Death benefit insurance and funeral payments

Many credit unions, particularly in Northern Ireland and Scotland, pay a fixed sum to a member's family when the member dies, to help with the funeral. These payments go under names such as Death Benefit Insurance, a death benefit fund or a bereavement fund, and the amounts typically range from £1,000 to £2,500, with some credit unions paying more for accidental death¹.

For many members the cover costs nothing: the credit union pays the premium as an operating expense rather than charging the member². Where there is a charge it is usually a small yearly amount. Eligibility normally depends on having joined the credit union before age 70, in good health, and in some schemes on keeping a minimum savings balance².

Death benefit insurance is not the same as the state's Funeral Support Payment in Scotland or Funeral Expenses Payment elsewhere in the UK, and it is separate from the life savings and loan protection insurance that credit unions also offer. This page explains what the benefit pays, what it costs, who qualifies, how a family claims it, and where it does not pay out.

How much it pays: £1,000 to £2,500 towards a funeral

Each credit union sets its own payment level, so the amount depends entirely on which credit union the deceased belonged to. Among credit unions that publish their figures, payments range from £1,000 to £2,500. Cookstown Credit Union pays £1,000 towards funeral expenses⁵, as do Camlin Credit Union and Waterside Credit Union⁸. BDS Credit Union pays £2,000, rising to £4,000 in the case of accidental death¹. Mourne Derg Credit Union pays £2,000 to the family of the deceased member². Larne Credit Union pays £2,500, and KRD Credit Union pays £2,500 to the next of kin³.

The payment is a fixed lump sum, not a reimbursement of the actual bill, so it will rarely cover the whole funeral. White Cart Credit Union states that funeral costs are normally between £2,500 and £3,500¹¹. Official and independent figures on funeral costs point the same way: the Competition and Markets Authority put the average cost of a funeral at nearly £3,800 in 2017, not counting extras that can add another £2,000 to the total bill⁶. Earlier official guidance put the average cost of a basic funeral at £3,950 in 2014¹², and one insurer's figure for 2016 was £3,897¹³. A death benefit of £1,000 to £2,500 therefore typically leaves a substantial gap for the family to find from savings, other insurance or state support.

For comparison, the state's own help is in a similar range but is means tested. In Scotland, the average Funeral Support Payment was around £1,700 according to one poverty charity¹⁴, while official statistics for the 2025 to 2026 financial year give a mean average value of £2,179⁷. Scottish Government guidance puts the average total payment at £2,065, with the amount depending on a number of factors¹⁵. A credit union death benefit can sit alongside these payments, because it is not means tested and is not part of the estate in the way savings are.

What it costs: free at many credit unions, a small charge at others

At many credit unions the member pays nothing. Mourne Derg Credit Union states that its Death Benefit Insurance is offered without direct cost to the member, with the credit union paying it as an operational expense². KRD Credit Union provides it to all eligible members free of charge⁴. Pennyburn Credit Union lists Life Savings, Loan Protection and Death Benefit Insurance among its benefits at no extra cost to members¹⁶. More generally, the Building Societies Association notes that most credit unions offer free life or loan protection insurance¹⁷.

Where a charge is made, it is a small annual amount rather than a monthly premium. BDS Credit Union states that the cost of Death Benefit Insurance for the member is £15, with the remainder subsidised by the credit union¹. This is much cheaper than standalone protection insurance: accidental death insurance, for comparison, is paid for through an annual or monthly premium¹⁸. The reason credit union cover can be so cheap, or free, is that the credit union buys group cover for its whole membership and, in many cases, absorbs the cost as part of running the business.

Because each credit union decides its own arrangement, the only way to know what your cover costs is to ask your own credit union. Two members of different credit unions a few miles apart can be in entirely different positions: one paying nothing, one paying a modest yearly amount, and one with no death benefit scheme at all. If a charge applies, check whether it is collected from your savings automatically and whether cover continues if your balance falls.

Who qualifies: joining age, savings balance and good health

The conditions are set by each credit union's own scheme, but three rules recur across the schemes that publish their terms.

