What is funeral insurance?
Funeral insurance refers to putting in place provisions to cover the cost of your funeral prior to your passing.
If you have been looking at putting measures in place to cover the cost of your funeral, it’s likely that you have come across the term ‘funeral insurance‘.
Essentially, funeral insurance refers to taking certain actions to ensure that upon your death your funeral is covered in some way, shape or form.
However, whilst funeral insurance is a term often used in this instance, it isn’t actually a product in its own right.
There are 2 types of funeral insurance cover which can be put in place; a prepaid funeral plan and life insurance.
What is a prepaid funeral plan?
A funeral plan allows you to manage your funeral arrangements before you’re gone.
The plan covers the cost of your chosen funeral directors fee. It also allows you to specify the details of your ceremony.
You choose a funeral director when taking out the plan and your loved ones simply have to make a phone call when the time comes. The funeral director takes care of the rest.
Plans vary depending on what you want to be included in the package, ranging from a basic coffin with no ceremony through to a luxury coffin, limousine procession and bespoke service.
There are various payment options available. You can either pay:
- A one-off payment covering the full cost of the plan
- A deposit followed by 12 interest-free monthly payments
- An instalment payment plan spread over a number of years.
Whilst an instalment payment plan is considerably cheaper on a month-by-month basis, this payment method does incur interest.
What is life insurance?
Life insurance provides your loved ones with a cash lump sum pay out upon your passing.
Monthly premiums are paid and if you die within the policy term, a pay out for a predetermined amount will be issued to your beneficiaries.
Commonly a life insurance policy is used to clear a mortgage, settle outstanding debts, provide inheritance and/or cover funeral expenses.
Prepaid funeral plan vs life insurance
Whilst life insurance can be used to cover the cost of your passing, a funeral plan provides you with more control over the ceremony itself.
The key benefit of funeral plans is that it allows you to pay for your funeral at today’s prices, as opposed to the cost at the time of death.
A funeral plan also allows you make arrangements for your funeral before your death. For example, choosing your coffin, service details and all other personal touches.
Not only does this ensure that you get the funeral you want, but it also takes the stress away from your family at an already difficult time.
According to a SunLife report, less than 1 in 5 people have told anyone what they would want from their funeral.
Whilst life insurance can be used to cover funeral expenses, it does mean that the funeral will be arranged upon your death and therefore, will cost the going rate at that time.
The pay out sum can be used to cover all of the necessary costs, but it does involve your loved ones making all the necessary arrangements at a difficult time.
Additional costs associated with dying
Whilst the average cost of a funeral in the UK is £4,271 there are a large number of additional costs associated with dying such as legal advice and probate.
As a result, this brings the average cost of dying to £9,204. These additional costs will not be covered by your funeral plan and therefore, could financially burden your loved ones.
Having a life insurance policy could ensure your loved ones receive a sum large enough to cover all these additional costs.
Following on from this, there are also a large number of third-party costs which are not covered by funeral plans:
- Venue hire for ceremony
- Minister fees
- Cost of food and drink
- All other costs associated with your wake.
A number of funeral plans will offer a contribution towards these third-party costs, but when considered that the average cost of a burial is £1,200, it’s easy to see this contribution will not go far.
The presence of a life insurance policy would provide your family with a sum large enough to not only cover the cost of your funeral but also help cover all of these third party costs.
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The full funeral insurance solution
Having both a funeral plan and life insurance in place allows you to cover all the costs associated with dying. It also allows you to control the arrangements for your ceremony.
It’s possible, budget permitting, to simultaneously have a prepaid funeral plan and a life insurance policy offering your loved one’s full funeral insurance.
Your prepaid funeral plan would cover the cost of your funeral at today’s prices and allow you to make all necessary arrangements regarding the details.
A percentage of the life insurance pay out could then be used to cover the remainder of the third party and other associated costs, ensuring your family are free from financial burden.
Arranging both life insurance and a funeral plan through an independent broker, such as Reassured, ensures you get the right solution, at the best price within your budget.
When no funeral insurance is in place
Without adequate provisions, the burden of paying for your funeral could fall to your loved ones.
If no funeral insurance provisions are in place when you die the costs of your funeral will be recovered from your estate.
Not only can this be complicated as dissolving the estate can take time, but it also reduces the amount left for your loved ones once the funeral costs have been deducted.
If your estate is not profound enough to cover the cost of your funeral, your family will be responsible for covering the shortfall.
In many cases, this results in loved ones having to borrow money, sell personal belongings or even take out loans.
Putting in place adequate funeral insurance – whichever option – can avoid putting your loved ones in this position.
Funeral insurance for over 50s
Funeral insurance for over 50s often refers to either a prepaid funeral plan or over 50s life insurance.
In the latter stages of life, we begin to think more about putting in place the necessary precautions for our death.
Funeral insurance for over 50s again is often used interchangeably for a prepaid funeral plan or an over 50s life insurance policy.
Whilst a funeral plan, generally speaking, remains the same regardless of your age, over 50s life insurance differs from standard life insurance in that it offers guaranteed acceptance if aged 50-85 years.
Usually, between the ages of 50-85, over 50’s life insurance doesn’t require you to provide any medical information in order to be accepted for a policy.
It tends to be more expensive than standard life insurance as the insurer is unable to determine the risk you pose to them, but it is a suitable option for those in later life or in poor health who would otherwise be declined life insurance.
Funeral insurance cost
The cost of your funeral insurance will depend on what form of cover you choose.
Funeral plans are a fixed price regardless of your circumstances and are valued based on your chosen tier of plan.
Once the value of your plan has been paid, you’ll no longer be required to make payments and your plan remains in place until it’s required.
Whilst the price of a funeral plan is fixed, you could end up paying more than this value if you opt for an instalment plan.
This is because you’ll be charged interest each month until the plan has been paid off.
The cost of life insurance, on the other hand, varies depending on your individual circumstances.
Your age, health, smoking status, type/value of cover and your lifestyle are all taken into account.
The cost of your premiums will be based on the level of risk you pose, with those who are considered to be high-risk paying more than their low-risk counterparts.
Compare funeral plans and life insurance
Using a broker will allow you to find the best funeral plans and life insurance quotes to suit your requirements.
By using a broker such as Reassured, you can quickly compare quotes.
And the best bit is our award-winning service is completely free to use.
We’ll provide quotes from a panel of leading UK insurers, providing you with options which suit your needs and budget.
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* 70p per day pricing is based on a 50 year old purchasing a Co-operative Simple Funeral Plan at £3,295 over 25 years (total amount repayable £6,247.40).
Sources:
[1] https://www.sunlife.co.uk/siteassets/documents/cost-of-dying/cost-of-dying-report-2018.pdf
Our providers
At Reassured, we will provide you with quotes from Co-op funeral care, as well as any information required regarding the best funeral plans.
This allows you to make a fully informed decision.
All of the funeral plans we provide are fully regulated by the Funeral Planning Authority (FPA) ensuring you and your money are protected.
