Life insurance can offer crucial financial support for your loved ones during a challenging period. By providing a lump-sum payout it can help prevent financial hardship, covering significant costs like mortgage payments, outstanding debts and everyday expenses.
In addition to general financial protection, some life insurance policies also include coverage for funeral expenses, further easing the burden on your family.
Below, we’ll look at typical burial and cremation costs, how life insurance can support these expenses and alternative options to consider.
Using Life Insurance for Funeral Costs
While death is a sensitive subject, funeral planning is one of the immediate concerns that families face after a loss.
Funerals are deeply emotional events that allow people to honour and remember their loved ones, but they can also come with substantial expenses. From funeral director fees and memorials to flowers and catering, costs can quickly add up—especially if the deceased was the primary income earner.
Preparing for these expenses ahead of time can ease some of the pressure on your family.
Fortunately, you have options to help your family manage funeral costs, with life insurance and specialised funeral plans being two of the most common.
What Does a Funeral Typically Cost?
According to the UK government’s MoneyHelper service, the average cost for a basic burial is around £4,794 while a direct cremation costs about £1,511 (1).
However, prices vary widely depending on location and services used. For instance, expenses may be lower without a funeral director, though these basic costs are often just the beginning.
Other common funeral expenses include:
- Death notices
- Memorial items such as a headstone
- Urns or other containers for ashes
- Floral arrangements
- Catering and venue rental for a wake
The final cost of a funeral depends on various factors, including the type of service and any additional features you choose.
By discussing your preferences with your family in advance, you can help them plan and budget accordingly.
How Life Insurance Can Cover Funeral Costs
There are two main ways to cover funeral costs through insurance:
Life Insurance Lump-Sum Payout: A life insurance policy—either term or whole life—can provide a lump sum to your beneficiaries upon your passing.
They can use this payout to cover as much or as little of the funeral expenses as they choose.
It’s worth discussing with your family how you’d like this payout to be allocated.
Specialised Funeral Cover Policies: Funeral payment plans allow you to prepay funeral expenses. While these plans ensure funds are directed specifically to funeral costs, they don’t offer the same flexibility as life insurance payouts, which can be used for other needs.
What’s the Difference Between Life Insurance and a Funeral Plan?
Life insurance provides a general payout to beneficiaries who can use it for any expenses, including funeral costs. Funeral plans, however, cover only funeral-related expenses.
How Quickly Are Life Insurance Payouts Made After Death?
Payout times can vary based on individual cases and provider requirements but once a claim is approved, payouts are typically made within a few days.
Do Life Insurance Beneficiaries Have to Use the Payout for Funeral Costs?
No, beneficiaries aren’t required to allocate life insurance funds to funeral expenses. They have the flexibility to use the payout in any way that supports the household, including paying off debts or other financial obligations.
What to do next?
If you’d like to speak to someone about a personalised life insurance plan, you can request a call back from our qualified advisors by clicking here.
(1) https://www.moneyhelper.org.uk/en/family-and-care/death-and-bereavement/how-much-does-a-funeral-cost