• Joining before age 70. Mourne Derg Credit Union requires a member to have joined before the age of 70². Cookstown Credit Union requires the member to have joined before age 70⁵, as do Waterside Credit Union and KRD Credit Union⁹.
• Good health or active work at joining. Cookstown Credit Union requires the member to have joined in good health, or while actively and regularly carrying out their normal occupation or duties⁵. KRD Credit Union requires members to have joined in good health⁴. Mourne Derg Credit Union applies the same test through its linked Life Savings Insurance, which covers members who joined before 70 and were actively at work or in good health at the time of lodgements², as does Faughanvale Credit Union¹⁹.
• A minimum savings balance. Waterside Credit Union requires £100 in savings as at 31 December⁹. Camlin Credit Union's terms state at least £150 in savings⁸. The two documents disagree on the threshold, so check with your own credit union which figure applies. KRD Credit Union requires only that the savings balance be kept above £1⁴.

The age 70 rule is the one that catches people out, because it is about when you joined, not when you die. Someone who joins a credit union at 72 does not qualify for the death benefit at most schemes, however long they remain a member and however much they save. Lisburn Credit Union notes that a credit union has the option of extending this age limit by affecting cover under what is called the Over 70 Rider²⁰. That extension is at the credit union's option, so a member who joined late cannot assume cover is in place; it is worth asking the credit union directly.

No medical examination is part of the process. The health test is applied at joining, based on the member's own position at that time, which is why the schemes ask about good health or active work rather than a doctor's report.

Death benefit insurance, bereavement funds and benevolent schemes compared

Credit unions use several different names and structures for help paid on death, and the differences matter for what the family receives.

Death Benefit Insurance is the most common arrangement. The credit union insures its membership as a group, and on a member's death a fixed sum, such as £1,000 or £2,500, is paid to the family or next of kin⁵. The amount does not depend on how much the member saved.

Bereavement funds and benevolent schemes work on a similar principle but are often run as funds rather than insurance policies, and some tie the payment to the member's savings. The key point for a family member is that the name on the paperwork matters less than the scheme rules: what triggered the payment, who receives it and whether anything could reduce it.

State support is separate. Bereavement benefits are entirely separate from Social Fund funeral payments²¹. In Scotland, the Funeral Support Payment is available to people on qualifying benefits such as Universal Credit, Income Support, Pension Credit, Housing Benefit, income-based JSA and income-related ESA²², and Social Security Scotland checks what money is in the estate of the person who died, including money in bank accounts, cash, an occupational pension, a life insurance policy, funeral insurance, a burial club and certain funeral grants²³. A credit union death benefit is not means tested in this way, which is why it can be worth claiming both.

Other protection products behave differently. Term life insurance pays a chosen amount on death within the term, but if you do not die during the term the policy pays nothing and premiums are not returned²⁴. Pension death benefits can pay a lump sum, an income, or a combination, depending on the scheme²⁵. Savings put aside for a funeral can affect eligibility for means tested benefits such as Universal Credit, Pension Credit and Housing Benefit²⁶, which is one reason a fixed insurance payment, which is not a saving, can be more useful to a low income family.

Does death benefit pay off a loan still owed?

Death benefit insurance and loan protection are two different things, and a credit union may offer both. Loan protection insurance is what deals with a debt. Lisburn Credit Union states that if a member who is eligible for insurance cover dies with a loan outstanding, the loan is repaid in full by the insurer²⁰. The Building Societies Association describes the same arrangement in general terms: when you borrow from a credit union you normally get free life insurance to cover the value of the loan, so the loan is repaid if you die before paying it back¹⁷.

Newarthill Credit Union combines the two: on the death of any member it makes an application to the Newarthill Death Benefit Fund, and in most cases the loan will be paid off in full, at no cost²⁷. So at some credit unions the family receives both a cleared loan and a funeral payment; at others only one applies.

Official guidance for families dealing with a death suggests always checking whether the deceased person's debts are covered by death cover for a mortgage, payment protection cover for personal loans or credit cards, and death in service benefits from a pension²⁸. A credit union loan is one of the debts most likely to be covered automatically, but the family should confirm with the credit union that the member was eligible for the insurance, since eligibility rules such as the age and health conditions apply to loan protection too.

How the family claims and who receives the money

The claim is normally made by the credit union rather than by the family. Larne Credit Union, for example, asks for the funeral bill in order to pay out its £2,500 Death Benefit Insurance³. The family's job is to tell the credit union about the death and provide the documents it asks for, usually the death certificate and the funeral bill.

Who receives the money depends on the scheme. When you join a credit union you nominate who you would like to leave your money to in the event of your death¹, and death benefit payments are commonly made to the family or next of kin². If no nomination was made, the credit union applies on the family's behalf and the payment goes to the next of kin.

