Get to know the differences between a funeral plan and a life insurance policy and compare what they both cover.
When researching later-life financial planning options, you may be considering funeral plans or life insurance. Both options allow you the peace of mind that your family will be supported financially but in different ways.
Funeral plans let you choose and pay for your funeral in advance so your loved ones don't have to cover the costs or arrange the logistics. Life insurance, on the other hand, is a way to ensure your family will receive a lump sum of money should you die during the period you've chosen to be covered for.
Learn more about how a funeral plan or a life insurance policy differs to help you weigh up each option.
A funeral plan is a prearranged package that covers the costs associated with a funeral. Funeral plans encompass essential services such as the cremation fees, transportation, and administrative costs.
One advantage of a funeral plan is the ability to lock in today's prices for future services, protecting against inflation and rising funeral costs. Funeral planning can also alleviate emotional stress for loved ones at the time of need.
Unlike life insurance, which provides a lump sum payment upon the policyholder's death, a funeral plan directly addresses funeral expenses. While life insurance offers flexibility in how beneficiaries can use the payout, funeral plans are specifically tailored to cover funeral-related costs, ensuring that financial burdens are minimised during a difficult time.
There are various ways to pay for a funeral plan, including via a single payment or monthly instalments which allows you to choose a payment method that best suits your financial situation.
The process of taking out a funeral plan will follow these steps.
Life insurance is a financial product designed to provide a lump sum payment to beneficiaries upon the policyholder's death. Unlike funeral plans, which specifically cover funeral expenses, life insurance offers a broader scope of coverage, allowing beneficiaries to use the payout as they see fit. This flexibility can encompass various needs, including replacing lost income, settling outstanding debts, or funding education expenses.
One of the key distinctions between life insurance and funeral plans lies in their primary focus. While funeral plans directly address funeral costs, life insurance serves as a safeguard against financial hardship for beneficiaries after the policyholder's passing. This fundamental difference dictates how the funds are allocated and utilised.
In terms of costs, life insurance premiums are typically based on factors such as age, health status, and coverage amount. Depending on these variables, premiums can vary significantly between individuals. Unlike funeral plans, which may allow for single or monthly payments, life insurance premiums are often paid on a regular basis over the duration of the policy.
Pros of life insurance include the financial security it provides to beneficiaries, offering a safety net during a challenging time. Additionally, life insurance policies can accumulate cash value over time, providing a potential source of savings or investment. However, there are potential downsides, such as the necessity of passing medical underwriting and the possibility of premiums increasing over time.
If you’re getting life insurance to cover your family's living costs, the cost of living is likely to rise over time.
There are policies available where the payout increases to account for inflation, but it's worth noting that the monthly payments will also rise.
If you’re covering yourself against an expense or debt that will decrease over time, for example your mortgage, you can get decreasing cover.
As you owe less money on your mortgage, your family will receive a smaller payout amount to pay it off.
If you’re happy for your loved ones to receive a set payout that doesn't change, life insurance with a fixed payout is available too.
Monthly payments for this type of cover will also be fixed so they don't change for the duration of your policy.
Your age will affect the price you pay for life insurance cover. The older you are, the more expensive it is.
You will also be asked medical questions to determine whether life insurance can be offered to you. These can affect how much your monthly payments will be as well.
Whilst looking into life insurance policies, you may also come across other products like over 50 life cover or life assurance.
Whereas life insurance is cover for a fixed amount of time, life assurance covers you for the whole of your life.
Important
The terms life insurance and life assurance can sometimes be used interchangeably, so always check the specific policy you're taking out for details of your cover period and payment terms.
At Distinct Cremations we offer cremation only funeral plans and plans for modestly attended funerals.
We're happy to answer any questions you may have about our plans over the phone, or you can request a free guide for details about what we offer. If you've decided a funeral plan is right for you, you can also view our products and take out a plan online.
Want to talk through our options? If you have questions or would like some in-person support we’re just a call away.
Call us on 01543 212997
Need some time to digest the details? You can download a PDF of our guide online or get a printed copy posted out.
Get our guide
If you’re happy that one of our plans is exactly what you’re looking for, you can get everything set up yourself online.
View our funeral plansThe average cost of life insurance in the UK is £34.43+ per month. However, the calculation for a life insurance plan depends upon a number of factors including age, health status, coverage amount, type of policy and policy length. With a life insurance policy you will continue to pay until it is needed.
With Distinct Cremations, the cost of a funeral plan starts at £19.44* over 10 years. This calculation depends on age, but doesn't include health or medical factors. The plan is also guaranteed to cover the costs in your plan after just 12 months, meaning that if you pass away before you have finished paying, your plan is guaranteed with no further payments required.
+ AVERAGE LIFE INSURANCE COST UK [2024], reassured.co.uk/life-insurance/average-life-insurance-cost-uk/
* Price advertised is for a 50 year old paying over a 10 year period. Total cost is £2,332.80 and includes administration fees.
