What is a Cleanup Fund
Cleanup fund is an insurance term referring to the final expenses associated with a person after his death. A cleanup fund, or fund for final expenses, is a type of life insurance policy intended to cover the final expenses of the deceased. Funeral expenses, cemetery or tomb fees, and the costs of settling financial and property issues may be covered.
- Cleanup fund refers to the money set aside to cover expenses related to funeral and other obligations of the insured.
- It can also refer to an account with funds for environmental cleanup costs for companies operating in industries that have substantial environmental risks, such as oil companies.
- Establishing a cleaning fund for funerals is convenient because it requires no examination and can be set up for as little as $5,000.
Understanding Cleaning Funds
A cleanup fund can be a standalone policy or can be written in combination with another type of life insurance policy. The cleaning fund provides the estate with the means to pay for certain expenses related to the death, including funeral expenses and the cost of disposing of the remaining property.
A cleanup fund may also refer to an account that has monetary resources devoted to environmental cleanup costs such as the aftermath of an oil spill. For example, the oil company British Petroleum established a $20 billion cleanup trust fund after the 2010 Deepwater Horizon oil spill. The fund had a broad mandate, from paying compensation to those affected by the spill to court expenses to working with state officials to clean up the leak.
In the case of personal insurance, the costs often associated with cleaning funds include:
- funeral, memorial service, cremation, etc .;
- Travel connected with such services, whether for the body of the deceased, or for members of the family to attend the services;
- burial, grave, vault, crypt, etc .;
- Paying credit cards, medical bills, etc.;
- Property disposal, realtor fees, auction fees, etc.;
- legal fees, executor fees, etc. and
- Miscellaneous expenses.
These costs can be daunting to make a clean-up fund an important consideration. Financial experts consider it as an ideal vehicle for paying final expenses as final expenses insurance pays on death. The funds are provided to the beneficiary quickly (usually within a month), and are almost always tax-free. Most funeral homes are happy to work with clients who have funeral insurance because they know they will get paid.
While term life insurance can be used for final expense needs, the policyholder must die to pay it before the term of the contract is over. Permanent insurance, whether it is whole life or guaranteed no-default universal life, is the safest type of policy to get if you want to use it for end of life costs.
Cleanup Fund Life Insurance Comes in Small Face Values
Whole life insurance with a face amount of $100,000 or more can be quite expensive. Also, most people don’t need that much coverage for final expenses. Therefore, cleanup fund insurance typically comes in amounts ranging from $5,000 to $50,000. They rarely require examination, and they are relatively lenient to health needs. All these features make the final cost affordable for most people.
What are the primary objectives of cleanup fund life insurance?
The cleaning fund, or money for final expenses, pays the deceased’s final expenses such as funeral, cemetery or burial fees, and the costs of settling financial and property issues.
Is cleanup fund insurance expensive?
Not really because there isn’t usually a lot of coverage needed. It generally comes in amounts ranging from $5,000 to $50,000. Policies rarely require examinations, and are relatively lenient with health requirements.