The average cost of a funeral by burial in the UK currently stands at £4,975, according to Sun Life’s latest Cost of Dying report, while cremations cost £3,858. The average cost of a funeral in London, meanwhile, has reached £5,963.
What’s more, these prices are before taking account of things like flowers, a memorial or headstone, and catering at the wake – which you can expect to add an additional £2,000 to the bill.
With costs on the rise, it’s increasingly common to start thinking about how to pay for your own funeral, so your family isn’t burdened with a sad and unavoidable bill at a particularly emotional time.
How to cover funeral costs
There are several ways to cover your own funeral costs, including opening a bank account with funds earmarked to pay for it and setting aside a portion of your will.
Taking out an insurance policy specifically designed to cover the cost is an increasingly popular way of going about things, however. You have several options:
Funeral insurance: These plans typically cover your chosen funeral director’s fees and are available from funeral directors themselves or from specialist insurance providers. There are many types of plan on offer, covering 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. Some plans offer tiered levels of cover, so if a plan only includes the price of your burial and not the cost of the wake or flowers you will need to budget separately for these expenses – should you require them.
Over-50s plans: Over-50s life insurance plans pay out a lump sum when you die, which can be used to cover funeral costs. The pay-out is fixed and you agree to make monthly payments for the rest of your life, so if you live for a long time, you will pay more into the plan than you will receive from it. These are insurance plans, so once you have paid the premium you can’t get it back, and if you miss a payment, you won’t get a payout at the end. Some plans link the payout to inflation to keep pace with living costs, while others only require you to pay in until you reach a certain age.
Term life insurance: Term insurance runs for a fixed period, and pays out if you pass away during it. 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, such as a mortgage.
Putting your life insurance policy in trust
Provided your estate is large enough, any life insurance policy you have taken out will be subject to inheritance tax, which is currently levied at 40% on anything you leave above £325,000.
However, if you write your life insurance in trust, your beneficiaries will be able to legally avoid paying inheritance tax on the total pay-out.
When taking out a new policy, you can ask your insurer to write it in trust. You may need a solicitor to help you put an existing policy into trust, however.
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 Expenses Payment – known as the Funeral Support Payment in Scotland – can help pay for burial or cremation fees. It may also cover other costs, including:
- Documentation, including a 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
- The cost of moving the body
You can now receive up to £1,000 to help pay for the funeral, but how much you get depends on your circumstances and whether there’s other money available to use, for example from an insurance policy or the deceased’s estate.
The importance of a will
You aren’t required by law to write a will, but if you haven’t written one, your estate will be organised by the government, which will decide how to divide up all your assets.
A well composed will should ensure that your estate will be divided according to your wishes. You can also use your will to set out how you’d like your funeral to be arranged, and to direct funds towards this. Bear in mind that funeral wishes stipulated in a will are not legally binding.
Compare life insurance
You can compare life insurance policies with the help of MoneySuperMarket. All you need to do is provide us with a few details about your and your lifestyle, and we will show you a range of options to suit various budgets.