Does Life Insurance Cover Funeral Costs?

Elaine Brookes Steve Case

Author: Steve Case - Insurance Expert

Reviewed & Fact Checked By: Elaine Brookes

Updated: 8th December 2023

Does life insurance cover funeral costs?

Since 2004, funeral costs have risen 128%, which is a rate much faster than inflation.

Such expenses are not a pleasant thing to think about, not to mention it is always tough to think about the events that will happen when you pass away. However, planning ahead might be the best option for you and your loved ones, and it may give you peace of mind.

In order to prepare for the inevitable, it’s best to have some sort of funeral cover or funeral support payment in place. There are two main options you should consider: a life insurance cover and a pre-paid funeral plan.

To help you fully understand the complexities of this topic, we’ll first give you some details on the general cost of a funeral in the UK. We’ll then explain the difference between life insurance and a funeral plan. Finally, we’ll answer some of the most frequently asked questions regarding life insurance and funeral service in the UK. Does life insurance cover funeral costs? Read on to find out.

How Much Does a Funeral Cost?

Funeral costs have been on the rise. What’s the average in general, and what’s the average for different funeral types such as cremation or burial? Let’s find out.

Average Funeral Cost in the UK

The average cost of a funeral in the UK stands at an all-time high of £9,263. This includes professional fees and a wake, which is an additional service.

Additional funeral services include, but are not limited to:

  • Flowers
  • Booking fees for catering and a venue for the wake
  • A funeral or death notice
  • An urn for ashes
  • A memorial, such as a headstone
  • Funeral director’s fees

For many people, £9,263 is a substantial amount, hence the idea to pay for their own funeral with a life insurance policy, prepaid funeral plan, or money from a different source.

What does life insurance cover?

Average Cost of Cremation in the UK

On average, funerals by cremation cost £3,885. However, these costs may vary depending on the region. In the Midlands, the average stands at £4,488, while in London, it can be as high as £5,235. Direct cremations, meanwhile, cost £1,554.

In 2020, 59% of funerals were cremations.

Average Burial Cost in the UK

The average burial cost in the UK currently stands at £5,033. Experts predict that burial fees will continue to rise. By 2025, the average cost of a basic funeral (whether by burial or cremation) may even hit £5,044.

Life Insurance / Funeral Plan

There are two different products that may prove helpful in covering funeral expenses. Most people know that they can take out life insurance or even multiple life insurance policies if need be. However, funeral plans are also a viable option.

Read on to learn about the differences between these two products.

What Is Life Insurance?

Life insurance is a specific type of cover that allows your beneficiaries to receive a cash lump sum in the event of your death.

The cost of your life insurance premiums is calculated based on a number of personal and policy-related factors, such as your age and medical history, as well as the term of your policy and your preferred type. Your loved ones can use it to pay off debts, clear the mortgage, spend as inheritance, or cover your funeral costs – sometimes all of the above if you manage to amass such an amount.

There are many different types of life insurance policies, such as whole of life, over 50s life cover, level term life cover, decreasing term life insurance, or joint life insurance policy. You can take out one policy, but if you can keep up with your monthly premiums and need additional cover, you can purchase multiple policies.

What Is a Funeral Plan?

A funeral plan is an agreement with a funeral plan provider to carry out your funeral when the time comes. It allows you to pay a fixed sum in advance for your funeral services. You can decide how much is spent on your funeral and choose the type of funeral you want to have.

It’s one of the best ways to protect your loved ones from a stressful task – planning your funeral on their own.

The Difference Between a Life Insurance and Funeral Plan

Here’s a rundown of major differences between life insurance policies and funeral plans:

Life insurance:

  • Pays out a lump sum in cash if you pass away during the term of the policy
  • Requires monthly premium payments
  • Depending on the type of policy, premium payments continue until the policy expires or until you pass away
  • Provides your loved ones with an additional layer of financial support which can be spent how they see fit
  • Different policy types to suit individual needs and budgets
  • Requires underwriting to determine how much it will cost you and whether you qualify for the cover

Funeral plan:

  • Guarantees to cover your funeral services at today’s rate
  • Provides you with several payment options – pay in full or divide the cost with monthly instalments
  • Payments end when the funeral plan has been paid in full
  • Has no cash value – the funds can be used only for your funeral
  • Different funeral plans to suit different needs and budgets
  • No medical questions asked, guaranteed acceptance

As you can see, these two products are completely different. Given your circumstances or preferences, you might want to choose one or the other – or opt for a prepaid funeral plan on top of your existing life insurance payout.

funeral and life cover faq's

Frequently Asked Questions

In this section, we’re answering some of the most frequently asked questions regarding funeral costs, life insurance, and funeral plans.

