What does indexation mean for a funeral insurance policy?

Imagine: you took out a funeral insurance policy fifteen years ago for €6,000. A perfectly fine amount at the time. But the average funeral in 2026 easily costs more than €10,000 (source: NOS analysis of CBS data, July 2025). That gap of €4,000 or more? Your loved ones pay that out of their own pocket. This is exactly the problem indexation solves. In this article, I explain what indexation actually means, how it works, when it does or doesn't apply, and what to look out for when reviewing your policy.

What exactly is indexation?

Put simply, indexation means that the insured amount of your funeral insurance policy is adjusted annually to match the risen costs of a funeral. If those costs go up by 3%, your insured amount increases by the same percentage. Your premium goes up as well, but in return, your coverage stays on track.

Insurers base this annual adjustment on the consumer price index (CPI) published by the Central Bureau of Statistics (CBS). The CBS tracks how the prices of all kinds of products and services develop, including funeral services. Average inflation in the Netherlands in 2025 was 3.3% (source: CBS, January 2026). But funeral costs consistently rise faster than general inflation. Over the past ten years, funerals and cremations have become roughly 40% more expensive, while general inflation over the same period was around 31% (source: NOS analysis of CBS data, July 2025). That 9 percentage point difference makes indexation all the more relevant.

Tip: Check your policy for an indexation clause. If there's no mention of indexation, your insured amount probably isn't keeping pace, and you may be underinsured.

Why have funeral costs risen so sharply?

To understand why indexation matters so much, it helps to grasp why funeral costs keep climbing. In 2017, the Nibud (National Institute for Budget Information) estimated the average funeral at €7,500. By now, average costs have surpassed €10,000 (source: NOS, July 2025). That's an increase you really feel as a consumer.

The causes are varied. Higher energy costs play a role (think of gas for cremations). Labour costs in the funeral industry have risen, partly due to collective agreement wage increases that exceeded inflation. Municipal fees for burial rights go up every year. On top of that, bereaved families increasingly opt for more personalised farewells with more bespoke ceremonies, which drives costs up further.

This combination of factors means that a policy without indexation gradually loses its value over time. Not because your insurer is doing something wrong, but simply because the world around your policy is getting more expensive.

Capital, in-kind or combination: when does indexation apply?

This is where you need to pay close attention, because indexation doesn't work the same for every type of funeral insurance.

With a capital insurance policy (also called a cash benefit policy), a lump sum is paid out to your loved ones upon death. This is precisely the type where indexation is crucial. The amount you once locked in loses a bit of purchasing power every year due to price increases. With indexation, that amount grows along. You can indicate whether you want automatic indexation when you take out the policy, and with most insurers you can also switch it on or off during the term. Insurers such as ASR offer a capital insurance policy where you can opt for indexation.

With an in-kind insurance policy (also called a services policy), the situation is different. Here, you don't insure a cash amount but products and services: the coffin, transport, care of the deceased, the ceremony. The insurer delivers those services upon death, regardless of what they cost at that point. Price increases are automatically absorbed into the premium. Indexation in the traditional sense is therefore not needed here, because your insurance is by definition inflation-proof. However, your premium does rise annually in line with increased costs. DELA and Monuta offer this type of insurance.

A combination insurance policy combines a basic package of services with a freely spendable cash amount. For the services portion, the same applies as with in-kind insurance (automatically inflation-proof), but for the cash portion, indexation is certainly important.

Tip: Don't know which type of insurance you have? That's nothing to be ashamed of, because Nibud research showed that a quarter of policyholders have no idea what kind of policy they hold (source: Nibud, report 'Knowledge and awareness of funeral costs', 2017). Dig out your policy documents or call your insurer.

How does indexation work in practice?

Most insurers apply indexation once a year, usually on 1 January. Monuta, for example, indexes all its policies annually on that date (source: monuta.nl). You then receive a notification (by post or email) stating the percentage by which your insured amount and premium have been adjusted.

