In this article, we outline what you should consider when choosing between a life insurance policy and a funeral plan to pay for your funeral arrangements. Both types of plans pay out in the event of death but there are pros and cons to each depending on your personal circ*mstances. We will describe how different types of life insurance work compared to a prepaid funeral plan. Understanding how life insurance differs will help you decide which is better suited to your needs and budget.
Is life insurance or a funeral plan best for you?
It depends on your budget, health, age and whether your family will need money to pay for things other than your funeral.
As you reach later life you may start to think about how your family will meet the cost of your funeral if you were to die. Most people find that arranging someone's funeral highlights the costs involved. UK funerals cost £4,141 on average according to the SunLife Cost of Dying Report 2024. Still, they can vary depending on location, type of funeral service and whether there are any optional extras such as flowers, cars, catering and so on. The report also highlights that the cost of dying may be close to double this amount when you include the extra options and probate fees charged to settle your estate.
If you wish to arrange a plan that will give your family money to cover the costs of your funeral arrangements then you should jump ahead to "Life insurance to cover your funeral costs" where we explain the choice of insurance plans that will achieve this. On the other hand, if you would like to make your funeral arrangements and pay for these upfront, carry on reading as we explain how Funeral Plans work.
What is a funeral plan?
Funeral plans are 'prepaid funeral arrangements' that allow you to pay for your funeral during your lifetime so that your family and friends do not have to worry about doing this when you die. A funeral plan will include the details of your chosen funeral arrangement based on the choices you make when you buy it. If you have the money to pay for your funeral and do not wish to give your family the task of arranging and paying for your funeral, a pre-paid funeral plan can be a good choice. However you should talk to your family to discuss the arrangements that you will put in place. It is common for the bereaved family to add to your arrangements in an effort to give you a good send off and these may cost more at the time of your death than it may do if you were to include them upfront.
How do prepaid funeral plans work?
A prepaid funeral plan allows you to pay for your funeral upfront and you can do this in one lump sum or you can choose to pay the amount in instalments over a period of time. When you die, your family will notify the funeral plan provider and it will exercise your wishes so your family will not need to make any arrangements or pay any costs unless they wish to add to the service options that you chose.
You will usually choose:
- Whether you would like a burial or cremation service
- The type of coffin that will be supplied
- If pallbearers will be needed
- Whether a service will take place
- Whether mourners will attend your service
- Whether a hearse will be required
- Whether limousines are needed to transport mourners
- Whether flowers will be organised
How do Direct Funeral Plans work?
Direct funeral plans do not provide options for a funeral service and instead carry out a simple cremation or burial without a ceremony which can cost much less as a result. The plan covers the cost of retrieving your remains and either carrying out a simple burial or cremation as outlined by you when you buy your plan. If you choose a burial, you will usually have to pay for the burial plot in addition to the burial costs whereas in the case of a cremation, your ashes will be delivered to your family or scattered per your wishes.
Although there has been an uptick in the number of direct funeral services carried out over recent years, it is a good idea to discuss these plans with your family to ensure that they support your choice.
How much do Funeral Plans cost?
The cost of your funeral plan is determined by:
- Your choice of funeral arrangements
- Where you live geographically in the UK
Funeral plans usually cost upwards of £3,000 but Direct Funeral Plans can start at as little as £1,500.
What are the payment options for a Funeral Plan?
- Pay in one lump sum - the amount paid will usually cover all of the costs of your funeral even if these rise in the future but a rise in third-party costs such as doctor's fees or burial plot costs may not be covered unless your funeral plan provider offers a guarantee which you will usually cost extra.
- Pay in instalments - many funeral plan providers offer customers the option to spread the cost of the funeral plan over 12 months or longer but you should check whether the instalment option includes interest charges that may make the plan more expensive. Also, check whether the plan will pay out if you die whilst making your payments as some providers cover your funeral costs once you have made at least 12 months of payments while others may just refund your payments to your family.
How to arrange a Funeral Plan
A number of providers offer funeral plans and it is worthwhile getting quotations from a good selection. You may also get quotes for the type of funeral you wish to arrange from your nearest funeral director so that you can compare the cost of the funeral plan to the actual cost. Some funeral plan providers offer quotations online while others will provide you with a quote once you have spoken with them.
Funeral Plan providers
Co-op Funeral Plans - a reputable name in the funeral industry that offers a range of funeral plans to meet your needs and also carry out the funeral. The Gold Funeral Plan is rated 5 stars by Defaqto and Moneynet has voted the Co-op, "Best Funeral Plan Provider" for the last 7 years.
Avalon Funeral Plans - covering both UK residents and ex-pats, this company has been awarded "Best funeral plan provided" 5 years running at The Personal Finance Awards and has a 4.9 out of 5-star rating on Trustpilot where over 90% of reviewers gave it 5 stars.
Golden Charter Funeral Plans - owned by an association of independently owned funeral directors, Golden Charter has over 30 years of experience in the funeral industry. It is rated 'excellent' by consumer review site, Trustpilot with 4.6 out of 5 stars based on over 2,700 reviews.