This is different from how state funeral payments are made. The Funeral Support Payment in Scotland can be paid either to the applicant or to the funeral director directly²⁹, and if the applicant consents to payment of the funeral director, the full award, including any costs already paid for, goes to the funeral director towards the funeral bill³⁰. Turn2us describes the same choice: the payment can be paid either to you or to the funeral director³¹, and Mental Health and Money Advice notes it can be paid directly to you, your partner or the funeral director coordinating the funeral, depending on the preference stated in the application³². The Funeral Expenses Payment in the rest of the UK works similarly: into your bank account if you have already paid for the funeral, or directly to the funeral director or organiser if you have not³³.

Other sources of funeral money follow their own rules. Many banks will release money from a deceased person's account directly to the funeral director³⁴. Work related charities often only consider paying an outstanding funeral bill and usually pay the funeral director directly, with many unwilling to pay a family member or friend, though some may in certain cases³⁵. A credit union death benefit, by contrast, is a payment to the family, which they can put towards the bill or use for other costs.

Where death benefit cover does not pay out

The main situations where no payment is made follow directly from the eligibility rules. If the member joined the credit union at 70 or older, most schemes do not cover them². If the savings balance fell below the scheme's minimum, or the member was not eligible for the linked Life Savings Insurance, the death benefit may not apply⁹. Because eligibility is checked at the point of claim, a family can face a refusal years after the member assumed they were covered.

Where the payment is structured as accidental death cover, the exclusions are narrower still. Accidental death insurance does not pay out if you die from an illness or disease, from suicide or self inflicted injuries, from reckless or dangerous behaviour including being under the influence of drink or drugs, or from some dangerous sports and activities¹⁸. Accidental death benefit carries all the same exclusions¹⁸. A scheme that pays £2,000 on death but £4,000 on accidental death¹ will apply definitions like these to the higher payment.

State support has its own gaps. The Funeral Support Payment will not cover extra costs if the burial or cremation takes place in an area in which the deceased was not living and costs are higher as a result³⁶. And families arranging a funeral should be careful about how they pay: if you take out credit for a funeral, most charities will not reimburse you for this, as they tend only to look at money remaining on the bill³⁷.

More than one credit union, and family members

A person can belong to more than one credit union. Pennyburn Credit Union confirms this directly: you can be a member of more than one credit union¹⁶. Where separate insurance policies are held with different companies, both, or all, should pay out on death within the term of those policies³⁸. In practice, that means a family could claim a death benefit from each credit union the deceased belonged to, provided each scheme's eligibility rules were met, since each credit union runs its own scheme.

Family membership is also common. Citizens Advice notes that if one member of your family is already a member of a credit union, other relatives living at the same address can usually join too³⁹, and the Building Societies Association describes the same position: as long as one member of a family meets the common bond requirements and has joined, the other family members living at the same address can usually join¹⁷. This matters for death benefit because each family member who joins before age 70 and in good health can build up their own entitlement, so a household can hold several separate payments rather than one.

If you are considering this, the rules to check with each credit union are the same ones covered earlier on this page: the joining age, the health condition at joining, any minimum savings balance, and whether the credit union charges for the cover. Our guides on the common bond, joining a credit union and finding a credit union you can join explain how membership works.

Where to get help

Several organisations offer free, independent help with funeral costs and with claiming what is available.

• Social Security Scotland administers the Funeral Support Payment, with eligibility based on qualifying benefits such as Universal Credit, Pension Credit and income related benefits²², and applications can be made by telephone³⁰. The average total payment is £2,065, but the amount depends on individual circumstances¹⁵.
• One Parent Families Scotland provides crisis support and notes that the average Funeral Support Payment is around £1,700, which could be much less than the actual cost of the funeral¹⁴.
• Quaker Social Action, through its Down to Earth service, offers help with planning an affordable funeral, and warns that savings for a funeral can affect means tested benefits²⁶. It also publishes guidance on money left by the person who died³⁴ and on grants from work related charities³⁵.
• Turn2us explains how to claim a Funeral Support Payment in Scotland³¹.
• Contact, for families of disabled children, publishes guidance on the Funeral Support Payment and its exclusions³⁶.
• Marie Curie offers information on help with funeral costs, including how the Funeral Expenses Payment is made³³.

For help with the credit union side, the guides on what happens to savings and loans when a member dies, life savings insurance and loan protection insurance cover the other payments a credit union makes on death, and nominating someone to receive your shares covers the nomination that decides who receives your money.