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‘Life Cover protection gap’ opens up for over-50s

Posted in: Corporate

  • More than two in five (42%) funeral plans and life policies don’t offer enough to cover a basic cremation (£3,290)[i]
  • Among all adults aged 50+, 68% remain without any life cover, instead opting to leverage the value of their estate (33%) or dig into savings (29%) to cover funeral costs
  • There will be significant amount of change within funeral funding sector when the FCA regulation comes into place in July 2022

A ‘Life Cover Protection Gap’ is emerging, as 42% of funeral plans and life policies don’t offer as much cover as individuals need.

More than two-fifths of those with a policy in place to cover funeral costs[ii] are only covered up to the value of £3,000 according to the research from OneFamily, with a quarter (24%) only covered up to £2,000. Yet the latest figures show a cremation with a simple service runs to £3,290 on average.

And more expensive funeral arrangements may cause further issues. A fifth (20%) of those with less than £4,000 in funeral cover said that they want a burial – which typically costs £4,383 or more[iii]. Furthermore, many of those with less than £4,000 in funeral cover expect more costly elements like catering (19%) and limousines (11%) to be covered too.

Meanwhile, 68% remain without any life cover or insurance at all. Those who don’t have a funeral plan or life cover in place most commonly say they will instead ask family members to take the value from their estate (33%) or have set aside a savings pot (29%) to deal with the cost of their funeral.

However, almost one in 10 of those who don’t have cover in place (9%) say they don’t know how they’ll cover funeral costs at all. Similarly, 33% of those using savings to cover funeral costs say they don’t know how much they have put aside to manage costs. Seven percent intend to take out life cover at a later date.

Paul Bridgwater, Head of Insurance at OneFamily, comments on the findings: “Having funeral costs covered can give peace of mind, but it’s not always the most pleasant thing for people to have to think about. As a result, it’s likely that many people don’t have the level of cover or savings they need for the type of funeral they want, but are also reluctant to look into their arrangements in more depth. That’s why it’s key for advisers to ask the right questions and ensure that the policy and payment levels they advise are really going to provide what the customer needs.”

The research comes as the sector prepares for FCA regulation to come into place from July 2022, which aims to drive up standards for pre-paid funeral funding plans. The goal of the regulation is to ensure that providers and intermediaries meet consumer needs and provide the right outcomes, while offering fair value and ability to deliver on plans.

Paul Bridgwater continues: “The new regulation coming into force is likely to mean some funeral funding providers will be unable to operate or choose not to apply for authorisation. There is likely to be a fair amount of uncertainty among advisers initially when it comes to recommending pre-paid funeral funding plans. As a result, we expect to see more advisers looking to life cover to meet this consumer need and Over 50’s guaranteed acceptance plans can be a neat and easy solution.”

Notes to editors

Unless otherwise stated, all research conducted by Opinium, on behalf of OneFamily, between 2nd – 8th March 2022, among a nationally representative of the over-50s UK population.

[i]According to data from MoneyHelper
[ii]The research shows 40% of those with life cover in place expect it to cover all of their funeral costs, while a further 19% expect it to cover some of their funeral costs
[iii]According to data from MoneyHelper