Work out your final expense number with a worksheet and a sample family

The right amount of final expense coverage is not a round number that someone suggests; it is the sum of what your death will cost the people left behind, minus the money already set aside to pay it. This worksheet walks through that sum for a hypothetical household, shows how to adjust it for the years between now and when the money is needed, and leaves blanks for your own figures. All the sample amounts are illustrations picked so the arithmetic is easy to check. They are not prices or averages.

Why start from the costs and not from the policy

Coverage amounts often come from a sales conversation: "most people take $10,000" or "this plan tops out at $25,000." Those numbers describe products, not needs. If you start from the policy, you can end up with too little, which leaves family members paying out of pocket, or with more than you need, which means premiums that do not buy anything useful.

Starting from costs reverses the order. You find the target first, then see which funding tools can reach it: savings, a payable-on-death account, a small policy, or a larger one. The final expense insurance: what it covers and costs guide explains the products that fit; this post helps you decide how much of one to want.

The five groups of costs

Final costs fall into five groups. Some are certain and some are only possible, and the worksheet labels the difference.

1. The funeral or cremation. The largest single item for most households and the one with the widest price range. A line-by-line method with local quotes is in a funeral budget worksheet you can fill in with local quotes, and the what a funeral costs and how families pay for it guide covers the national benchmarks and your rights under the FTC Funeral Rule. Use that total here.
2. Debts that will need to be paid. Credit cards, personal loans, unpaid medical bills and any other unsecured balances. Secured debts such as a mortgage or car loan are a separate question, covered below.
3. Travel and family costs. Flights and lodging for relatives who come for the service, plus time off work for the person who handles things.
4. Winding down the household. Utilities, insurance and upkeep on a home that sits empty while it is sold or cleared, storage, cleaning, and return of any rented equipment such as a hospital bed.
5. Estate and legal costs. Court filing fees and attorney fees if the estate goes through probate, the cost of preparing the person's final income tax return, certified copies of documents and similar items.

Then, on the other side of the ledger:

1. Money already set aside. Savings earmarked for the purpose, a payable-on-death account, and any existing life insurance meant to cover these costs.

Who pays a person's debts

People often ask whether children inherit their parents' debts. As a general rule, debts are paid from the deceased person's estate, and relatives are not personally responsible for them. Exceptions exist: a co-signer or joint account holder can owe the balance, and states differ on matters like community property and some obligations for medical care. Debt collectors sometimes contact relatives as though they were responsible. The state attorney general or a probate attorney is the right person to ask about a specific case.

This matters for the worksheet because the estate's cash often pays debts before heirs receive anything. A modest insurance payout to a named beneficiary passes directly to that person and does not go through the estate, which is one reason families use it to pay funeral costs quickly. If you name the estate itself as the beneficiary, creditors may reach the money; see why naming your estate as beneficiary is usually a mistake.

The sample family

Say Rosa Delgado is a hypothetical 72-year-old who lives alone in a house she owns outright. She has two adult children. She wants a number she can plan around. She has $6,000 in a savings account with a payable-on-death beneficiary and a $5,000 final expense policy bought some years ago. Her estate is small, well below any estate tax threshold, and she does not own a business.

Filling in the groups

Here is the sum, group by group.

• Group 1: $9,500.
• Group 2: 3,200 + 4,500 = $7,700.
• Group 3: $1,500.
• Group 4: (3 × 900) + 500 = 2,700 + 500 = $3,200.
• Group 5: 2,500 + 600 = $3,100.

Added together: 9,500 + 7,700 + 1,500 + 3,200 + 3,100 = $25,000.

Adding a cushion

Costs surprise people. A bill arrives late, a relative needs a flight, probate takes longer than hoped. Rosa adds a 10 percent cushion on the total: 25,000 × 0.10 = $2,500. Her gross target is 25,000 + 2,500 = $27,500.

A cushion is a judgment call. If your figures come from recent written quotes, a smaller one is reasonable; if you are guessing, use a larger one.

Subtracting what is already set aside

Rosa has two sources earmarked: the $6,000 savings account and the $5,000 policy, for 6,000 + 5,000 = $11,000.

Her net target, the amount she still needs to arrange, is 27,500 − 11,000 = $16,500.

That is her number. It is not the same as the policy sizes she may be shown; $10,000 would leave a $6,500 shortfall, and a $20,000 policy would overshoot by $3,500. Neither is wrong as a choice, but she can now see what each one means.

A second household for contrast

Say Walter is a hypothetical 68-year-old renter with no children nearby. He prefers a direct cremation, has a small estate and would qualify for a simplified small-estate process in his state, which varies. He has $1,500 in a checking account and no life insurance. His lines look like this.

Group totals: 5,800; 1,900 + 2,200 = 4,100; 800; 1,100 + 400 = 1,500; and 600 + 300 = 900. Added: 5,800 + 4,100 + 800 + 1,500 + 900 = $13,100. A 10 percent cushion is $1,310, so the gross target is 13,100 + 1,310 = $14,410. Subtract the $1,500 in checking and the net target is 14,410 − 1,500 = $12,910.

