Funeral costs have risen by an alarming rate in recent years, so it’s not surprising that an increasing number of people are looking at the various options available to help with them, such as funeral plans and over 50 life insurance. but which is the best option for you and what is the difference between funeral cover and life insurance?
Whether a funeral plan or life insurance is right for you, may depend on 3 things:
- Do you want to arrange the funeral yourself, so your family won’t have the worry?
- Would you prefer to leave money for your family so they can make the funeral arrangements?
- What’s your budget?
What is a funeral plan?
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.
Whereas life insurance pays out a cash sum when you die that can be used how you or your family wish.
What is the difference between a funeral plan and life Insurance?
The main difference between funeral cover and life insurance is:
With a funeral plan you are arranging and paying for your funeral in advance at today’s prices, so that when the time comes, your family just need to make one phone call and the services detailed in the plan will be taken care of by the funeral director.
With Over 50 life cover, no funeral services are agreed or paid for in advance, your family will simply receive a cash sum that they can use to help pay for the funeral, if they choose.
Life insurance vs funeral plan
Although you can use a funeral plan or life insurance to help with funeral costs, they each do this in very different ways, so it is worth considering what you want to achieve.
As a prepaid funeral plan lets you arrange and pay for your funeral services in advance at today’s prices, you avoid any future price rises and reduce 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 have the flexibility to make the decisions, 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. This means it may make a smaller contribution to funeral costs in the future, than it would today.
Can you get life insurance with funeral cover?
Funeral cover isn’t always included in life insurance, however most over 50 life insurance plans these days offer a funeral benefit option. Not to be confused with a funeral plan, this free option gives you the opportunity to take advantage of extra money towards your funeral costs, typically between £250 to £300 depending on your provider, in return for agreeing to have the cash sum paid directly to a specified funeral director when the time comes. This will also give you the chance to specify any wishes you may have regarding the funeral arrangements.
What is the difference in the cost of funeral plans and life cover?
The difference between the cost of funeral plans and life insurance mirrors the difference in what each product is providing.
A funeral plan provides everything specified in the plan, such as the funeral director’s services. It can be paid for with a single payment of between £3,000 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.
Over 50 life insurance simply provides a fixed cash sum on your death, The cost of Over 50 life insurance plans ranges from around £4 to £50 a month depending on your age, how much you want to pay each month and how much cover you want. The cash sums available are relatively modest because your acceptance is guaranteed, regardless of your health, and the pay out from one policy is unlikely to pay for your funeral,
You are covered for the full cash sum after one or two years and your monthly premiums are payable until you die or until your 90th birthday; so 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 more cost-effective as you are freezing your costs at today’s prices. However, if you prefer to stick to a lower monthly budget, then you may prefer life insurance.
Can you buy life insurance to cover funeral costs?
Yes, you can buy life insurance that pays out a higher cash sum than the cost of a funeral, which could be enough to pay for your funeral – it will depend on how much you can afford to pay each month. If you are in good health and happy to answer health and lifestyle questions, you could choose regular whole of life insurance.
It works in a similar way to over 50 life insurance however acceptance is not guaranteed as your application is assessed. If you are accepted, you could get at least 40% more cover for your money.
Are funeral plans worth it?
Funeral plans could be worth considering if you have the funds available, as you could save money by paying for the services included in the plan at today’s prices. You will also help ease the pressure on your family of having to make the funeral arrangements when the time comes.
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 considering 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.
Compare funeral plans and Over 50 Life insurance to find the right plan at the right price for you
To decide whether a funeral plan or life insurance is the right option for you, why not compare both options and get a quote? It doesn’t take long and could save you money in the long term, so could be time well spent.