Life Insurance and Funeral Costs

Find out what options are available to help cover the cost of a funeral.

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Failing to account for the cost of a funeral can leave your loved ones with a financial struggle at a time they least need it.

In 2016, Royal London’s National Funeral Cost Index found the average cost of a funeral was £3,675. A burial funeral averaged £4,136 and a cremation funeral totalled £3,214, on average.

When you add extras, such as flowers, a memorial or headstone, and catering at the wake, you could expect to add an additional £2,000 to the bill.

With costs on the rise, more people are thinking about how they can pay for their own funerals just so their families don’t have to worry about these sadly unavoidable bills at what is an emotional and stressful time.

How to cover funeral costs

Funeral insurance

Funeral insurance offers a way to plan ahead and cover funeral costs. These plans typically cover your chosen funeral director’s fees and are available from funeral directors themselves or from specialist insurance providers.

Be aware that different plans cover different costs, so check the small print to see what is specifically included, for example burial fees, grave-digging costs or cremation costs might come as standard.

Other plans offer tiered levels of cover – and the most basic might not cover certain costs. So if a plan only includes burial costs but not the cost of the wake or flowers, you will need to budget separately for these expenses.

Over-50s plans

Over-50s life insurance plans will pay a lump sum when you die, which can then be used by your family to cover funeral costs.

"Be aware that different plans cover different costs, so check the small print to see what is specifically included, for example burial fees, grave-digging costs or cremation costs might come as standard."

However, it is worth knowing that you often have to agree to make monthly payments for the rest of your life. Meaning that if you live for a long time, you will pay much more into the plan than you will receive out of it – as the payout will be fixed.

These plans are insurance schemes, so once you have paid the premium you can’t get it back. Plus, there is usually a fee if you want to cancel the plan early. If you miss one payment, then your plan will stop and you won’t get a payout.

Some plans link the sum you receive to inflation, so that the payout you receive keeps pace with living costs. While others only require you to pay in until you reach a certain age. If you die within a year of starting you scheme, the premiums might be returned to your estate, depending on your provider.

Term life insurance

Term life insurance runs for a fixed period of time. The policy pays out the amount insured if you pass away during this time. Many term life insurance policies come with the option of a lump sum pay-out. Your family could use the lump sum they’ll receive to pay for the cost of your funeral.

You can choose from different types of term insurance, such as level cover, where the payout stays the same over the term. Or decreasing cover, where payout reduces over time in line with any debts you may have, a mortgage, for example.

Remember too, that if you have any pre-existing medical conditions, premiums may be expensive.

Read: Life insurance policy types

State support for funeral costs

If you are on a low income or receiving benefits, then you might be eligible for state support for your funeral costs.

The ‘Funeral Payment’ offered by the Department for Work and Pensions can help pay for burial or cremation fees. Other costs covered include:

  • Documentation (doctor’s certificate or death certificate).
  • Expenses such as funeral director’s fees, flowers or the coffin.
  • Travel to arrange or go to the funeral.

However, any money you’ll receive is repayable, so you will usually have to pay back any money you get from the deceased person’s estate.  

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