Funeral plan or life insurance?

The average cost of a traditional funeral in the UK is now £4,510*.

When factoring in the average associated ‘send-off ‘ costs (£1,312) and professional fees (£2,635), the total cost rises to a sizeable sum.

To ensure this financial burden is not passed onto loved ones after you are gone many secure financial protection to cover these costs.

The most common methods for covering rising funeral costs are either through a funeral plan or life insurance. But how do these two options differ and which is best for you?

In this in-depth guide, we explore the key differences between funeral plan vs life insurance, as well as the advantages and disadvantages.

What is a funeral plan?

A funeral plan, often referred to as a ‘pre-paid funeral plan’ enables you to plan and pay for the cost of your funeral in advance.

After you pass away, the funds from your plan are paid out directly to your chosen funeral provider or funeral director to carry out your funeral.

You can either pay for your funeral plan upfront in one single payment or via monthly instalments over a set term.

Acceptance is guaranteed for over 18s in the UK (age limits may vary by provider) and there are no medical questions asked during the application.

The cost of a funeral plan and what it covers can vary depending on the type of funeral you want. For example, a traditional cremation or burial will differ greatly from a low-budget direct cremation.

A simple direct cremation funeral plan, like that offered by Simplicity, costs from as little as £1,799.

This includes:

Cremation fees
Urgent collection of the deceased
A basic coffin
Transportation of the deceased to the crematorium
Return of the ashes in a simple urn

For a more traditional funeral with mourners present, along with a procession, hearse and a wake, the cost of a plan rises significantly.

Key benefit of a funeral plan: Lock-in the cost of your funeral at today’s rate, avoiding future price increases. By paying for your funeral prior to your passing, you do not pass this significant cost onto loved ones.

What is life insurance?

Over 50 life insurance, commonly known as an ‘over 50s plan’, is a type of policy that provides a guaranteed cash payout to your loved ones after you pass away.

While the proceeds from a payout are often used to meet funeral expenses, it can be used as your beneficiaries wish. For this reason, it can be referred to as ‘funeral insurance’.

Other common uses include providing an inheritance, paying off debt or helping cover the living costs of the surviving partner.

Whilst life insurance provides more flexibility with regards how the funds can be used, the real terms value of a payout is subject to inflation.

Therefore what a payout is worth at the point of taking out the policy may be very different to its true value after you pass away.

Acceptance is guaranteed if you are a UK resident aged 50 - 85 and unlike term-based life insurance, no medical questions are asked during the application.

The maximum cover amount (or ‘sum assured’) you can secure on an over 50s policy is £20,000**. Although this is dependent on your budget and personal circumstances.

For example, if you are aged over 80, it is highly unlikely that the insurer would offer you the maximum over amount***.

Over 50 plans also include a waiting period, sometimes referred to as a ‘qualifying period’. This is a set period of time, usually 12 or 24 months, at the beginning of the policy where you cannot make a successful claim, (although premiums are repaid).

Lastly, despite the ‘life insurance’ name, over 50s plans are actually a form of 'life assurance', as a payout is ‘assured’ when (not if) you pass away.

Because premiums are paid for life and no one knows how long we will live, there is a chance that you could pay more into a policy than it will ever pay out.

Please note, Simplicity Cremations do not offer over 50 life insurance policies.

Key benefit: No medical questions are asked, acceptance is guaranteed and a cash payout offers more flexibility as the funds can be used as your beneficiaries wish.

Funeral benefit option

A small number of over 50 life insurance providers offer a funeral benefit option as an add‑on.

A funeral benefit option enables the payout be sent directly to a chosen funeral provider to help cover funeral costs, often with a small discount or contribution added by the provider.

Funeral plans vs life insurance: Key differences

Funeral plans and over 50 life insurance are two separate financial products, however both can enable you to cover rising funeral costs in different ways.

An inflation proof prepaid funeral plan provides the funds that can only be used to cover your funeral. In contrast, an over 50 life insurance policy provides a lump sum payout not tied to a specific expense.

Below we explore the key differences between funeral plans vs over 50 life insurance.