The percentage used for indexation is based on the increase in funeral costs as measured by the CBS. This is not the same as general inflation. The CBS publishes specific price index figures for funeral services, and as mentioned, these are consistently higher than the average. On average, you can expect an annual increase of somewhere between 2% and 5%, depending on the year.

A concrete example: suppose you have a capital insurance policy with an insured amount of €8,000. The insurer applies 3.5% indexation. Your insured amount then becomes €8,280. Your premium rises proportionally. Over a period of twenty years, this makes an enormous difference. Without indexation, you stay at €8,000, while funeral costs may increase substantially during that period.

Important: indexation is not mandatory. You can choose to decline the annual increase. Some people do this to keep their premium low. That's understandable, but do realise that you are consciously accepting the risk of underinsurance.

Tip: Have you been declining indexation for years? Contact your insurer to calculate how large the gap has become between your insured amount and current funeral costs.

What if you don't have indexation (or have declined it)?

This is the scenario many people run into without realising it. The Nibud found that 45% of Dutch people with funeral insurance are insufficiently insured to cover the costs of a complete funeral (source: Nibud, 2017). That percentage has likely only increased since then, given the above-average cost rises in the funeral sector.

If your insured amount is €5,000 and the funeral costs €10,000, your loved ones need to make up the €5,000 difference. Nibud research shows that nearly half of all Dutch people have no savings above €5,000 (source: Nibud). The chance that your loved ones cannot easily absorb that shortfall is therefore very real.

What can you do if you discover you're underinsured? There are a few options. You can activate indexation with your current insurer after all (if you have a capital insurance policy). You can have your insured amount increased as a one-off, though this may require you to complete a health declaration. Another possibility is to take out a supplementary policy alongside your existing one.

Switching to a different type of insurance is also an option. An in-kind insurance policy is by definition inflation-proof and removes the uncertainty about future cost increases. With DELA, for example, you can choose between a services policy and a cash benefit policy, depending on what suits you best.

What to look for when choosing or reviewing indexation?

Not all indexation arrangements are equal. There are a few points to watch out for when taking out a new policy or reviewing your current one.

First: what is the indexation based on? Most insurers use the CBS consumer price index for funeral services. That is the most accurate benchmark. Some policies work with a fixed indexation percentage (for example 3% per year). That is more predictable, but less flexible. If the actual cost increase exceeds that fixed percentage, you'll still accumulate a shortfall.

Second: is indexation automatic, or do you need to activate it yourself? With most insurers, automatic indexation is the default for new policies, but with older policies, you may need to switch it on explicitly.

Third: what happens if you're premium-free or have paid the premium in one lump sum (single premium)? In that case, indexation is generally no longer possible. Your insured amount is fixed and no longer grows. This is an important consideration if you once opted for a single-premium policy.

Finally: keep in mind that indexation doesn't cover all costs. Municipal burial fees vary considerably from one municipality to another (source: Monuta) and may deviate from the average increase that insurers use in their calculations. Monuta therefore recommends checking every three years whether your insurance still matches your wishes (source: monuta.nl).

Tip: Ask your insurer for an up-to-date overview of your insured amount and compare it with current average funeral costs. That way, you know exactly where you stand.

Conclusion: indexation isn't a luxury, it's maintenance

Indexation might sound like a dull insurance term, but it's really just maintenance on your policy. Just as you maintain your home to preserve its value, indexation ensures that your funeral insurance retains its value in a world where everything gets more expensive. Without indexation, the gap between your coverage and the actual costs grows larger every year, and ultimately it's your loved ones who foot the bill.

It doesn't have to be complicated. Dig out your policy, check whether indexation is enabled, and see if your insured amount still matches current costs. Not sure if you're adequately covered? Click here to compare funeral insurance policies and explore what options are available. That way, you make sure your loved ones won't face any surprises down the line.