Will an over 50 life insurance plan pay for my funeral?


Jan 31, 2017
over 50s life insurance funeral costs

Sooner or later, someone will have to pay for your funeral when you die. The question is whether you are going to make it easier for your surviving family or friends to foot that bill by taking action now in order to make provision for the future.

In these uncertain economic times, your family may already be struggling to pay their normal, everyday bills. In fact, as we reported last year, in the UK £576m has been borrowed in the form of payday loans to pay for loved ones’ funerals over the past 5 years.  

Additional, major, unexpected expenditure – such as the funeral expenses of a loved one – are simply not part of the budget. Trying to meet any such demand might leave your family in serious financial hardship.

And all this at a time when funeral costs are not only increasing but look set to rise still further in the years to come.

The cost of dying

Naturally, there is some variation in estimates of those costs, but one of the most authoritative is the annual Cost of Dying Report compiled by insurers Sun Life. Since Sun Life’s first survey in 2004, the cost of a basic funeral has more than doubled, from £1,920 to very nearly £4,000 in 2016. If all the additional costs typically associated with the ceremony are taken into account, the total cost of dying has climbed 16 times greater than the rate of inflation during this period and is currently headed towards a total of £9,000.

The increase in the cost of a funeral has risen by 5.5% in the past year alone, says Sun Life – an increase which outstrips by more than twice the rate of that for growth in average incomes, pensions, and inflation.

What is more, research by the International Longevity Centre UK (ILC-UK) suggests that the increase in these costs are set to rise still further, with the cost of a basic funeral itself rising from the current £4,000 to £7,000 – “if not more” – by the year 2020.

In the face of such escalating costs, what can you do now to help ensure that you and your surviving relatives are able to meet them when your time comes?

How can I pay for my funeral?

There are essentially three options when it comes to ways of paying for your funeral now, or ensuring that the funds are available when they are needed:

Life insurance

  • if you survive that term, no payout at all is made – so your family might still be left struggling to fund your funeral when you do die;
  • whole of life insurance, on the other hand, pays out whenever you die – giving you the option to request that beneficiaries use at least part of that payout to cover your funeral expenses;
  • this type of policy often requires a detailed medical report and you may find the cost of cover prohibitive if you suffer from a pre-existing medical condition when the insurance commences. Nevertheless says the ABI, it is bought by an estimated 5.7 million people in the UK.

This leaves you two further options …

Over 50s Life Insurance

  • over 50s life insurance policies are whole of life insurance policies – but with a difference;
  • the most obvious difference, of course, is that they are designed for individuals over the age of 50;
  • but there are other important differences that mark over 50 life insurance plans from regular types of life insurance – the most significant of which are that no medical examination is required and acceptance for cover is guaranteed - although you may need to pay more if you are a smoker;
  • these policies are designed for people who are on low budgets and or don't want to declare their lifestyle or medial history; perhaps they may have been refused life insurance elsewhere or due to a pre-existing condition.
  • premiums typically start from just £5 a month;
  • if you die within the first one or two years from commencement of the over 50’s life insurance plan, it will not pay out – but your family will typically get a refund of premiums paid;
  • as with any type of whole of life insurance, premiums are payable for the remainder of your life (although the requirement may be lifted once you reach the age of 90) and although the amount of the eventual payout is guaranteed, you might end up paying more in premiums than the amount of the agreed settlement figure

Although, there are now some new over 50 life insurance plans on the market that will refund any payments made (to your family) greater than the sum assured. For example British Seniors offer this type of product.

  • with the effects of inflation on the amount of insurance you decide to buy, there is no guarantee that the settlement is going to cover the costs of the funeral you had planned;

Prepaid funeral plan

  • prepaid funeral plans do just that and, by paying in advance, allows you to cover the basic costs of your funeral at today’s prices;
  • through this kind of funeral planning, you are defining exactly what the amount you have paid is designed to cover and, by paying for it in advance, you are able to freeze the costs at today’s prices, thereby avoiding the effects of inflation;
  • you should note that while funeral plans will guarantee that there is no more to pay, not all plans will guarantee all your costs. It is only the funeral directors costs that are guaranteed with all plans and not the whole funeral (however, Dignity will guarantee all the costs for a cremation funeral);
  • no medical examination is required, acceptance is guaranteed, and you may make prepayment in a series of instalments – if you die before all instalments are complete, the amount you have paid is available to cover your funeral expenses and the balance needs to be met by your surviving relatives;
  • funeral directors themselves may offer prepayment options, but there is a risk that the firm may go out of business during the period before your death – and it may be difficult to recover the payments you have made;
  • this ensure that the funds you have prepaid are kept securely on your behalf in an independent trust or applied in the purchase of a whole of life insurance policy which guarantees a payout upon your death.

What is the difference between a prepaid funeral plan and over 50s life insurance?

When choosing between a prepaid funeral plan and over 50s life insurance, it might be helpful to compare the costs involved with each option. The table below shows the typical amount that needs to be paid (in instalments for a prepaid funeral plan and the total monthly premiums you pay for over 50s life cover if you live until the age of 90):

Period

Standard Funeral Plan

Over 50 Life Insurance

Number of Years

Monthly Payments

Total Amount Payable

Monthly Payments

*Total Amount Payable

5 Years

£66.07

£3,964

£50

£18,000

7 Years

£49.93

£4,487

£40

£14,400

15 Years

£28.84

£5,192

£25

£9,000

* these illustrative figures for life insurance are for a 60 year-old non-smoker and are correct as of the 16th of January 2017.

The most noticeable difference, of course, is that over 50 life insurance might appear the more expensive option for anyone living until they are 90 or so years of age. A standard prepaid funeral plan, on the other hand, may guarantee that basic funeral costs are met after paying relatively cheaper monthly repayments.

Over 50s life insurance might also be a cheaper option if you are content for any payout to cover only part of your probably funeral costs – a 60 year-old, non-smoker, for example, might pay as little as £5 a month for a settlement of £896 or £10 a month for £2,043.

Of course, should you die after the qualifying one or two years initial period with the over 50 plan and many years before your 90th birthday this plan could cost you less financially.

Summary

So in answer to the question, will an over 50 life insurance plan pay for my funeral?

The answer is this depends on how long you live and funeral costs in the future.

A prepaid funeral plan is the only way to guarantee that your funeral will be arranged as you wanted and that most of the costs will be paid, although if these are outside of your monthly budget then an over 50 life insurance will certainly help your family with your funeral costs.

If you are using your over 50 life insurance to help with funeral costs then you should also write down your funeral wishes and keep safe, so that when the time comes your family will know what you wanted.

In summary, it is possible to plan for the future, make the funeral arrangements you want to see implemented when the time comes and start paying for those expenses now, either through a prepaid funeral plan or by way of an over 50s life insurance policy.

Compare Over 50 life insurance

Help your family pay for your funeral costs.


Ashley Shepherd is an Over 50s Personal Finance Expert

ashley shepherd

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