Updated 03 September 2020
We know three things about this event: it will be sad, it will be expensive, and it will definitely happen one day. So why are so many people financially unprepared for it – when it’s actually very easy to make arrangements?
You know the old cliché: the only two certainties in life are death and taxes. Usually when we trot out that line, we go on to talk about taxes. Well, today it’s the other one.
No-one likes to mention it, yet we all know with 100 per cent certainty that it’ll happen eventually. Despite this, a staggering number of people don’t do anything to prepare for the equally inevitable cost of kicking the bucket. A recent study from the British Seniors Insurance Agency has revealed the number of people in the UK who have been forced to use emergency measures – ranging from credit cards to payday loans – to cover the funeral expenses of a loved one.
According to the research, around 2.7 million Brits have had to resort to such means of payment, being unable at the time to meet the costs themselves. Of these, 1.1 million people have taken out payday loans, collectively borrowing £576 million in this way. As a result many people have undoubtedly faced additional stress and potentially higher costs at what is already a difficult time.
The unexpected cost of bereavement
It’s clear that for the majority of people, this sudden expense and the manner of paying came as completely unexpected. When asked, 40 per cent of adults assumed that the cost of the funeral would come out of the deceased relative’s estate, while only 23 per cent thought they would have to cover the cost themselves. The reality is, of course, that it usually takes at least a couple of months to settle a person’s estate (and so unlock the money in it), and if the individual has not made a will this can take much more time – you could be looking at six months or even longer. Very few people (2 per cent) expected that they would have to pay by credit card or payday loan – in stark contrast to the actual number who did: a shocking 25 per cent of everyone who’s had to deal with a loved one’s affairs.
The cost of a funeral is also greater than most people expect: the average estimate of the cost of a funeral is £3,733, but the actual average spend is £4,136. Costs are also predicted to rise: projections by the British Seniors Insurance Agency have them going up by 22 per cent over the next ten years, to £5,066.
No-one should be surprised by this
When you think about it, getting caught out by funeral expenses is a ridiculous misfortune to happen to anybody. When most people take out insurance (whether it’s car insurance or critical illness cover), they do so with the clear understanding that they may never need to draw on their policy. Indeed, the vast majority of people will actively hope that they won’t have to. By contrast, we can hope to delay funeral expenses as long as possible, but we know for certain that they will come one day. With this in mind, it’s amazing that more people don’t take out senior life cover, to ensure that when they die these costs are instantly covered.
Dave Sutherland, managing director of Neilson Financial Services, said, ‘Our customers tell us the last thing they want when they die is for their loved ones to be left in debt paying off their funeral. We want to encourage people to make sure that they have some form of life insurance or cover in place so as to provide peace of mind that when the inevitable happens, they’ve got it covered.’
The best way to find out if your family could benefit from you taking out senior life cover is to talk it over with an IFA. Your IFA can assess the likely cost and recommend the most suitable products from the whole of the market.
To find the most suitable IFA near you, use our smart search.