How to cover the cost of a funeral without leaving a huge bill for your family

I am 52 and keen to take out Dignity Funeral Plans, but my husband (59) is not keen.

I would be interested in your opinion of them and if there are any drawbacks?

Christine, Cheltenham (via email).

Gareth says…

I was stunned to find that the average cost of dying is now thought to be almost £10,000, covering a funeral, professional fees and a wake.

According to a report published this year by insurance company SunLife, being buried costs £4,975 while a cremation costs £3,858, on average. The company has published a regional breakdown too – in the South West, where you and your husband live, the average cost of a basic funeral is £4,522. Funeral costs have risen by 62 per cent over the past decade, and rose 3.4 per cent on last year, far outstripping inflation.

So, I can understand why you might be thinking about how to cover the cost of a funeral without leaving a huge bill for your family to deal with at such a distressing time.

A funeral plan effectively enables you to prepay for your funeral years in advance, covering the cost of a coffin, a hearse, care of the body and viewings, the funeral procession, limousines and some or all of the cremation and burial costs. I’ll come back to this point later.

While funeral plans cover much of the cost of a funeral, they certainly don’t cover everything. Headstones, burial plots and flowers are commonly excluded from the plans, as are catering costs for a wake, for example.

Perhaps most surprising is that a bill for your funeral could still land on your family’s lap even after you’ve prepaid for a plan. There are typically basic, standard and comprehensive-style plans, each offering more features for a higher cost. Depending on the level you purchase, burial and cremation costs may not be covered in full – instead the plan will pay a contribution towards the costs.

With basic plans, you could get a £1,000 contribution to a burial – far short of the average £4,975 cost of having one carried out. Even with the most comprehensive plans, the most we’ve seen paid out towards a burial is £1,220. This contribution tends to rise with inflation each year, but that very rarely matches the pace of rises in funeral costs. Cremation costs are generally lower, and many plans guarantee to pay the full amount. It’s perhaps worth having a discussion with your family about what your wishes are to better gauge the financial impact.

Only one provider guarantees to cover the cost of a burial – and that’s the Co-operative Funeralcare, although this does not cover the purchase of a grave, no matter what level of plan you purchase.

Dignity, the provider you are looking at, offers four plans. When we last reviewed this market, back in early 2019, cremation costs were guaranteed with each of them, while £1,220 was paid towards a burial. Its prices range from £2,995 for its most basic plan, with restrictions on viewings and no limousines; to £3,995 for its most comprehensive plan, which offers two limos and a host of other benefits.

Dignity is also a member of the Funeral Planning Authority, a trade body that represents the industry. Firms that belong to this organisation have signed up to a code of conduct which means that funerals will be paid for if the worst should happen and your provider goes bust. These plans are not yet regulated by the city watchdog, the Financial Conduct Authority (but will be in the future) which does add some risk. However, the providers have a duty to safeguard your funds.

Before leaping into purchasing a plan, do some research. You can read Which?’s reviews of funeral plans at which.co.uk/funeralplans, and compare plans on comparison sites such as funeralplanmarket.com.

But you should also consider the alternatives. Life insurance can become expensive as you get older, but if you’re in good health, you may be able to get an affordable whole of life insurance policy for a relatively low sum (say £30,000) to cover your funeral costs, which could be more cost-effective than a funeral plan. If either of you have suffered from poorer health, over-50s plans could be an option, although they are generally poor value for money. They will pay a fixed amount on death without considering your medical history, but you could end up paying more in premiums than what your heirs get back. A good life insurance broker can help you understand the options.

Funeral costs can be taken from your estate when you die, without any inheritance tax applied to them too. So if you are leaving behind some assets (such as property or savings), the costs could be taken from that.

Gareth Shaw is head of money at Which?