SunLife’s Cost of Dying Report 2026 reveals 58% of people have had to fund a funeral shortfall. Families without a funeral plan in place were also shown to spend on average, £335 more than those with structured guidance.
While life insurance payouts can go towards funeral costs, without the adequate provisions, families must often turn to savings, loans, family contributions or even crowdfunding.
At what is already a challenging time, planning ahead not only reduces the financial burden, but also the practical and emotional stresses that come with it.
Flexibility versus function
Funeral plans and life insurance overlap but solve very different problems. A lump sum paid out on death from an insurance provider can ultimately be used by beneficiaries could fund anything, like mortgage payments or household bills. Crucially, the money in a funeral plan has a dedicated use.
While the flexibility offered by life insurance can be valuable, it also comes with risks.
Most premiums are payable for life, and if payments stop at any point, the policy may be cancelled with no payout at all – a potentially huge loss. There’s also the question of value over time. Depending on how long you live, you could end up paying more in premiums than the lump sum ultimately paid out. And, because the cash amount is fixed, inflation steadily reduces its buying power.
Funeral plans lock in funeral director fees at today’s prices so, no matter how much they rise in the future, those costs are guaranteed. Funds are also set aside for third-party expenses such as crematoria or cemetery fees, flowers, celebrants or catering, with estimated inflation in mind.
Prepaid plans represent a more personal and practical approach. Built around an individual’s specific wishes, individuals can decide on the type of service they want, preferred arrangements, and the costs expected at the time of need.
Misconceptions of cost
We often hear from individuals concerned about the cost of funeral plans. This is a common misconception. Insurance payments can be as low as you want, as they aren’t designed to cover specific needs, while monthly funeral plan payments can be higher as they reflect the realistic cost of a service today (and expectations for future budgets).
Many people also incorrectly assume funeral plans are rigid or that money is ‘lost’ if it isn’t spent. In reality, they allow greater choice. If funds have been allocated for catering, for example, but less is spent, any excess may be refunded once the full funeral cost is calculated. It’s rare to find another type of policy that gives families money back if it is not spent.
Some of our funeral plans also offer payment suspension options and catch-up periods, whereas a life insurance policy may be cancelled if even one monthly payment is missed.
Potential challenges
Perhaps the greatest pitfall of relying solely on life insurance is that it leaves families with decisions to make – quickly, emotionally, and often without guidance.
A funeral prepaid plan does more than cover costs. It sets out wishes clearly and removes the burden of decision-making at an already painful time. Families know what to do, who to contact, and what the person wanted.
There are, of course, some potential risks.
Most include an arrangement fee. And while funeral director fees are fixed, third-party costs such as crematorium charges, florists, celebrants, and catering have risen above inflation in recent years. If a plan is taken out today but not used for a decade, a small shortfall in those costs may need to be covered.
It’s important to research the provider, and the details of the plan offered, before making any purchases.
The ideal approach is clarity and responsibility
In an ideal world, people have both life insurance for wider financial protection, and a prepaid funeral plan that sets out wishes clearly and covers the funeral itself.
The real gift is not just money – it’s certainty. It allows loved ones to focus on saying goodbye, not scrambling to make arrangements or worry about finances.
It’s never too early to have a conversation about your wishes. You can speak to experts like our funeral directors to explore your options and realistic costs, and get one of our free Plan of Wishes that can be stored with important papers and shared with your family.
It costs nothing to have the conversation, but it can be priceless for the people left behind.