The basic cost of a funeral has risen, up 6.2% from £3,091 in 2011 to £3,284; contributing to a 71% increase from 2004.
Sun Life Direct said its ninth annual Cost of Dying Report has recorded the eighth consecutive occasion the research has recorded a year on year rise.
Burial costs represented the largest increase this year (9.6%) while cremation costs (6.6%) and funeral directors' costs (5.3%) also recorded significant rises.
However, the cost of dying including death-related costs such as probate, headstones and flowers in addition to the basic cost of a funeral has decreased slightly by 1.9% from £7,248 in 2011 to £7,114.
Sun Life Direct said this was primarily driven by shrinking estate administration costs reflective of increased price competition and consumer awareness.
The study also reveals that 27% of respondents have not thought about how they will pay for their funeral.
The 17% of respondents who struggled with funeral costs had to resort to serious measures to meet the shortfall with 20% putting the outstanding balance on a credit card, 10% borrowing money from a loan provider, and 9% even having to sell their belongings.
Despite rising costs and increasing funeral poverty, discretionary spending has risen. Spending on memorials (up 7%), flowers (up 7.6%) and limousines (up 7.1%) has increased; this discretionary spending now constitutes 27% of the cost of the average funeral.
Simon Cox, head of life planning for Sun Life Direct, commented: "The industry needs to ensure that suitable options are available for people to take financial responsibility for their own funerals.
"‘Debt', ‘despair' and ‘distress' are common hallmarks of arranging a funeral and there is no light at the end of the tunnel to suggest that funerals will become more affordable.
"Moreover, a difficult economic climate and increasing demand on public services make further state support unlikely. We must encourage people to look ahead and start planning in advance."
