 40% due to changes in Social Security benefits, spouse’s retirement income and earnings.
Your mortgage, car payment, utilities, food, clothing and health care premiums are all part of your monthly budget that need to be paid on this reduced income. The death benefit from a life insurance policy can help provide the funds you need to help cover these expenses.
Debt Payoff
You are generally not personally responsible for paying off the debts of your husband, as long as they are in his name alone. That includes credit card debt, student loans, car loans and business loans. Instead, debts will be paid by his estate. When an estate does not have enough funds to pay all the debts, any gifts that were supposed to be paid out to beneficiaries will most likely be reduced.