Does life insurance cover funeral costs?

Simply put, life insurance is not designed to function as a funeral cover. Your beneficiaries can use the payout to take care of some of their most important financial responsibilities, other than your funeral cost (such as regular payments, mortgage, tuition fees, debt repayments, and so on). However, it can provide them with sufficient financial support, making it possible for them to pay for your funeral with the funds from your life insurance.

Are beneficiaries of my life insurance policy responsible for funeral costs?

No, beneficiaries of your life insurance are not obliged to cover funeral costs – they can spend their insurance payout as they please. However, if the amount is sufficient, they may use this money to pay for all of your funeral expenses after you pass away.

When does a life insurance payment payout after death?

The payout time varies depending on your circumstances and the provider. Sometimes medical evidence has to be collected, or a claim may need to be verified. However, once the payout has been cleared out and agreed upon, it can often be made within a matter of days – in time to cover funeral costs.

How can I pay for a funeral with life insurance?

You now know you have at least two options – your life insurance policy (or multiple policies) and prepaid funeral plans.

In the case of the first option, your beneficiaries receive a cash lump sum from your life insurance policy. They can contribute as much or as little as they want to your funeral expenses.

The second option gives your loved ones funds that can be directly spent on your funeral – and nothing else since it has no cash value.

Either way, it would be best to talk with your loved ones about these two solutions to give them (and yourself) peace of mind they’ll surely need when you’re no longer with them.

What’s better, a life insurance policy or a prepaid funeral plan?

Both options have advantages and disadvantages:

Life insurance:

  • Gives your beneficiaries a lump sum cash payout in the event of your death
  • Provides comprehensive financial protection and can be used for a variety of expenses, not only funeral costs
  • Can be modified – if you want to maximise your life insurance payout, you can buy another policy or take out additional cover, such as critical illness cover

The cons of life insurance include:

  • The fact that not everyone is eligible for it
  • It may be too expensive for some people to take out
  • There’s a possibility that you’ll end up paying more towards your life insurance cover than what’s actually paid out when you die

Here’s a rundown of pros regarding prepaid funeral plans:

  • They guarantee you’ll cover your key funeral expenses at today’s rate
  • Everyone can get them – no medical records or health questions are needed
  • They allow you to plan your funeral the way you want it to look like
  • You know exactly how much you’ll pay for a funeral plan because the rates are fixed

Still, funeral plans have some drawbacks:

  • They force you to think of your mortality, which is something many people tend to avoid
  • They can be more expensive than life insurance, especially if they’re extremely short-term – they usually start at around £3,000 for a traditional funeral.

As you can see, both options have good and bad sides to them. A good rule of thumb is to pick a product that gives you and your family peace of mind in the event of such a difficult time.

The Bottom Line

Funeral services and their costs in the UK have reached their peak point, with experts predicting they will continue to rise over time. With the average cost reaching almost £10,000 in 2024, it’s understandable why many people want to take care of it themselves and ease this financial burden on their families.

If you’re one of them, there’s more than one way that can help them cover all your funeral fees and other related costs. You may want to decide to take out a life insurance policy, be it the over 50s life cover, whole of life insurance, or a different type whatsoever – you can even have multiple policies if you want. In the event of your death, your beneficiaries will receive a lump sum which they can then use to cover all your funeral costs.

On the other hand, you can look into prepaid funeral plans and provide your family with a fund dedicated specifically to serve one purpose – cover your funeral cost with all its fees and additional services.

You can also combine these two products and give your loved ones that extra layer of financial protection. Ultimately, the choice is yours – pick the option that suits you best.

Why Use Insurance Hero?

Experts at Insurance Hero are ready to help you get the best life insurance policy that fits your lifestyle and needs. Reach out to us today and find the right policy for you! We work with specialist insurers and professionals who are ready to prepare a great deal for you at competitive prices.