Is it better to have life insurance or a funeral plan?

Neither product is better than the other, as life insurance and funeral plans are vastly different products each with their own benefits.

More people in the UK have life insurance (around 23 million)[1], but funeral plans are a growing market with more than 1.5 million people protected to date[2].

A funeral plan is designed to cover the cost of your key funeral services, whereas life insurance provides a cash pay out if you pass away during the policy term.

Reassured has written this life insurance vs funeral plan guide to help you decide which is the better option for you and your family.

Our award-winning broker service can provide you with free, no-obligation life insurance quotes.

Alternatively, we can help you arrange a SunLife Guaranteed Funeral Plan, which is a type of funeral cover.

This is different to the funeral plans discussed throughout this article because it comes in the form of an insurance policy, rather than via a contractual agreement with a funeral provider.

Continue reading as we provide all the information you need to make a fully informed decision on life insurance vs funeral plans...

What is life insurance?

Life insurance is a form of cover that pays out a cash lump sum in the event of your death.

It can be used by your loved ones to cover funeral costs, pay off debts, clear the mortgage or spend as an inheritance.

There are different types of life insurance policies to suit different needs. Over 50s plans and whole of life are the most popular for covering funeral expenses as loved ones are guaranteed a pay out when you pass away.

How much you can secure, and the cost of your life insurance premiums will depend on the type of policy you choose and your personal circumstances.

Life insurance starts from just 20p-a-day through Reassured, so get in touch to secure your best available quote.

What is a funeral plan?

A prepaid funeral plan allows you to pay a fixed sum in advance for your key funeral services.

It’s an agreement with a funeral plan provider, such as Co-op, to carry out your funeral when the time comes.

A funeral plan gives you the opportunity to choose the type of funeral you want to have, and to decide how much is spent.

It protects loved ones from the difficult task of planning your funeral and helps to safeguard against any future price increases.


The SunLife Guaranteed Funeral Plan

As mentioned, the SunLife Guaranteed Funeral Plan is different to traditional funeral plans that we outline in this article.

Reassured can’t compare quotes for traditional funeral plans, but we can provide quotes for the SunLife Guaranteed Funeral Plan.

This is a type of insurance policy which guarantees to pay out for your chosen funeral services after two years.

There are two different levels of cover to choose from, with prices beginning from just £19.18 ^ a month.

Get in touch with our dedicated funeral cover experts to secure your free, personalised quotes.

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Key features of the SunLife Guaranteed Funeral Plan:

  • Guarantees acceptance to UK residents aged 50 - 80
  • No medical or health questions
  • Pay out guaranteed after two years
  • Immediate accidental death cover
  • 100% pay out protection with FSCS

What’s the difference between life insurance and funeral plans?

As mentioned, life insurance provides a cash lump sum pay out after you pass away, whereas a funeral plan is specifically designed to cover the cost of your funeral.


Here are the key differences between life insurance and funeral plans:

Life insuranceFuneral plan
Pays out a cash lump sum if you pass away during the term of the policyGuarantees to cover the cost of your funeral services at today’s rate
Provides financial support for loved ones, and can be spent how they see fitHas no cash value; funeral plan payments are used only for your funeral
A monthly premium must be paid whilst cover is in placeChoice of payment options - pay in full or spread the cost in monthly instalments
Premium payments continue until the policy expires or until you pass away (depending on the policy)Payments end when the funeral plan has been paid in full
Requires underwriting to determine whether you can secure cover and how much it will costGuaranteed acceptance and no medical questions
Different policy types to suit different needs and budgetsChoice of plans to suit different needs and budgets

Life insurance to cover funeral costs: pros and cons

The pros of life insurance include:

List icon Life insurance provides a cash lump sum pay out

The money can be spent however your family wish, whether that be for your funeral or for other expenses.

List icon Life insurance provides comprehensive financial protection

Life insurance is designed to protect your family from financial hardship if you were no longer around to support them.

Depending on your personal circumstances and the type of policy you choose, the pay out is likely to be higher than just what’s required for your funeral.

List icon You can add additional cover e.g. critical illness cover (CIC)

Life insurance can be layered with other types of protection, such as terminal illness cover (comes as standard with all term policies through Reassured) or critical illness cover (at an additional cost).

Some policies also have additional benefit options that can be added to the policy if you choose, to help you make the most of the cover (but will cost extra). Some of these include waiver of premium, special events option (guaranteed insurability), and separation benefit.

