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  • James Douglas

Which is REALLY better, a Funeral Plan or Life Insurance?

Updated: Jan 17

With funeral costs rising by an alarming rate every year, it’s not surprising that an increasing number of people are looking at the various options available to help with funeral costs; but with Over 50 life insurance and Funeral Plans to choose from, how do you know which is the best option? Well your answer to whether a Funeral Plan or Life Insurance Plan is the best option really depends on 3 things:

  1. Do you want to arrange the funeral yourself so your family won’t have the worry?

  2. Would you prefer to leave money for your family so they can make the funeral arrangements?

  3. What’s your budget?

Life insurance and funeral plans; what are they? A life insurance plan pays out a cash sum when you die that can be used how you or your family wish. A funeral plan lets you pre-arrange and pay for your funeral services in advance so your family won’t have the emotional or financial worry when the time comes. Life Insurance vs Funeral Plan – the main differences Over 50 Life Insurance and Funeral Plans are both regularly used for funerals by families throughout the UK, the main differences being:

  • With a funeral plan you are arranging and paying for your funeral in advance, fixing costs at today’s prices, so that when the time comes, your family just make one phone call and everything is taken care of by the funeral director, as detailed in the plan.

  • With Over 50 Life Cover, your family will receive a cash sum that can help them pay for the funeral.

So although you can use a funeral plan or life insurance to help with funeral costs, the reality is that they both achieve this in very different ways, therefore it is important to think about what you really want. Consider yours and your family’s needs. As a prepaid funeral plan lets you arrange and pay for your funeral services in advance at today’s prices, you save money by avoiding future inflation and remove the financial and emotional worry from your family of having to arrange and pay for the funeral when the time comes. With over 50s life insurance, the cash sum that is paid out when you die gives your family the flexibility to choose how they spend the money, which in the majority of cases is to help with funeral costs. So if you want certainty that the funeral services and costs will be covered, a funeral plan may be worth considering. If on the other hand you think your family would prefer the money so they can organise your funeral for you at the point of need, then over 50s life insurance may be more suitable. When weighing up Life insurance vs funeral plans, do keep in mind that with over 50s life cover, the cash lump sum paid out is usually fixed, so inflation will reduce its value over time. With funeral inflation running at around 5% to 6% a year, it makes sense to think about the impact this will have on the cash sum paid out when the time comes. Also most over 50 life insurance plans these days offer a funeral benefit option. Not to be confused with a funeral plan, this option gives you the opportunity to take advantage of extra money towards your funeral costs, typically between £250 to £300, in return for agreeing for the cash sum to be paid directly to a specified funeral director. A lot of people think they have a funeral plan, when in-fact they have a Life Insurance policy with a funeral benefit, this assumption can be dangerous as the Life Insurance policy, as discussed, wont have actually fixed that customers funeral costs... Think about the long term cost. As far as budget is concerned there are a number of options available. Funeral plans can be paid for with a single payment of between £1,500 to £4,000 depending on your chosen level of service, or by monthly instalments of between 1 to 25 years. The 12 month option usually costs the same as the single payment method however instalments paid for longer than 12 months will incur additional administration fees from some providers. Over 50 life insurance plans range from around £4 to £50+ a month depending on how much you want to pay and how much cover you want. You are covered for the full cash sum after just one or two years and your monthly premiums are payable until you die or until your 90th birthday; therefore there is a chance you could pay more in premiums than the cash sum paid out. It all depends on how long you live. So if you have the money available, a prepaid funeral plan could be a cheaper option as you are freezing your costs at today’s prices. If you prefer to stick to a lower monthly budget but want cover soon, then you may prefer an insurance backed product. Are funeral plans worth it? Funeral plans are worth considering if you have the funds available as you can save money by paying today’s prices, therefore avoiding inflation and removing the worry of having to make the funeral arrangements when the time comes from your family. When you buy a prepaid funeral plan your money is held in either a trust fund or a life insurance plan, ready to pay for your services when the time comes. It is also worth choosing a funeral plan provider that is registered with and regulated by the Funeral Planning Authority, so you can be sure your money is protected by their safeguards. To speak to someone further about your options and what could be best for you, reach out to us below.

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