A Guide To Funeral Insurance

With the average cost of a funeral in the UK currently around £3,600 to £4,000, the overall cost is rising year-on-year at a rate that is faster than inflation. Studies shows that the cost of funerals could rise to £7,000 by 2026 and as much as £12,000 by 2036 - placing a potential burden on the person's loved ones to fit the bill.

How Do Prepaid Funeral Plans Work?

Due to rising costs, there has been a surge of interest in funeral insurance, known commonly as prepaid funeral plans. The idea is that you buy a plan either in one lump sum (at around £3,000) or in monthly instalments starting from £25, with cremation insurance starting at £15 per month.

The contributions will be used towards paying for your burial and funeral costs, but the costs are fixed at today's prices - meaning you won't be stuck paying the potentially huge sums if you pass away in 10, 20 or 40 years.

Typically, it is more cost effective to pay for the policy in one-go, as paying in instalments is a more flexible option but comes as a slightly higher cost.

A Breakdown Of Funeral Costs

The costs of a funeral can add up quickly, especially with the trend of showing love and respect to those who are bereaved. Whilst cremation is around one-third cheaper, it is the carrying out of the ceremony where the largest fees are incurred.

Notably, the average funeral director can charge around £2,000 to £2,500 to carry out vital tasks such as arranging transportation of the deceased, booking and organising the ceremony. One can carry out these tasks themselves including embalming but it places quite a burden on the family during a difficult time.

Other costs include the rental of the hearse or limousine vehicle at around £200 for the day and a coffin which depending on the wood, can cost upwards of £500. Other additional costs which are not compulsory include flowers (around £100), food for guests (around £500), prayer sheets, obituary in the local paper and more.

It is important to check the terms of your funeral plan since not all of the expenses will be covered. It is common for policyholders to get a shock by any additional costs, so it is important to be aware of these.

Is Funeral Insurance Regulated?

Currently, the funeral insurance industry is not regulated but there is a governing body which has a code of conduct for its members that they must adhere to. Once you have purchased a policy through a company like Cooperative or Dignity, your money is placed in a trust fund and kept there securely until you need to use it for yourself or your loved one.

For individuals concerned about purchasing a policy, there is additional security if you pay with a credit card. Part of Section 75 of the Consumer Credit Act means that any purchases made over £100 are protected by your credit card company. So in the event that your loved one passes away and the insurer cannot pay out the claim and fulfil its duties, your credit card provider may be able to assist.