Covering funeral costs: the difference between funeral plans and funeral insurance

Couple sat in their kitchen talking over a coop funeral plan brochure.

None of us want to leave our family with a big funeral bill to pay, and so like others, you may have started to look at ways to cover the cost of your funeral.

There are so many adverts trying to sell all kinds of funeral cover, from funeral plans to over 50s life insurance policies, but which is right for you? We’ve put together a list highlighting the differences between these two products to help you decide.

Funeral plans explained

Unlike other types of funeral cover, funeral plans don’t pay out any money to your family when you die. When you buy a funeral plan, you have essentially pre-paid your funeral, so your family won’t have to pay anything more at all for the services in your plan.

At Co-op Funeralcare, our funeral plans are insured, meaning that the money you pay goes into an individual whole of life insurance policy that is only released to us when you die or if you choose to cancel your plan. This ensures that we’re able to pay for all the services in your chosen plan when the time comes to arrange your funeral.

Funeral insurance explained

With funeral insurance, like over 50s life insurance policies, you pay a fixed monthly amount and then when you die your family receive a fixed cash amount. The amount you pay each month is based on how much you want your family to receive when you die, so if you want a large pay out, you will pay higher premiums. One of the benefits of over 50s life insurance is that you’re usually covered after 2 years of payments.

Am I protected from rising funeral costs?

Like most other things, funeral prices are rising year on year and have almost doubled in the last decade.

Taking out a funeral plan protects you against these rising costs as you will already have paid at today’s prices, with no more for your family to pay for the services in your plan. You will need to check that the plan you have chosen fully guarantees things like third-party costs, as some providers only give a contribution towards these costs.

Over 50s life insurance policies pay out a fixed sum when you die and depending on the level of cover, this may cover all the costs of your funeral. However, it’s not guaranteed and there may be a shortfall that your family will have to pay.

What does funeral insurance cover, compared to a funeral plan?

Funeral insurance is where you pay a fixed amount each month until you die and then your family receives a lump cash sum to help pay for your funeral. It doesn’t necessarily have to be spent on your funeral, but this is what it is most likely to be used for.

Funeral plans cover the exact items that are listed in the plan, no matter how much they would cost when the time comes.

Funeral plans vs funeral insurance

So, which should you choose? It all depends on your reason for buying. If you want your family to receive a cash sum where they can choose to either put it towards your funeral or use it to help with other costs, then funeral insurance could be the right choice for you.

If you want to protect your family from rising funeral costs and make sure your funeral is paid for in full, then a funeral plan is the best option.

The main difference between funeral insurance and a funeral plan is that you have no protection against rising funeral costs and your family may be left with a shortfall to pay if the lump cash sum doesn’t cover the entire bill. Other differences are that in some cases you may end up paying in more than what you get back depending on the type of cover and how long you live.

Also, there is no claim period with a funeral plan, so your family can start to make funeral arrangements straight away. With any kind of insurance policy, your family will have to start a claim and wait for it to be paid.

Can I pay monthly?

Many people choose life insurance because of the ease of making small monthly payments, but you can choose to pay for funeral plans this way as well. While you have the option to pay upfront for a funeral plan if this is the right choice for you, you can also pay in monthly instalments if you would prefer to spread the cost.

With Co-op Funeralcare, if you decide to pay over 2-25 years you are also covered by our Co-op Commitment: this means that if you die before you have finished paying, we will still honour your plan without asking your family to pay the balance. Learn more about our Co-op Commitment.

Will I save money on a funeral plan?

Will you save money by getting a funeral plan? The quick answer is yes. Unlike funeral insurance cover, you only pay for a funeral plan over the payment term you choose, such as 2 years or 5 years. There is a fixed amount that you will pay, as opposed to most funeral insurance where you pay every month until you die.

By paying for your funeral upfront at today’s prices, you are also saving your family money. It's highly likely that what they would have had to pay more in the future, with prices rising each year.

You could save money on a funeral plan with us if you are a Co-op Member. We offer exclusive member prices saving you 5% when you buy a plan with us. Find out more about our exclusive member prices.

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We hope this has helped you to decide whether funeral insurance or funeral plans are the right choice for you. Learn more about our award-winning funeral plans.

Alternatively, you might be interested in finding out more about Over 50s life insurance. Please visit Co-op Insurance to find out more.