Life policy payouts can be held up for months by probate, but a new campaign is pressing insurers to release smaller sums immediately to pay for funerals.
Many families struggle to fund a decent send-off as funeral costs accelerate faster than inflation.
A burial using a funeral director now costs £4,136 on average or £3,214 for cremation, according to the Money Advice Service, and a lot more in some parts of the country.
More than half of over-55s expect their beneficiaries to pay for their funeral, research from Old Mutual and Toluna shows, but probate delays often mean they cannot access funds in time, including life insurance payouts.
This applies to popular term assurance policies, which pay out if you die within a set period, and whole-of-life cover, which pays when you die as long as you keep up the premiums.
These policies may be worth hundreds of thousands of pounds, but can leave families short of a few thousand needed for a funeral.
Paying claims The Protection Distributors Group (PDG) is calling on insurers to help families by automatically paying a funeral director up to £5,000 on a valid life claim where no other plans have been made.
Aegon, Royal London, LV=, AIG Life, Zurich and most recently Old Mutual Wealth have signed up to its “funeral payment pledge” but others are holding back, leaving policyholders scrambling about for cash.
Many families underestimate the cost of paying for a funeral, with 16 per cent expecting the send-off to cost less than £2,000, and two thirds thinking it will cost between £2,000 and £5,000.
Emma Thomson, director of insurance broker LifeSearch, the chairwoman of the campaign group, said it launched the funeral payment pledge campaign to help families who would struggle to pay “outrageous” funeral costs if the life payment is delayed by probate: “We want to take away that worry at a time when families have enough to cope with.”
She is delighted that many insurers have signed up and is pushing for more to follow. Paul Roberts, head of protection for Old Mutual Wealth, says planning a funeral is an emotional time and insurers should help make it as smooth as possible: “We do not want to see people going into debt to pay for a funeral when life assurance could cover it.
Making plans Millions ease the burden on their family with pre-paid funeral plans, sold by companies such as Age UK, Co-operative Funeral Care, Dignity, Perfect Choice and SunLife.
These are often arranged through a funeral director and also allow you to plan your send-off in advance.
Age UK’s basic level Ivy plan costs £3,295, while its more comprehensive Rowan Plan costs £3,899, with prices cut in recent months.
Plans allow you to spread the cost with monthly payments over between one and 15 years.
Over-50s life cover plans pay out a small sum when you die and are sold by Asda Money, Legal & General, the Post Office, SunLife, Tesco Bank and many more.
Some plans charge premiums for as long as you live. Look for a policy that halts your premiums after a certain age, say, 85 or 90, while still maintaining cover.