Updated: Sep 18
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Death is an inevitable part of life. Unfortunately, it’s a topic of discussion that most cultures either consider taboo or discourage open conversations around.
In reality, preparing and planning for death is important because it helps the deceased to make the most of their final moments in life and also spares the bereaved from the burden of making difficult decisions in the event of a death.
Funeral insurance, also known as burial insurance, is an important part of planning for death. It is a way to ensure that all aspects and costs of the funeral process are taken care of in advance because let’s face it, the cost of funerals in the UK and USA continues to rise exponentially and most families can’t afford to make a one-off payment, especially one that wasn’t planned for. So, whether you prefer burial or cremation, you’re going to need a number of funeral services; each attracting a different cost.
How Does Funeral Insurance Work?
The premise is simple. You pay a fixed amount to a funeral insurance company of your choice (similar to a standard insurer) and in return, the company will offer you a burial insurance package, with the details of all services covered under the package.
You’re required to keep paying the premiums between when the funeral insurance policy starts and when you die. After you’ve passed on, the funeral insurance company typically provides a fixed pay-out for your funeral process, with coverage ranging from $5,000 to $15,000.
The Average Cost of Funeral Insurance in the UK and USA
The face amount of funeral insurance cover
Your age – the older you are, the higher the cost of a funeral insurance policy
Current health prognosis
On average a man over 50 in good health will pay £15/$16 per month for a £5,000/$5,000 policy. The funeral insurance cost rises to £60/$65 per month at the age of 80 and above.
The funeral insurance cost for women is similar although generally a few pounds/dollars cheaper per month. For example, a healthy 50-year-old woman will, on average, pay burial insurance of £13/$14 for £5,000/$5,000 cover. The funeral insurance cost rises to £45/$48 at the age of 80 and above.
It’s worth getting a personalized funeral insurance quote as there is a significant difference between the funeral insurance costs offered by different companies in the UK and USA.
According to the National Funeral Directors Association (NFDA), the average cost of a burial in the USA is $7,000, whereas the average cost of a cremation is $2,000.
In comparison, the average cost of a burial in the UK is £1,698 whereas the average cost for a cremation is £823.
The average funeral costs cover the following services:
A basic service fee for the funeral home.
Transporting the deceased’s remains to a funeral home
Preparing the body
Facilities and staff to manage the viewing
Facilities and staff to manage the funeral ceremony
Casket or urn
The median cost of a funeral with viewing and burial
Types of Funeral Insurance Policies
There are two main types of funeral insurance in the UK and the USA:
A preneed policy is a funeral insurance package whose benefits cover the cost of a funeral; whether cremation or burial. Services covered under this policy include; basic fees for the funeral home, burial or cremation merchandise, and church fees.
The preneed funeral insurance policy is paid out virtually immediately, once the death certificate has been received and the funds are paid directly to the funeral home of your choosing. Whereas this type of burial insurance does make the funeral process easier, there is a possibility of overpaying the funeral home. The funeral insurance policy pays a set amount, if your funeral doesn’t cost that much, then the funeral home keeps the difference.
These are the standard approach to funeral insurance and are often referred to as whole-life policies. You pay the agreed installments while you’re alive. Upon your death, the agreed payout amount is transferred to your designated relative.
The idea is that the bereaved have enough funds to cover the cost of the funeral process but they’ll still have to arrange all the intricate details.
In essence, there is a small difference between life insurance and funeral insurance. Both have the capability to pay a lump sum at the end of the contract and in both cases, your beneficiary will receive the funds. However, in the case of life insurance policies, the package usually covers a wide range of areas such as death, accidents, and illnesses.
In addition, life insurance is generally a cheaper option compared to funeral or burial insurance. Life insurance also has the potential to pay out a much higher amount, depending on the type of policy you take out. All in all, the decision on what insurance policy to take out should be based on your financial situation.
Consider the following aspects before deciding on a funeral insurance policy:
Funeral insurance is a good option for anyone worried about their loved ones not having the funds to pay for a funeral. Having funeral insurance takes away all the financial burdens associated with the funeral process so that the bereaved have time to grieve.
If money isn’t an issue, there is little benefit to having funeral insurance.
Understand Your Needs
Before you take out funeral insurance you need to know what type of funeral process you would like and how much this will cost on average. This will ensure that your funeral insurance policy pays out enough to cover the actual cost of your desired funeral.
Analyze Your Monthly Budget
Before you take out a funeral insurance policy, you need to be confident that you can afford to make the regular payments that cover the total funeral insurance cost.
Know What You Qualify For
Your current health will affect the price of a premium. In turn, this affects the type of funeral insurance policy you can afford. It’s important to verify what services in the funeral process are covered by your intended funeral insurance policy before you commit.
Compare Policies and Ask Questions
There are many different insurers in the USA and the UK who offer a range of funeral insurance policies. Make sure to get several quotes and compare them before finally settling for any funeral insurance cover.
Inform Your Beneficiary
Once you have a funeral insurance policy in place, make sure that your beneficiary knows. Let them know about any preferences you have for the funeral process as well as they will be responsible for placing the insurance claim in the event of your death.
Alternatives to Funeral Insurance
There are several options available if you decide that funeral insurance is not the right choice for you when planning the funeral process. Some of these include:
Instead of taking out a funeral insurance policy, you can decide to invest money in a dedicated funeral bond. Funeral bonds require regular payments over time, and the money invested grows in value with interest. The money can only be used for the funeral process and the value can either appreciate or depreciate.
These work in a similar way to funeral bonds but, instead of being invested, the funds are placed in a special account and cannot be accessed until your death.
A payable-on-death account will offer a fixed rate of interest, all you have to do is keep putting money in the account for it to grow in value. A payable-on-death account can result in additional funds for your loved ones after the funeral process is paid for.
Another alternative to funeral insurance is a standard savings account. This gives you complete control and you can access the funds whenever you need to. For this approach to be effective you’ll need to know the funeral process costs and make sure the funds in your account are adequate at all times.
In the event of an emergency, you can withdraw the funds and there’s also the possibility of increasing the account balance so that it’s enough to cover funeral costs and other expenses that might arise after you’ve passed on.
Funeral insurance is an effective way to ensure your loved ones have the funds available to pay for your funeral. Although there are other options available, the commitment to monthly installments and guaranteed pay-out, make this an attractive and affordable way to reduce the burden on those you love.