Life Insurance vs. Funeral plan: Why having both could save you money

Regardless of your age, it is always beneficial to have in place some form of cover in case the worst were to happen to you.

The average cost of a funeral has risen by 122% in the UK over the past 15 years and shows no signs of slowing down.

Without adequate cover, this cost will become the responsibility of your loved ones.

The most common end of life covers are life insurance or a funeral plan but too often people tend to focus on comparing the two rather than looking at what each type can offer individually.

Let’s take a look at the differences between the two, the benefits they offer and why you could actually save yourself money by having both in place.

Funeral Plans

As mentioned the cost of funerals has risen staggeringly fast, making provisions for your funeral that much more important to avoid the burden falling to your loved ones.

One of the most obvious answers with regards to planning your funeral is a funeral plan.

Typically this type of cover is associated with the elderly and is often taken out by those who are too ill or old to secure life insurance.

However, a funeral plan has benefits traditional life insurance doesn’t.

Taking out a funeral plan allows you to lock down the cost of your funeral at today’s prices meaning that you will not be subjected to the continually increasing cost of a funeral.

For example, if you were to have purchased a funeral plan in 2004 you would have paid £1,920 as opposed to today’s average price of £4,271 (dependant on the plan level you chose)!

The largest pitfall with only having in place a funeral plan is that the vast majority of plans only cover the cost of the funeral director and whilst a contribution towards third party fees (minister fees, venue hire etc.) is usually included, this contribution is small in the grand scheme of things, leaving your loved ones to pick up the bill for the shortfall.

Life Insurance

There are many different types of life insurance, each one suitable for a different purpose. But essentially life insurance involves paying a monthly premium and if you die, your loved ones receive a lump sum pay out.

Let’s look at the various types of life insurance policies;

Term-based policies

  • Level term life insurance – Involves paying monthly premiums and if the policyholder dies during the term of the policy, a lump sum for a predetermined amount will be paid to the beneficiaries. Typically suited to covering the cost of a funeral or providing an inheritance.
  • Decreasing term life insurance – Similar to level term life insurance, monthly premiums are made and if the policyholder dies during the term of the policy a lump sum pay out is made. However, the value of this lump sum decreases over time making it suitable to cover a repayment mortgage or large outstanding debt as it can decrease at the same rate as the remaining balance.

Life assurance policies

Rather than paying out if you die, life assurance policies guarantee a pay out and therefore pay out when you die.

  • Whole of life insurance – Monthly premium payments are made for the rest of your life and when you die a lump sum for a predetermined amount is paid to your beneficiaries.
  • Over 50s plan – Similar to whole of life, premium payments are made monthly for the rest of your life (or until 90 in many cases) and when you die a lump sum pay out is made to your beneficiaries. No medical information is required making this option suitable for those in later life or in poor health.

Whilst the pay out sum from a life insurance policy can be used to cover the cost of your funeral, it will mean paying the going rate at time of death which is likely to have experienced a further significant increase.

This could result in very little funds remaining for the purpose of an inheritance or other purpose.

The largest benefit with life insurance is that the pay out sum can be used for whatever the beneficiaries see fit, meaning it could be used to cover the third party costs associated with your funeral to avoid your loved ones having to cover the expense.

The full funeral solution

So far we have established that a funeral plan allows you to secure today’s going rate for a funeral and covers all of your funeral director costs, whilst life insurance provides you with a lump sum to spend as seen fit.

Pairing these two protection types together can allow you to fully cover the cost of your funeral, using your funeral plan to cover the funeral directors’ costs and the lump sum pay out to cover the third party costs associated with your service.

This will save you money as it will prevent you having to pay further inflated prices for the cost of your funeral and will cover the third party costs. This prevents the costs associated with your funeral being deducted from your estate, therefore, leaving more of an inheritance for your loved ones.


  • The average cost of a funeral has increased by 122% in the past 15 years
  • The cost of your funeral will fall to your loved ones if you have not put in place adequate provisions
  • A funeral plan will allow you to secure the cost of your funeral at today’s price
  • A funeral plan only covers the funeral directors’ fees, leaving third party costs to be covered through other means
  • Covering the cost of your funeral using life insurance will require you to pay prices at time of death
  • A life insurance pay out can be used to cover the third party costs associated with your funeral

Having in place a funeral plan and life insurance will provide you with all the cover needed to pay for your funeral and save money

About Charles Knox 1393 Articles was established to deliver accurate financial information that can help anyone that wants to take control of their finances achieve financial freedom. My Finances is your go-to place for online news. This site gives you an exceptional variety of news and information that helps you make the right financial decisions. We provide features, guides, access to companies offering professional advice & comparisons for smart money choices.