Does the funeral insurance payout have to be used for the funeral in Germany?
In short
No. In Germany the payout from private funeral insurance (Sterbegeldversicherung) does not have to be used for the funeral. The named beneficiary can spend it freely. Under section 1968 of the Civil Code the heir pays the funeral. The money is only tied to the funeral if it is assigned to the undertaker or the undertaker is the beneficiary.
Guide figures for funeral insurance premiums and funeral costs in Germany.
Example
Typical range
Funeral insurance, start at 60, sum EUR 7,000
about EUR 35 to 39 a month
Funeral insurance, start at 70, sum EUR 7,000 to 8,000
about EUR 54 to 63 a month
Cremation with an urn grave
about EUR 4,000 to 6,000
Burial in a family plot
about EUR 8,000 to 12,000
Guide values as of October 2026 from published tariff examples and cost overviews.
Your premium depends on age, sum and tariff; we obtain the exact quote for you.
Worked example
Daughter is beneficiary, son is sole heir
The father insured EUR 8,000 and named his daughter. His will makes the son the sole heir.
Payout to the daughter
EUR 8,000, outside the estate
Undertaker and cemetery bill to the son
EUR 7,200
Money left in the estate
EUR 3,000
Gap the son pays himself
EUR 4,200
Legally the daughter does not have to share. Naming the son or assigning the payout to the undertaker would have avoided the dispute. The amounts are a guide value from our quoting practice.
What German law says
Funeral insurance is legally a small life insurance policy. A named beneficiary acquires the claim when the insured person dies (section 159 of the Insurance Contract Act, VVG) and may use the payout as they wish. No rule says the funeral insurance payout must be used for the funeral.
The duty to pay is elsewhere: section 1968 of the Civil Code (BGB) puts the cost of the funeral on the heir. So the money is meant for the funeral, but it is not legally bound to it.
When the heir and the beneficiary are different people
This is where most family disputes start. Example: the daughter is the beneficiary, the son is the sole heir. The daughter gets the money outside the estate, the son gets the undertaker's bill.
Situation
Who gets the payout
Who pays the funeral
Heir is the beneficiary
the heir
the heir, usually from the payout
Someone else is the beneficiary
that person, freely
the heir from the estate
Undertaker named or assigned
the undertaker up to the bill
from the payout, rest to the family
No beneficiary named
the heirs, money goes into the estate
the heir from the estate
How to tie the payout to the funeral
If you want to be sure the payout will be used for the funeral, sign a funeral provision contract (Bestattungsvorsorgevertrag) with an undertaker and assign the policy benefit to them, or name them as beneficiary. Any surplus after the bill goes back to your relatives.
A tie like this also helps if you ever need social assistance: the welfare office usually treats reasonable, clearly earmarked funeral provision as protected. Details are on our page about funeral insurance and the social welfare office.
Tax on the payout
A payout to a beneficiary counts as an acquisition on death under section 3 of the Inheritance Tax Act (ErbStG). With typical sums of EUR 5,000 to 10,000 it is almost always covered by the tax-free allowances, especially for spouses and children.
If you need to bring the body home
Many international families want a burial in their home country. Repatriation within Europe costs about EUR 2,000 to 7,000 and much more beyond. If the payout is not tied to the funeral, make sure your beneficiary knows your wishes and the sum is large enough.
When the question does not matter
If the heir is also the beneficiary and there is enough money in the estate, it does not matter which pot pays. A tie to the undertaker is mainly worth it for blended families, disputes among heirs or a risk of needing social assistance.
Step by step
Check the policy to see who is the beneficiary.
Compare this with your will.
Change the beneficiary if they do not match.
For a firm tie, sign a provision contract and assign the payout.
Tell the insurer about the assignment in writing.
Checklist
Beneficiary named personally
Beneficiary and heir fit together
Sum covers the funeral you want, including repatriation
Assignment reported to the insurer if wanted
Relatives know where the policy is kept
Common mistakes
Assuming the payout goes to the undertaker automatically
Not updating the beneficiary after divorce
Naming heirs in the will but forgetting the policy
Agreeing an assignment without telling the insurer
Questions and answers
Frequently asked
Do I have to spend my mother's payout on her funeral?
Not as the beneficiary.
If you are also the heir, you must pay for the funeral, but which money you use is up to you.
Can the undertaker bill the insurer directly?
Yes, if the benefit is assigned to them or they are the beneficiary.
What happens to the rest if the funeral was cheaper?
Without a tie the beneficiary keeps everything.
With an assignment the surplus goes back to the family.
Is the payout part of the estate?
Only if no beneficiary is named or "the heirs" are named.
With a named person it bypasses the estate.
Does the beneficiary pay tax on the payout?
It counts for inheritance tax but usually stays tax free because of the allowances.