Reading the two households together is instructive. Rosa's total is nearly twice Walter's, yet Walter has the larger share left to arrange: his net target is about 90 percent of his gross (12,910 ÷ 14,410), while Rosa's is 60 percent of hers (16,500 ÷ 27,500). What separates them is not the size of the bill but how much has already been set aside. Two people with the same costs can need very different amounts of new coverage.

It also shows why a single "typical" figure fails. Walter's biggest line is a simple cremation; Rosa's includes a house to keep up and a probate process. Different assets and different choices lead to different totals, which is exactly what the worksheet is for.

When the money is needed

The target tells you how much. It does not tell you how fast. Different costs fall due at different times, and that affects where the money should sit.

Two lessons follow. First, a policy payout takes time, as the guide on how long life insurance takes to pay out explains, so something liquid should cover the first week or two. Second, a bank account in only Rosa's name is often frozen until someone is appointed to handle her estate, so a savings account with a named beneficiary is more useful at the moment of need than one without.

Adjusting for the years between now and then

If Rosa expects to need the money in a few years, the figures above are close enough. If you are 55 and the number is for a death 25 years from now, prices will probably have moved. A rough check applies an assumed growth rate to the line-by-line total.

Say Rosa wants a stress test that assumes her death ten years from now with costs growing 3 percent a year. The growth factor is 1.03 compounded ten years, about 1.3439.

• Total before cushion: 25,000 × 1.3439 = 33,597.50, which rounds to $33,598.
• Cushion at 10 percent: 3,360.
• Gross target: 33,598 + 3,360 = $36,958.
• Net of the $11,000 already set aside: 36,958 − 11,000 = $25,958.

That assumes the savings account and the policy stay at their current amounts. A small policy with a fixed death benefit does not grow, so inflation falls entirely on the gap. If Rosa's savings also grow, the net would be lower. If she spends some of them, it would be higher. The result is a range, $16,500 to roughly $26,000, and the honest summary is that her need is probably somewhere in between and depends on when and how costs move. Check the figures each year or two and update them.

From target to coverage

Once you have the net number, a few product facts help you read quotes sensibly.

• Graded and guaranteed-issue policies. Policies without health questions, called guaranteed issue, commonly pay a reduced benefit if death occurs in the first two or three years. Often the refund is premiums paid plus interest. A graded benefit is explained in graded death benefits: why the first two years matter. If Rosa bought one, the money would not be fully available if she died soon after, and her savings would need to cover that stretch. See guaranteed issue life insurance: no health questions, with limits for the details.
• The premium over time. A $16,500 benefit sounds small until you add up premiums for twenty years. The companion post, Is the premium affordable? A fixed-income worksheet for older buyers, tests whether a premium fits the budget and compares cumulative premiums with the benefit.
• Savings instead of insurance. If the net target is small and you can set it aside without strain, a dedicated account with a named beneficiary may serve the same purpose without premiums. Insurance transfers the risk of dying early, before you have saved the amount. Saving does not, but it has no age limit and no health questions.
• The calculator. The final expense and funeral cost calculator lets you try different totals quickly.

None of this tells you which to buy. The point is to compare options against a number you built, not against a figure in a brochure.

Items that change the number

A few situations push the worksheet in a particular direction.

• A mortgage or other secured debt. The worksheet leaves it out because there are several ways to handle it: an heir assumes the loan, the house is sold, or term or mortgage coverage is bought for that purpose. Decide that separately and add the chosen amount only if you plan to pay it off from these funds.
• A surviving spouse. If a spouse will live on, the household may want to cover more than final costs. That is an income-replacement question, not a final expense one.
• Care costs before death. If long-term care is a concern, the final stretch can generate large bills. That is a different planning problem, and the a worksheet for sizing your long-term care funding gap addresses it.
• Cremation versus burial. The funeral line has the widest range. Run the worksheet with both and see which total you are planning for.
• Prepaid arrangements. If a preneed contract already covers the funeral, take that line out and keep the others. Ask what the contract covers and whether it moves if you relocate.

Your blanks

Fill in the right-hand column. Leave a line at zero if it does not apply.

If line 15 is zero or negative, you may already be covered. If it is positive, that is the shortfall to plan for.

After you finish, write the date at the top. Tell the person who will carry out your wishes where the sheet is and what accounts it refers to. A well-built worksheet that no one can find does not help anyone.

Key takeaways

• Start with the costs, not the product. List funeral, debts, travel, household wind-down and estate costs, add a cushion, then subtract what is already earmarked.
• In the illustrative example, costs of $25,000 plus a $2,500 cushion give a $27,500 target; after $11,000 set aside, the amount left to arrange is $16,500.
• Test the number against time. With 3 percent yearly cost growth over ten years, the same example rises to a net of about $25,958, so the answer is a range.
• Match each cost to when it is due. The first bills arrive in days, before most claims pay, so keep something liquid and payable to a named beneficiary.
• Policies with graded benefits may pay less in early years, and the premiums over time deserve their own test before you buy.