The cons of life insurance include:

Cross Not everyone is eligible for life insurance, and it may be expensive for some people

It may be difficult for some people to secure affordable cover (or secure cover at all) due to their age and/or health.

Most insurers have an upper age limit, typically 80 or 85. Also, applicants with certain pre-existing conditions may be considered too risky to cover or may be charged higher premiums.

We have written an in-depth life insurance with pre-existing conditions article if you require additional information »

Cross You could pay more into a life insurance policy than what’s paid out

Policies that provide a guaranteed pay out, such as whole of life or over 50s cover, require premium payments up until you pass away.

This means, depending on how long you live, you could end up paying more into the policy than what’s paid out.

Also, with term-based policies, you could pay in but not receive a pay out at all if you outlive the policy term.

Funeral plan to cover funeral costs: pros and cons

The pros of funeral plans include:

List icon A funeral plan guarantees your key funeral costs (at today’s rate)

Funeral costs have risen 121% since 2004, which is a rate much faster than inflation[3].

With a funeral plan, you’ll have peace of mind that your key funeral services are paid for in advance and guaranteed at today’s price, avoiding any future price hikes and protecting loved ones from the large expense

List icon There are no medical or health questions

Funeral plans guarantee acceptance. This means even if you have a health problem or have a pre-existing medical condition, you can still get a plan (and at the same price as any other applicant)

List icon A funeral plan allows you to plan your funeral (your way)

Included in the cost of a plan is the support and guidance from a professional funeral planner, for every step of the way - for you, and for your loved ones when the time comes.

Some funeral plans also come with free bereavement advice for loved ones

List icon Funeral plan prices are fixed so that you know exactly how much you’ll pay in total

You can choose to pay in full for immediate cover or to spread the cost in monthly payments. The payments will end when your funeral has been paid in full and your plan will remain in place until your services are needed

Cons of funeral plans include:

Cross A funeral plan could be the more expensive option

In the short term, a funeral plan could work out more expensive than life insurance (especially if you’re in good health) and the pay out is only as much as you have paid in.

Although depending on the life insurance policy you choose and the level of cover you have, a pay out may not guarantee all your funeral costs, unlike a funeral plan

Cross A funeral plan forces you to think about your mortality

It’s a difficult subject, especially one to discuss with family and friends. Planning your own send-off may feel uncomfortable in the short term - but can give you peace of mind in the long term

Cost of funerals infographic desktop

Weighing up the cost

Whether it’s life insurance or a funeral plan, it’s likely your budget will have an influence on the right option for you.

On one hand, if you're in good health, then life insurance may offer a more affordable monthly cost.

Premiums could start from just £5 per month - less than the cost of a few takeaway coffees a month.

On the other hand, if you’re elderly, smoke and/or have a poor medical history you may find it more difficult to secure affordable cover (or cover at all).

In this case, a funeral plan may be a more suitable option.

Life insurance premiums are calculated based on personal factors, such as your age and health, as well as policy terms.

There are a variety of policy types available; the cover amount and term length can vary depending on what you wish to protect.

The higher the sum assured (cover amount) and the longer the term, the more expensive premiums will be.

Essentially, the cost of life insurance varies for every individual – but also varies between insurers.

This is why it’s important to compare multiple quotes from a variety of insurers.

At Reassured, we can do exactly this - saving you valuable time and money.

Funeral plans range in price and level of service.

Usually starting at around £3,000 for a traditional funeral.

Most come with three different payment options:

  • One lump sum payment
  • 12 monthly payments
  • Monthly instalments over 2 or more years (up to a maximum age limit which varies between providers)

Funeral plans also vary in price between providers.

Therefore, it’s sensible to weigh up your options and determine which provides the best value for money.

As mentioned, the cost of both life insurance and funeral plans vary depending on the provider.

You may wonder exactly what you can get for your money, and how much your loved ones could receive.

One of the fastest ways to find out is by using a life insurance broker, such as Reassured.

We can help you compare free life insurance quotes from a panel of top UK insurers, allowing you to find the cheapest possible premiums.

Contact our award-winning team today to secure your quotes.

Long term cost to consider

As mentioned, the cost of a funeral plan remains fixed at today’s price and payments will end once the plan has been paid in full.

