How to cover expenses before a life insurance payout arrives

Nobody wants to deal with financial stress after the death of a loved one. While most life insurance policies are designed to help you and your family cover the costs of living after a parent or partner has passed away, some people still have trouble managing the expenses that come up between the time of death and the life insurance payout.

You may have a mortgage payment to make, for example, or a funeral to pay for. You may also have costs associated with hospital visits and end-of-life care, from medical bills to hotel rooms — not to mention the extra money that goes towards food, transportation, childcare and other basic necessities. All of which can come up in the period of time after you file a claim, but before you receive the death benefit.

Waiting on the payout process can be challenging, no matter the benefit amount.

That’s why we asked Taylor Kovar, Certified Financial Planner professional and CEO of TheMoneyCouple.com, how people could handle the expenses that might come up before a death benefit arrives.

“During challenging times, it’s essential to stay resilient,” Kovar told us. “Financial solutions exist, even in the face of unexpected circumstances.”

Here are some of the solutions he suggested:

Tap into your emergency fund

Some people may be able to cover expenses between an unexpected death and a life insurance payout by withdrawing money from their savings accounts. “If possible, tap into any savings you may have to cover immediate expenses,” Kovar advises.

In a best-case scenario, you’ll have an emergency fund to draw from. In other cases, you may have to spend money that would otherwise go towards a vacation, a down payment or a retirement account. (Just note that withdrawing funds from a retirement account may have tax implications.)

Keep in mind that you may be able to replenish your savings after your life insurance payout arrives — and putting a portion of your death benefit towards your emergency fund is always a smart move.

“Having an emergency fund is like having a superhero in your financial corner,” Kovar explains. “It provides a cushion during these difficult times and prevents you from falling into a financial abyss.”

Most financial experts recommend keeping between 3-6 months of expenses in an emergency fund — but if that isn’t possible right now, every little bit helps. Kovar suggests saving at least $1,500 to start with, and continuing to build your emergency fund as your financial situation improves.

Take out a personal loan

If you don’t have enough savings to cover the financial gap before a death benefit arrives, you might consider taking out a personal loan.

“When life throws curveballs, personal loans can serve as temporary bridges to financial stability,” Kovar told us. “Explore options with local banks, compare interest rates, and evaluate repayment terms.”

If you decide to borrow money to cover expenses until you receive a life insurance payout, try to use as much of your life insurance payout as possible to pay off your loan in full. By making a plan to pay off your loan as quickly as possible, you’ll be better prepared to handle the temporary financial burden without going into long-term debt.

“Borrowing should be a well-thought-out decision to avoid further financial stress,” Kovar advises.

Reach out to family and friends

In some cases, family and friends might have the resources to help you and your loved ones cover day-to-day expenses until your life insurance benefit arrives. Even if your friends and relatives aren’t able to contribute cash, they may still be able to provide valuable assistance with childcare, home-cooked meals or transportation.

“In times of need, the power of community can be astounding,” says Kovar. “Consider reaching out to family, friends, or even crowdfunding platforms to seek financial assistance. People are often willing to lend a helping hand during difficult times, and collective community support can provide the necessary relief.”

If you borrow money directly from family or friends, try to repay them from your life insurance benefit when it arrives. Lending money to loved ones works best when the loans are paid back promptly. And if you can offer similar resources to family and friends when they need a little extra help, that’s even better.

Contact your life insurance provider

If you have questions about your life insurance benefit options or want to know how long it might take to receive your life insurance payout, contact your life insurance provider directly. “Communication is crucial during this period,” says Kovar. “Reach out to the life insurance provider to inquire about the payout timeline and discuss any immediate financial concerns.”

You may also want to connect with a financial advisor, especially if you are trying to decide whether to receive your life insurance benefits as a lump sum payment or distributed over time in an annuity. “Seeking guidance from a financial planner can provide valuable insights tailored to your specific circumstances,” Kovar explains.

At Haven Life, the average life insurance payout is a little over $600,000, and many beneficiaries may not know how to handle an unexpected amount of money while simultaneously grieving a loved one. A good financial advisor can help you not only manage your life insurance payout, but also help you come up with ways to cover your expenses before your life insurance payout arrives.

That’s why we reached out to Taylor Kovar, after all — and why he hopes his advice will help you and your loved ones.