Funeral plan

Covers the cost of your chosen funeral services for a fixed price
No cash value; funeral plan payments can only be used for your funeral
Acceptance guaranteed to UK residents aged 18 and over (usually no upper age limit)
Protected against inflationary future price rises
No waiting period if paying for your funeral plan upfront
Can pay upfront with single payment or via monthly instalments
After the funeral plan is paid off in full, payments cease
Does not form part of your estate therefore not subject to inheritance tax

Over 50 life insurance

Provides a fixed cash lump sum payout after you pass away
Payout can be used to cover funeral costs or spent as your beneficiaries wish
Acceptance guaranteed to UK residents aged 50 - 85 with no medical questions asked
Not protected against inflationary future price rises
Waiting period applies before a full pay out can be claimed (either 12 or 24 months)
Pay a fixed monthly life insurance premium
Whilst cover is in place, you pay a monthly premium until you pass away
Forms part of your estate therefore potentially subject to 40% inheritance tax (unless the policy is written in trust)

Pros and cons: Funeral plan vs life insurance

Choosing between a funeral plan and over 50s life insurance isn’t always straightforward - each offers very different benefits, costs and levels of certainty.

Understanding the key pros and cons of both options helps you decide which type of protection best meets your needs.

Advantages of funeral plan

Covers key funeral costs detailed in your plan at today’s rate (avoiding future price rises)
Ensure you arrange the funeral that you want
Funeral plan prices are fixed whether you pay upfront or via monthly instalments, providing greater financial certainty
As funds are paid directly to your funeral provider/director, they don’t form part of your estate
Can be cancelled at any time with refund of payments less a cancellation fee outside cooling off period
Ability to add and amend special requests
Short and easy application process
Guaranteed acceptance & no medical questions

Disadvantages of a funeral plan

Monthly payment option can incur added instalment fees
Can be more expensive than over 50 life insurance (see below)

Advantages of life insurance

Provides a cash lump sum payout
High payout rates, (for example, SunLife pay out 100% of claims***)
Instalment payments' for over 50s life insurance can be cheaper
Can include a free funeral benefit option (cash contribution)
Short and easy application
Guaranteed acceptance & no medical questions

Disadvantages of life insurance

Does not guarantee to cover all your funeral costs
Could pay more into a policy than it will pay out
Pay out could be subject to 40% inheritance tax
If you are a smoker premiums will increase***
12 or 24 month waiting period before a successful claim can be issued
If you stop paying your premiums, cover will cease. (A funeral plan provider like Simplicity will return any money paid in and cancel the plan; minus a cancelation fee outside the cooling off period)

Cost comparison: Choosing a funeral plan or life insurance

It is difficult to make a fair cost comparison between a funeral plan and an over 50 life insurance because of the different ways they work.

Initially life insurance may appear to be the more cost effective option, with providers offering premiums from just £4 a month (depending on age and smoking status**).

However, in order to benefit from such cover monthly premiums need to be paid for the remainder of your life (and no one knows how long this will be) or until you reach a certain age, (for example, on the anniversary of the policy after your 90th birthday****).

Also, the £4 a month premium claim is unlikely to provide the necessary funds in order to meet your all funeral costs. In fact, if you are a non-smoker aged 70 you would need to pay £20 a month for £2,776 of cover**.

When you consider the average cost of a traditional funeral is now £4,510, which excludes the sizeable associated costs of a send-off and professional fees, an over 50s life insurance may not be as cost-effective as first appears.

The national average of a traditional funeral in the UK can appear daunting. However, there are low-cost funeral plan offerings which provide a more affordable send-off.

While, life insurance requires that you pay a monthly premium for life (or until you reach a certain age specified by the insurer), you can pay for a funeral plan with monthly instalments over a set period. (Please note, it is also possible to pay upfront for your funeral plan which is generally a cheaper option; this is not possible with life insurance).

When analysing the cost of these two products it is not easy to run a direct comparison as they work in different ways. It is about assessing what you want your plan to cover to establish which provides the best value for you.

Should I get a funeral plan or life insurance?

We hope the above ‘funeral plan or life insurance’ guide has provided you with the information required to make a fully informed decision on which option works best.

It is not a case of one product necessarily being ‘better’ than the other; but a case of which product best meets your unique needs.