However, with an over 50s plan or a whole of life policy, you’ll continue to pay monthly premiums until you pass away.

This means, depending on how long you live, it’s possible that you could pay more in than is paid out.


Funeral plans can be paid in one single payment, or by monthly instalments.

Paying over several years can help reduce the monthly cost, but long-term instalment plans from 12 months will incur instalment charges.

So, whilst the cost of the plan remains the same, for the convenience of spreading the cost, you’d pay more than its overall value.

However, many opt for this payment choice as it offers an affordable solution to covering the expense.

Over 50 plan vs funeral plan

An over 50s plan is a type of life insurance policy designed for people aged between 50 and 85, who want to leave behind some money to help cover their funeral costs.

Unlike a funeral plan, the pay out is a cash sum that is paid directly to loved ones after you pass away.

The pay out amount is usually between £5,000 and £20,000 (maximum limit varies between insurers).

How much you can secure depends on your age (and sometimes your smoking status), and acceptance is guaranteed if you’re within the specified age bracket.

Premiums are calculated based on your age, the sum assured and sometimes your smoking status.

An over 50s plan remains in place for the rest of your life, which means a pay-out is guaranteed when you pass away.

Insurers offset the risk to them by implementing a waiting period from the start of the policy.

This is usually the first 12 or 24 months during which a claim can’t be made if you were to pass away naturally.

Over 50 planFuneral plan
Guarantees a cash lump sum pay out when you pass away List icon Cross
Guarantees to cover your key funeral costs Cross List icon
Guaranteed acceptance (age restrictions apply) List icon List icon
No medical or heath questions List icon List icon
Choice of payment options Cross List icon

What about whole of life insurance?

Similar to an over 50s plan, whole of life insurance guarantees a cash lump sum pay out to loved ones when you pass away.

The difference is that whole of life offers a much higher sum assured (up to £1,000,000) which could go far beyond paying for your funeral.

Also, no waiting period applies, so cover is immediate. This makes it one of the more expensive forms of cover.

Premiums are calculated based on your age, health, smoking status and the terms of the policy.

As medical information is required and standard premiums tend to be higher, this policy type may be more suited to those in good health.

Compare quotes for over 50s plans as well as whole of life insurance through Reassured.

Over 80 life insurance vs funeral plan

People over 80 can take out life insurance or a funeral plan, but the option that’s better for you will depend on your specific age and budget.

Life insurance gets more expensive the older you are, and premiums can be sky-high for people over 80 with poor health.

Also, for the older applicant, the type or level of cover you can secure may not be sufficient for your needs.

We have written a dedicated over 80 life insurance article if you require more information »

A funeral plan may be the more suitable option because you can pay it in full today and have immediate cover for all your key funeral services.

However, as the cost of a funeral plan takes into account that funeral prices may increase in the future, you may find that paying for your funeral in advance doesn’t have the same benefits as for someone who is younger.

Please note, the SunLife Guaranteed Funeral Plan which can be arranged through Reassured is not available to applicants aged over 80.

Can you have life insurance and a funeral plan?

Yes, it’s certainly possible to take out life insurance and a funeral plan simultaneously to serve different purposes - budget allowing.

A funeral plan can remove a lot of worry for your family by ensuring your funeral services are paid for in advance and that arrangements have been taken care of.

Then the cash pay out from a life insurance policy can provide your family with some additional financial support, whether that’s to maintain their current standard of living or to enjoy as an inheritance.

Life insurance vs funeral cover from SunLife

As mentioned, Reassured can help you arrange a type of funeral cover provided by SunLife.

This is called the SunLife Guaranteed Funeral Plan.

We can also compare multiple quotes for life insurance from a panel of top UK insurers.

One way to find out which option is best for you is to compare quotes for both.

We have a dedicated team of life insurance and funeral cover experts, on hand to provide you with all the information you need to make a fully informed decision.

Get in touch today to start the journey to protecting your loved ones.

Sources:

[1] https://www.finder.com/uk/life-insurance-statistics

[2] https://www.mirror.co.uk/money/funeral-plans-top-tips-make-15010040

[3] https://www.sunlife.co.uk/siteassets/documents/cost-of-dying/cost-of-dying-report.pdf/

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  • The SunLife Guaranteed Funeral Plan is an insurance policy which after two years guarantees to pay for your chosen funeral services
  • SunLife is authorised and regulated by the Financial Conduct Authority
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