Here's a table comparing the pros and cons of life insurance and funeral plans:
| Aspect | Life insurance | Funeral plans |
|---|---|---|
| Coverage | Provides a lump sum payout to beneficiaries upon the policyholder's death, offering financial security and flexibility in how the funds are used | Covers specific funeral expenses, such as cremation fees, transportation costs, and administrative expenses |
| Flexibility | Offers a broad scope of coverage, allowing beneficiaries to use the payout for various needs, such as replacing lost income or settling debts | Provides a structured approach to covering funeral expenses, ensuring that financial burdens are minimised during a difficult time |
| Payment Options | Premiums are typically paid on a regular basis over the duration of the policy, with options for different payment frequencies (monthly, quarterly, annually) | Can be paid for in a single payment or through monthly instalments, offering flexibility in payment |
| Cost | Premiums are influenced by factors such as age, health status, coverage amount, and type of policy | Costs can vary depending on factors such as the type of funeral and age |
| Inflation Protection | Generally, does not offer protection against inflation, meaning the payout's value may decrease over time or monthly payments increase | Our funeral plans allow for locking in today's prices for future services, and monthly payments will never increase, protecting against rising funeral costs due to inflation |
| Transferability | Policies may be transferable if you move or change preferences, depending on the terms of the policy | You are unable to transfer the plan to another funeral provider |
For both life insurance and funeral plans you will need to decide what happens after your death.
Funeral plans and life insurance are designed for different purposes and it is completely possible to take out both at once.
Just make sure that if you're paying for both monthly you can keep up with the payments. Your funeral plan may be cancelled or your life insurance cover may end if too many payments are missed.
Taking out both a funeral plan and a life insurance policy means:
# Funeral costs were £1,835 in 2004 and £4,141 in 2023 (SunLife Cost of Dying Report 2024, sunlife.co.uk/funeral-costs)
We offer plans for simple, no fuss cremation funerals.
Choose between our Unattended Direct Cremation Plan, Small Attended Cremation Plans or full length celebrant-led Simple Funeral Plan.
For additional pricing information and a full list of our optional extras, please see our price list.
Our Unattended Direct Cremation Plan is a great choice for those looking for a simple, low-cost unattended cremation without a funeral ceremony.
With our Unattended Direct Cremation Plan, the cremation takes place with no service or mourners present at our high-quality crematoria where dignified care is guaranteed.
Our Small Attended Cremation Plans offer a private funeral where the number of people attending is limited to a small gathering of friends and family.
With our Small Attended Cremation Plans, you can have up to 8 people attending a 10 minute service or up to 20 people attending a 20 minute service.
The option to have a completely unattended funeral means you can save money and your family can celebrate your life in their own unique way instead.
Funeral plans and life insurance meet very different later-life financial planning needs. Whether or not either option is worth your money depends on what you want to happen when you die.
Do you want to pay for your own funeral or get a payout to support your family?
The amount you pay for your funeral plan or life insurance varies widely depending on what you choose. Factors like your age can also affect the amount you pay.
Funeral plans could be a good option for you if you worry about how your family will cover the costs of your funeral.
Even if the money for your funeral could be taken from your savings, property or other assets, some of your money could be lost to inheritance tax and it can take time for funds to be released. Funeral providers often need a payment or deposit upfront to start arrangements so your family could have to cover the costs initially.
Factors that affect the amount you pay are:
Life insurance could be a good option for you if you worry about how your loved ones would cope financially if you die.
You may have children who are at school or university and are financially dependent on you. Or it's possible you have a spouse who relies on you to pay the mortgage. You may just want to gift your loved ones money in the event of your death. A life insurance policy means that if you die whilst covered you can still support your loved ones.
Factors that affect the amount you pay are:
Providers of both funeral plans and life insurance products are subject to regulation to help protect consumers' money.
Distinct Funeral Plans Limited (DFPL) is authorised and regulated by the Financial Conduct Authority (FCA) to sell and administer funeral plans. As part of our regulatory responsibilities, we provide full and clear information about how we keep our funeral plans safe.
Companies that sell life insurance products are authorised by the Prudential Regulation Authority (PRA) and regulated by the FCA and PRA. They are also subject to the same regulatory standards, designed to enhance consumer protection and to protect the integrity of UK financial services markets.
How we keep your money safeTo help you continue your research into the financial products available to you and plan for later life, you may find these other resources helpful.
Decided that a funeral plan is right for you? Find out how to choose a plan that takes your funeral wishes and preferences into account.
Choose a funeral plan
As well as planning financially, there are some other important ways you can prepare yourself and your family for your death in the future.
Prepare for your death
If you need to arrange a funeral for someone else, whether now or in the future, we can provide a compassionate cremation funeral.
Arrange a funeralWe offer the highest level of support, but don't just take our word for it. Below are recent reviews from customers who bought a funeral with us.
Oak Tree Court, Brookfield Drive, Cannock, WS11 0JN