Key considerations to ask yourself:

What do you want your protection to cover?
Do you need to cover more than just funeral expenses?
Do you have any other form of cover in place?
Do you have dependants who reply on you financially?
Do you have any savings in place?
Would you benefit from certainty regarding monthly costs

If you want to secure and plan a dignified funeral today, locking-in the current rate and avoiding any future inflation - then a prepaid funeral plan may be a good option.

However, a funeral plan may not be suitable for everyone. If you need to cover more than just funeral costs and want flexibility, then life insurance may work better for you.

At Simplicity, we offer a simple direct cremation funeral plan from just £1,799 (upfront payment) or £1,899 over 24 monthly instalments of £79.12 - before the entire cost of your funeral is covered.

Funeral plan or life insurance FAQs:

Can you have a funeral plan and over 50s life insurance?

Yes, it is possible to take out life insurance and a funeral plan simultaneously if you desire and budget allows. For example, you could secure a funeral plan to cover the cost of a funeral at today’s rate and an over 50s life insurance to provide an inheritance for loved ones.

Is the beneficiary of life insurance responsible for funeral costs?

No, a life insurance beneficiary is not legally required to use a payout to pay for your funeral. Therefore, if you want to guarantee you get the funeral that you want and that costs are covered, then a prepaid funeral plan may be a better option.

Are funeral plans and life insurance regulated?

Yes, in the UK, both funeral plans and life insurance are regulated to ensure consumer protection and high standards of care.

Funeral plans are regulated by the Financial Conduct Authority (FCA), which has overseen the sector since July 2022. This regulation bans cold‑calling, enforces fair value rules, and requires providers to safeguard consumer funds.

Life insurance is dual‑regulated: The Prudential Regulation Authority (PRA) oversees insurers’ financial stability and ability to pay claims (prudential regulation). The FCA regulates how life insurance is sold and how customers are treated (conduct regulation).

Together, the FCA and PRA ensure strong consumer protection, financial security, and continuity of care across both products.

For additional consumer protection both products are also protected by Financial Services Compensation Scheme (FSCS). The FSCS protects consumers by ensuring they can receive compensation or continued cover if a regulated funeral plan or life insurance provider fails, safeguarding your money and intended arrangements.

Does over 50 life insurance cover funeral costs?

A life insurance policy can cover funeral covers, although this will depend on the payout amount. Generally speaking, the older the applicant is, the lower the cover amount you will be offered.

For example, if you are in your early 50s you will likely be able to secure the higher sum assured (£18,000 - £20,000 depending on your provider). However, if you are over 80 the sum assured offered will likely be significantly less and thus not guaranteed to cover all funeral expenses.

Am I protected from rising funeral costs?

Yes, if you have a funeral plan in place you will be protected against rising future costs, as you lock-in todays rate. However, the lump sum payout from life insurance is fixed, so it’s real terms value may shrink over time as funeral costs rise.

Is funeral insurance the same as life insurance?

Yes, ‘funeral insurance’ is a term sometimes used by insurers to describe an over 50 life insurance policy which has been taken out specifically to cover funeral costs. It’s not a separate standalone product in its own right.

What if you have no protection in place?

If someone dies without any financial protection in place, funeral costs usually fall to their estate or, if that isn’t enough, to family members. Lastly, the local authority can provide a basic public health funeral (or paupers funeral) if no other support is available.

Can I purchase a funeral plan or life insurance online?

Yes, it is possible to secure both a funeral plan and over 50s life insurance online, although not all providers will offer this service.

At Simplicity Cremations we offer our funeral plans online providing you with the convenience and flexibility 24/7. Alternatively, if you have questions you can call our dedicated UK call centre who will be happy to answer your queries.

Can I get a free gift incentive with a funeral plan or life insurance?

Yes, it is common for both funeral plan and over 50s plan providers to offer a free gift incentive. Whilst a free gift is a nice perk, longer term it is more important to make sure you take out the right product from the right provider to meet your unique needs.

Sources:

*https://www.sunlife.co.uk/over-50-life-insurance/funeral-costs/

**https://www.onefamily.com/assets/consumer/downloads/over-50s-life-insurance/direct-over50s-policy-summary.pdf

***https://www.sunlife.co.uk/over-50-life-insurance/

****https://www.aviva.co.uk/insurance/life-products/over-50-life-insurance/