Life insurance to cover your funeral costs
Three types of life insurance could cover the cost of your funeral and I have highlighted the pros and cons of each type below.
Will term life insurance cover my funeral costs?
Yes, but term life insurance may expire before you die which means that it may have to be replaced in the future. Having said this, term life insurance is typically bought by people during their working lives when they may wish to cover needs other than their funeral costs. You will usually buy this type of life insurance so that if you die, your mortgage can be paid off or your family can be provided for. If you need term life insurance for these reasons, it can be sensible to add a little extra cover to this type of policy to cover the cost of your funeral. This will mean that should you die prematurely, the money can be used to pay off your debts, take care of your family and pay for your funeral.
If you live beyond the term of your life insurance policy you should assess your needs again. At this point, if your family has sufficient funds to cover your funeral, you may not need any more life insurance. If not, you can look to buy another type of life insurance or funeral plan at this point - you will find these described below. It is wise to review your life insurance needs before your existing cover comes to an end so that there is no gap in your insurance.
Action- if you fall into the above description and feel that term life insurance may be for you then speak to a life insurance specialist* who will talk you through quotations based on your requirements and you can get up to £100 cashback if you go ahead.
Monthly cost of £200,000 level term life insurance for 20 years
| Age 20 | Age 30 | Age 40 | Age 50 | Age 60 | |
| Monthly payment for a non-smoker | £4.36 | £6.46 | £12.06 | £28.04 | £78.95 |
| Monthly payment for a smoker | £6.19 | £11.00 | £25.87 | £69.86 | £199.90 |
Monthly premiums above assume that you are in good health and do not participate in any dangerous activities
Will Over 50s life insurance cover my funeral costs?
Yes, Over 50s life insurance policies are a popular way to cover your funeral costs but they may not provide the best value for money for everyone. You can usually choose between a few thousand pounds of cover up to around £20,000 based on your age and how much you are happy to spend. The cover will stay in place until you die which is when it wil pay out the insured amount to your nominated beneficiaries. You can qualify for over 50s life insurance if you are between 50 and 80 years old regardless of your health as your health will not be assessed and this is its main appeal.
Although over 50s life insurance can be a great option for people with health issues, it is worth noting that the cost of the insurance reflects this. A healthy person may find that whole of life insurance provides them with more value for money and we explain this option below. Furthermore, you will have to wait between 12 and 36 months to qualify for full cover - if you die during the qualifying period, the full cover amount will not be paid but your premiums will usually be returned and there may be a payout if your death was caused by an accident. You will have to keep paying for your policy until you reach age 85 to 95 years old and some providers expect you to keep paying your premiums until you die. There is no cash in value and you could end up paying more into the insurance than it eventually pays out depending on how long you live.
Action - if you are between 50 and 80 years old and think that an Over 50s life insurance policy may meet your needs then speak to an Over 50s life insurance broker* who will search the whole market and make recommendations after assessing your needs.
Monthly cost of an over 50s plan that pays £5,000
| Age 50 | Age 60 | Age 70 | Age 80 | |
| Monthly payment for a non-smoker | £12.00 | £19.00 | £30.00 | £63.00 |
| Monthly payment for a smoker | £20.00 | £31.00 | £51.00 | £75.00^ |
^this price is for £4,500 of cover
Will guaranteed whole of life insurance cover my funeral costs?
Yes, guaranteed whole of life insurance can cover your funeral costs and is often overlooked by consumers searching for funeral solutions. Guaranteed whole of life insurance will pay out the insured amount when you die and has no end date so it is guaranteed to pay out when you die. However this type of life insurance requires a health questionnaire and if you are in poor health, you may find that it is expensive and in cases of serious ill health, you may be declined by the insurance company altogether. If you are not put off by the health questionnaire and are reasonably healthy a guaranteed whole of life insurance plan could offer you a larger amount of cover for your budget than you would get with an over 50s life insurance. Health conditions that are well managed and controlled need not affect your application adversely so it is worth enquiring about this type of life insurance before you make your decision. You do not have to wait until you are over the age 50 to buy guaranteed whole of life insurane so it can be arranged when you are younger and less likely to have suffered health complications.
Action - guaranteed whole of life insurance plans are few and far between but if you speak to an expert* they will help you source various options and they will share the costs based on your health and the amount of cover you need.
Alternative ways to provide for your funeral
Planning your funeral may be something that your family are happy to do and you can put aside funds to cover the cost of it. If you choose to leave your family to pay for your funeral, here are some things you should consider:
- Inflation may erode the value of the money that you have earmarked for your funeral so ensure that you factor this in.
- The cost of funerals may rise and are likely to over a long period of time so be realistic about what it may cost in the future
- Share your wishes with your family as many families who have arranged funerals state that this helps
- Ensure that the funds that you expect your family to use are accessible and not tied up in assets from which they would be difficult to extract
