Paying for a funeral can cost thousands of pounds so, although often difficult, it's worth planning ahead. Like many things, costs will increase over time, meaning delaying a decision could mean any shortfall being left to friends and family.
According to SunLife’s Cost of Dying Report 2024, the current average cost of dying is an estimated £9,263. Sunlife has been tracking the market for many years, and since 2004, the cost has increased by 126%.
A popular way to offset funeral expenses is to plan ahead your own funeral and pay for it in advance. There is a whole range of products that can cover some or all of your funeral costs, including insurance policies and funeral plans.
Popular options for a funeral in the UK
Two of the options that you can use to offset the expense of a funeral, leaving your loved ones free of the financial burden, are life insurance or a funeral plan. Deciding which is right for you depends on many things.
Life insurance
Life insurance is a form of cover that pays out a cash lump sum in the event of your death. Your loved ones will be able to use the life insurance to cover funeral costs, pay off debts, clear a mortgage, or to keep as an inheritance.
There are several different types of life insurance to suit different needs.
- Over 50s life insurance: This insurance is designed for UK residents between the ages of 50 and 80 who want to leave a cash sum for their loved ones after they die. The money can be left as a gift or put towards funeral costs.
- Over 80s life insurance: This is the simplest and cheapest type of life insurance for people aged 80 years and over. You choose the term of the life insurance cover. The insurance only pays out if you die within the period you’ve agreed.
- Whole of life insurance: This insurance policy is ongoing, usually paid by continuously paying a monthly premium and it pays out whenever you die. Your loved ones will receive a lump sum payout from your insurer.
- Funeral insurance: Also known as burial insurance or final expense insurance, you pay a premium, usually a monthly figure, that goes towards a lump sum paid out upon death. The lump sum depends on the funeral insurance policies and isn’t necessarily just to cover funeral costs.
Funeral plans
With prepaid funeral plans, you’re able to pay a fixed sum in advance for your key funeral services. You make an agreement with a funeral plan provider, such as Pure Cremation, to carry out your funeral when the time comes.
It allows you to choose the type of funeral you want and how much is spent. It also protects your loved ones from the difficult task of planning your funeral and helps to safeguard them from ever-increasing funeral costs.
Depending on the provider, there are different options, but two of the most common are Over 50s funeral plans (which operates much like a whole of life insurance product but is designed to match the future cost of your desired funeral) and trust backed funeral plans (where money is deposited in a trust and is invested to grow in line with funeral plan costs).
Life insurance vs. funeral plans: what do they cover
Both funeral plans and life insurance are regularly used for funerals by families throughout the UK. Whether it’s a funeral plan or life insurance that you choose, your budget will be one of the most significant factors. But the price is not the only thing to consider.
A funeral plan, for example, guarantees your key funeral services, whereas life insurance provides a cash pay out if you pass away during the term of the policy. However, this isn’t the only difference.
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Life insurance |
Prepaid funeral plan |
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If you pass away during the term of the policy, it pays out a cash lump sum |
It guarantees to cover your pre-determined funeral services irrespective of when you die |
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Your loved one receives financial support and can spend the payment as they see fit |
Plan payments are only used for your funeral |
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If you stop paying your premiums, then the plan has no cash value |
Over50s Funeral plans: If you stop paying your premiums then the plan has no cash value Trust Backed funeral plans: if you cancel your plan then you will normally receive a refund less a cancellation fee |
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As long as the cover is in place, you pay a monthly premium |
When the funeral plan is paid in full, payments stop |
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This type of policy may require underwriting, which determines whether you can secure cover and how much you’ll have to pay |
No medical questions have to be answered, and you are guaranteed acceptance |
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Different policies are available depending on your needs |
Various plans are available to suit different budgets |
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Monthly premiums will vary depending on your age (generally increasing the older you get) and sometimes with medical condition |
Over 50s Monthly premiums will vary depending on your age only (generally increasing the older you get). A Trust Backed funeral plan’s price is the same, irrespective of age or medical condition |
Can life insurance be used for funeral expenses?
Yes, it can, but it depends on the policy. When you take out a life insurance policy, you can choose its value. If you want it to cover funeral expenses, you must make sure the sum insured is generous enough to cover your funeral costs in the future. Some over 50s policies include life insurance with funeral cover which means specific funeral benefits are paid directly to a funeral director on your death.
Cost comparison between life insurance and funeral plans
Life insurance premiums tend to be based on personal factors such as your age and health. The terms of the policy will also affect the overall cost. A range of policy types is available, with the cover amount and term length varying depending on the level of cover you require.
You can expect premiums to be higher if the sum assured is higher or the term is longer. The cost of life insurance varies on an individual level. However, it can also vary between insurance providers.
Funeral plans also range in price and level of service but tend to come with three different payment options. You can pay one lump sum, 12 monthly payments, or monthly instalments over 2-25 years.
Funeral plans also vary in price between plan providers.
Is funeral insurance the same as life insurance?
No, insurance for funeral costs and life insurance are not the same. They differ in several ways:
- Health: If you’re in poor health, life insurance coverage can be expensive. For funeral expenses insurance, a medical exam is not usually necessary.
- Cover: Funeral insurance policies usually have a maximum coverage amount. With life insurance, you’re generally covered for a higher amount because it’s designed to help replace some or all of the income you would have provided for your family, rather than just enough to cover the funeral.
- Payout: The payout from funeral cover insurance in the UK is mainly to help cover the cost of your funeral. Life insurance, on the other hand, helps with the long-term financial security of dependents.
Over 50s life insurance vs. funeral plans
Over 50s life insurance is an affordable way to leave some money for your loved ones when you’re gone. You pay regular monthly payments, and when you die, those left behind receive a lump sum that can contribute to the cost of your funeral. It can also be used in any other way your loved ones choose.
The life insurance also remains in place for the rest of your life. However, there are some things you should consider. Insurers often charge higher premiums and implement a waiting period of between 12 and 24 months. It’s also possible, the amount you secure is only sufficient to cover basic funeral costs. On average customers pay more over the life of the policy than the policy pays out in the end.
With an over 50s funeral plan, you prepay for your funeral costs at current prices. You can choose whether you pay one payment or monthly instalments. If you pay in instalments, then there is normally a qualifying period of 24 months unless you have paid in full before this time. A funeral plan can cover various basic arrangements, such as a service, funeral director’s fees, and viewings of the deceased. Other costs, such as a burial plot and flowers, can be excluded if you choose. The package can be customised depending on your budget, what you require, and the funeral plan provider you choose.
Over 80s life insurance vs. funeral plans
When you’re over 80, it’s possible to take out life insurance or a funeral plan. Which is best for you depends on your budget and age.
As you get older, life insurance becomes more expensive, and if you’re in poor health, premiums are even higher. It’s also possible that the type of level of cover is not sufficient for your needs.
A funeral plan may be a better option because it provides immediate cover for all your key funeral services, if you pay it in full immediately.
Is a life insurance or funeral plan better for you?
Either option is possible. You can even choose to have both, depending on your circumstances and budget. What’s most important is that you select the product that’s right for you.
With a funeral plan, you’re able to remove lots of the worry for your family because you’ve paid for your funeral services in advance, and the arrangements have been taken care of. Depending on the level of cover you have, the cash payment from a life insurance policy can provide additional support for your family, whether it’s to enjoy as an inheritance or to help maintain their current standard of living. It’s worth bearing in mind that if a lower level of cover is selected, it may not cover your funeral costs.
If you’re undecided, have more questions, or would like a quote, contact us today.
