Is it worth taking out funeral insurance?
No one likes to think of the time when they’ll have to write a will, but if you want to ensure that you can protect your family and loved ones even after you’re gone, it’s a good idea to plan ahead and think about the best way to pay for your funeral so that you don’t leave the hefty cost of a funeral to your loved ones.
You might want to consider including information about your funeral in your will, and even though it’s not necessarily a requirement to prepare for your funeral expenses payment in your will, it can take some of the stress off your family.
There are several ways to cover your funeral, but if it’s not a subject that you feel comfortable talking about right now, it might not be something you’ve looked into. In our guide to funeral costs and cover, we talk you through some of the types of funeral plans you can look into and the pros and cons of taking out funeral plan insurance.
Can you get insurance for your funeral?
If you’re worried that you might not be able to cover the cost of your funeral by leaving money in your will and you don’t want to leave the cost of paying for your funeral up to your loved ones, you can take out funeral insurance which will pay out a lump sum to the beneficiaries to cover the funeral costs in the event of your death.
What is the difference between getting a funeral plan and a life insurance policy?
A funeral plan helps you to put money aside to cover the costs of your funeral, whereas life insurance pays out in the event of your death if you die within the policy terms, which can be used to cover any costs (i.e. funeral, bills, debts, etc).
Are funeral costs covered by life insurance?
Many life insurance policies will pay a lump sum of money to your beneficiaries that can be used to help cover funeral costs.
However, you can also get a specific plan in place with your life insurance provider to ensure that there is a set amount of money put aside from your estate when you die that can be used to pay for your funeral. The payment is usually made very soon after you die and it doesn’t usually have to go through probate.
The pros and cons of funeral insurance
Of course, there are both advantages and disadvantages of taking out funeral insurance, take a look at them below before you decide the best way to cover your funeral costs.
- Free from inheritance tax.
- Usually protected against inflation.
- It can help your loved ones and beneficiaries with cash flow while they’re waiting for the payment to come through via probate as your funeral will already be covered.
- Not everything is covered - your family will have to make additional payments if they want any extras for your funeral.
- It could limit your options with regards to funeral directors as most funeral insurance plans are based on using specific funeral directors, which means your family could end up waiting a while to have your funeral when you die.
How to cover funeral costs
There are several ways that you can cover your own funeral costs, including opening a specific bank account to pay for your funeral, using your life insurance policy to pay for funeral costs or to take out a specific funeral plan.
Take a look at some of the best ways to cover funeral costs below.
- Over 50s life insurance - this type of insurance involves paying a monthly payment from the time that you take out the policy until you die and then it will pay out a lump sum upon your death. However, if you live for a long time, you could actually end up paying more into the policy than you get out and if you miss a payment, you won’t receive a payout at the end of the policy.
- Term life insurance - this insurance policy runs for a set period of time, usually for around 25 years, and it will pay out if you pass away during that time. You can also choose between level term insurance and decreasing term insurance, depending on the type of payout you want.
- Pre-paid funeral plans - pre-paid funeral plans are arranged while you’re still alive and you can choose to pay for one in a lump sum payment or spread the payments across several months or years to help you cover the cost of your payment. Funeral plans can be used to pay for things like a coffin, the cost of the funeral service, funeral director fees and sometimes additional fees such as flowers.
- Put your life insurance policy in trust - by putting your life insurance policy in trust, you can avoid the payout being subjected to inheritance tax, which is always a bonus for your loved ones.
Should I put a plan in place to cover my funeral?
A pre-paid funeral plan can help to cover the costs of your funeral when you die so you don’t have to worry about leaving the financial burden of a funeral to your family and loved ones.
However, determining whether life insurance is better than a funeral plan depends on your own individual circumstances, particularly with regards to your financial circumstances.
The average cost of a funeral in the UK is over £4,000, so they’re certainly not a cheap thing to spend money on, especially if you leave the responsibility of paying for it to your family when you die. Therefore, having some kind of funeral plan or life insurance policy in trust could really help out when you pass away.
It’s important to consider all the financial options when deciding the best way to pay for a funeral. Life insurance might be the best option for you depending on the level of cover you want to take out, or you might want to buy a specific funeral plan so you can rest assured that your funeral costs are covered even before you die.
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