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End-of-life costs — and how an IUL covers them
- Creative Director
- Sep 1
- 5 min read
Updated: 7 days ago
Families don’t buy an IUL because life is rosy; they buy it because the first year after a death is financially brutal. When someone passes, their family isn’t just planning a funeral. They’re suddenly dealing with a pile of bills, accounts, and to-dos. A well-designed IUL turns a chaotic pile of urgent bills into a funded plan. Here’s what loved ones are left with the first year—and how an Indexed Universal Life (IUL) policy’s tax-free death benefit is a simple way to protect them.
The First 365 Days - The Most Brutal
Day 1–7: Bills don’t wait; cash can.
What hits:
Funeral home deposits, obituary fees, travel for relatives, child-care fill-ins, plus everyday bills that still draft from accounts. If key bank accounts were in the deceased’s name only, access can stall while paperwork catches up.
Cost:
Burial path (typical example) - median funeral w/ burial $8,300
Cemetery plot (illustrative), opening/closing, perpetual care → ~$2,000–$4,000
Headstone/marker → ~$1,000–$3,000
Obituary, flowers, programs, extra death certs → ~$300–$800+
Estimated all-in: ~$12,500–$18,800+
Cremation + memorial (typical example) - median funeral → $6,280
Venue/obituary/flowers/extra death certs/travel → ~$500–$2,000+
Estimated all-in: ~$6,800–$8,500+
Utilities, subscriptions & autopays: Phone, internet, streaming, cloud storage, apps, gym/club dues, home deliveries, security systems — someone must find and cancel or transfer all of them.
Pets (yes, really): Immediate care/boarding, food, meds, ongoing vet costs; typical boarding runs ~$25/day (and up)
How an IUL helps:
A properly set-up IUL pays a death benefit directly to named beneficiaries—typically outside probate—so the family isn’t waiting on court timelines.
Proceeds can cover funeral and burial/cremation costs, replace missing paychecks, and keep auto-pays from bouncing.
Bottom line: families often need $6,000–$10,000+ immediately (before we even talk about debts or monthly bills). An IUL’s death benefit can drop into your beneficiary’s account quickly to handle this cash crunch.
Weeks 2–6: The benefits cliff (health insurance & income gaps)
What hits:
Employer health insurance usually ends quickly. COBRA or marketplace coverage is expensive. If the deceased handled school pickups or after-care, child-care expenses can spike overnight. Missed work for the survivor often means missed pay.
Cost:
Health insurance premiums: shifting to COBRA/Marketplace means the family pays the full cost out-of-pocket (employer subsidy ends). Medicare beneficiaries averaged $6,330 out-of-pocket
Child care & household help: National average child-care price was $13,128 (per child; varies by state and age).
Education funding: Average public in-state tuition & fees is $11,610 (before housing/food/transport). Full student budgets run ~$29,910 for public in-state and ~$62,990 at private nonprofits.
How an IUL helps:
The death benefit can fund COBRA or marketplace premiums for a year or two, buying time to stabilize.
Families often earmark a portion of the benefit for child-care so the surviving parent can keep working.
If an illness preceded death and the policy included living-benefit riders (accelerated benefits for terminal/chronic/critical illness), some funds may have been available even before passing—reducing the debt pile that shows up now. (Riders vary by policy.)
Months 2–4: Housing, debt, and probate friction
What hits:
Mortgages and rents stay due. If the loan wasn’t in the survivor’s name, dealing with the servicer can be slow. Probate can delay access to certain assets. Meanwhile, credit-card balances, medical bills, and auto loans keep accruing interest.
Cost:
Home costs that don’t pause: mortgage or rent, taxes/HOA, insurance, utilities, security, maintenance.
Living expenses - gas, groceries, diapers, detergent etc.
How an IUL helps:
Many families use part of the death benefit to make several months of mortgage payments up front—or to retire the loan entirely—eliminating foreclosure risk during the paperwork slog.
Because beneficiaries are paid directly, IUL proceeds can be available while probate takes its time.
Months 3–9: The “one income, same bills” squeeze
What hits:
One paycheck gone, but the same fixed costs. The surviving spouse may face higher taxes in future years filing as single, and premiums for healthcare/Medicare can rise relative to household income. Any gap shows up in the checking account first.
Cost:
Your part of the income is gone. Average household relies on $6,000/mo take-home.
How an IUL helps:
The death benefit is often sized at 10–15× annual income to rebuild the missing paycheck for years.
Settlement options can be structured as monthly income (instead of one lump sum) to mimic a paycheck and prevent overspending.
If the policy had accumulated cash value and the insured died, beneficiaries still receive the contractual death benefit; families plan the amount to cover taxes, insurance, and living costs for a multi-year runway.
For Example:
Household relied on $6,000/mo take-home from one earner.
We size an IUL to deliver $6,000/mo for 5–10 years (that’s $360k–$720k of coverage), plus: 36 months of health premiums, child-care costs (~$13,128/yr per child as a planning placeholder), and a final-expenses reserve
Result: survivors can keep the home, keep coverage, keep school/daycare, and breathe.
Months 6–12: Lingering liabilities
What hits:
Private student loans, medical collections, and legal costs don’t vanish on their own. Selling a home or business can take months. Cash flow is the difference between negotiating from strength and taking a bad deal.
How an IUL helps:
Families use the benefit to knock out high-interest debts immediately, stopping the interest bleed.
Keeping strong cash reserves from the payout allows smarter timing on big decisions (home sale, career changes) rather than fire-sales under pressure.
If the deceased owned a small business, proceeds can cover payroll and vendor obligations while ownership transitions.
The ongoing monthly hit (what sticks)
What hits:
Child-care, groceries, utilities, car payments, activities, and tuition all continue. There’s no “widow’s discount.”
How an IUL helps:
The face amount can be designed to create a sustainable monthly income stream for 5–15 years, covering the period when kids are most expensive.
Some policies offer riders that automatically convert a portion of the death benefit into a defined monthly payment for a set term, preventing the money from being spent too fast. (Names and availability vary.)
Design choices that make an IUL actually work at crunch time!
Correct face amount: Start with replacing after-tax income, then add final expenses, high-interest debts, and a child-care buffer.
Beneficiary setup: Primary and contingent beneficiaries; consider a trust for minors or special-needs planning.
Riders to consider: Accelerated death benefits (illness), waiver of premium (if disabled before death), income-protection/settlement riders.
Ownership & coordination: Align policy ownership with your estate plan so proceeds go where you intend without detours.
Review annually: Pay attention to caps, floors, charges, and performance; adjust premiums/face amount as life changes.
Why people pick an IUL for these costs?
Tax-advantaged payout for your family:
Life insurance death benefits are generally income-tax-free to beneficiaries.
Faster access:
With a named beneficiary, life insurance typically bypasses probate, so loved ones can claim benefits directly from the insurer.
Can align to your exact target:
Many clients earmark $30,000–$50,000 (or more) to cover funeral, cemetery, travel, and a cushion for final bills—then adjust as life changes.
Flexible while you’re living:
Your IUL builds cash value you can access along the way for planned expenses (or opportunities), while keeping long-term protection in place.
Living benefits when life happens:
Many IULs include accelerated death benefit options for qualifying terminal, chronic, or critical illness—letting you access part of the benefit while alive to handle big bills with dignity
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