Death is a subject none of us likes to think about, but failing to consider how our funeral costs will be covered could make life really difficult for loved ones left behind.
The average cost of a funeral has increased by 80% over the past decade, according to research by the University of Bath’s Institute for Policy Research, and costs are expected to continue to rise.
It now costs £3,456 for the average funeral, which includes fees and a cremation or burial. Extras, such as flowers, a memorial and catering, add an average of £2,006 to the bill.
As a result, increasing numbers of people are thinking about how they can pay for their own funerals, so that their families don’t having to worry about how they will foot these bills at what will already be a stressful and emotional time.
We explain some of the different ways you can ensure costs will be covered.
Some plans link the lump sum you receive to inflation, so that the payment you receive keeps pace with living costs
Funeral insurance offers one way to plan ahead and cover funeral costs. This kind of plan will typically guarantee to cover funeral director’s costs and is available from specialist providers or from funeral directors themselves.
Different plans cover different costs, so some will cover things such as burial fees, grave-digging charges or cremation costs and organist charges as standard, while other plans offer tiered levels of cover. The most basic may not include all of these items, so it’s important to read the small print carefully before buying.
If, for example, a plan only covers certain funeral costs, but not other things such as the costs of the wake, or flowers, you’ll need to budget for these additional expenses too.
Plans usually offer the option to pay a lump sum up front, or to spread the costs by making monthly payments. However, if you choose to pay monthly, bear in mind that you will probably have to pay extra to do so.
Over-50s life insurance plans promise a fixed lump sum when you die, which can be put toward funeral costs, but be very careful about understanding what you are committing to with these schemes.
When you sign up to this kind of plan, you often have to agree to make monthly payments for the rest of your life. What this means is that, if you live for a very long time, you will end up paying much more into the plan that you will get out, as the pay-out itself is fixed.
These plans are insurance schemes, so once money has been paid in, you can’t get it back, and there are usually fees involved if you want to cancel the plan early. If you can’t make your monthly payment one month, then the plan will stop and you won’t get a pay-out.
However, some plans link the lump sum you receive to inflation, so that the payment 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 may be returned to your estate.
Term life insurance
Term life insurance policies run for a set period of time, and will pay out the amount insured if you die during this term. If you don’t die, then the policy will finish on the date you agreed at the outset and you won’t get anything back.
You can choose ‘level’ cover, where the potential pay-out remains the same over the policy term, ‘decreasing’ cover, where it reduces in line with a debt, such as a mortgage, and ‘increasing’ cover, where the sum insured increases either with the rate of inflation, or by a set amount every year.
Always compare a range of quotes before buying, as premiums can vary widely depending on which provider you go to. Remember too, that if you have any pre-existing medical conditions, premiums may be expensive.
State support for funeral costs
If you are receiving benefits or are on a low income, you might be eligible for state support for a funeral costs.
These Funeral Payments can help pay for burial fees, cremation fees and provide up to £700 for funeral expenses, such as the coffin and flowers. They can also contribute towards travel to arrange or go to the funeral, and the costs for moving the body within the UK.
However, any money you receive is repayable, so you’ll usually have to pay back any money you get from the deceased person’s estate.