How can life insurance cover funeral costs?
Just like with life insurance, many of us don’t dwell on our funerals other than the purely aesthetic choices. You may have occasionally thought of what song or prayer you’d like to feature at your own funeral or the flowers you would prefer but we rarely think about the cost of the whole funeral and how it will be paid for – after all, we won’t be around to pay for it.
By not planning in advance, we may cause financial difficulty for our loved ones at a distressing time. Funerals are surprisingly expensive.
According to the Royal London National Funeral Cost Index Report 2019, the average cost of a simple funeral with cremation is £3,250. The average cost of a simple funeral with a burial is £4,321. As with most things, these prices are always rising, so today’s price may differ.
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Why are funerals so expensive?
There are several factors that affect how much you will pay for a funeral, depending on how affordable or extravagant you want the funeral to be. However, even a simple funeral arrangement is fairly expensive in the UK, certainly more than many people are aware of.
So what elements contribute to how the price you will pay differs from someone else’s? Where you live is a factor, as is if you choose to go for a burial or a cremation and then we get to the special requests, such as; the burial plot, the minister or official, the headstone, the type of coffin, the flowers, the venue and everything your loved ones will add to give you the best possible send-off.
How can I cover funeral costs with life insurance?
There are several ways life insurance can help you pay for your funeral.
Term insurance
Term insurance is the most popular type of life insurance and it is usually taken out when people want life cover for a specific amount of time. This may be to pay off a mortgage, or debt, or to cover the care of young children until they grow up. The policy will only payout if you die within the term and this is usually in the form of a lump sum. There are two main types of term life insurance policy:
- Family life insurance (level term life insurance) – the level of cover stays the same throughout the whole policy
- Mortgage life insurance (decreasing term life insurance) – the level of cover decreases over time as you repay more of your mortgage
Many families use this cash sum to help pay towards the cost of a funeral, although be aware that if you die outside the term then they will not receive any pay-out.
Whole of life insurance
If you want a guaranteed pay-out, no matter when you die, then it is best to opt for whole of life insurance, also known as “life assurance.”
This is more expensive than term insurance, as it is inevitable that the money will go out at some point. It is important to make sure you can pay into the policy until into your old age since if you stop payments then the cover will be canceled. You can convert some term insurance policies into whole-of-life cover. This is known as convertible term insurance.
Over 50’s life insurance
The younger you are, the easier and cheaper it is to get life insurance, however, there are options for plans if you are a bit older and one of these is — over 50s life insurance.
This is a useful plan for those who do not want to go through a medical check as anyone will be accepted. As with whole-of-life insurance, a payout is guaranteed but the payout and the premiums are usually quite small. This is why many people use this plan for solely funeral expenses.
As with other types of life insurance, it is important to keep up with the premiums as if you stop, the cover will be over and you will not get the money back.
Funeral insurance
As we have seen, the payout from regular life insurance can be used towards your funeral but what if you want a specific plan just for funeral costs?
Funeral insurance is specifically tailored to cover the costs of your funeral. You pay a premium and your family members will receive a lump sum after you die. Funeral insurance plans usually cover the fees of funeral directors and burial or cremation costs but not extra expenses, such as flowers, the headstone, or the wake.
When choosing between life insurance or a funeral plan it is important to first work out exactly what you need from the cover and go from there.
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What happens if I can’t afford life insurance?
You may be wondering what you can do if you can not afford life insurance and do not have savings for a funeral.
In the UK, the government has a scheme called Funeral Payment which is aimed at people with low income. Any money received will have to be paid back from your estate. It will help pay for costs such as death certificates, cremation or burial fees, and travel to the funeral.
There is also the option of a Public Health Funeral if there is no money at all in the estate to pay funeral costs. This is usually a short service and cremation and the local authority will decide the date.
Need life insurance advice?
If you are thinking about taking a new Life Insurance policy to protect your FAMILY or HOME, you can contact our team of FRIENDLY EXPERTS to get FREE advice on 0800 009 6559 or CLICK HERE
Resources
Gov.uk – Get help with funeral costs (Funeral Expenses payment)
