Prepaid Funeral Plans: The Pros and Cons
Providing for expenses after your death can help leave your family financially secure, even when you’re not there to take care of them. You may already have other financial plans in place to cover expenses after your death, including life insurance, but you may want to consider purchasing a funeral plan as well. Unlike other investments, funeral plans protect your family from increasing costs associated with funerals.
Weigh up these pros and cons to see if a funeral plan is a good option for you.
9 Pros of Funeral Plans
Protection Against Rising Funeral Expenses
One of the benefits of a funeral plan is that it offers you protection against rising costs of funerals. The expenses associated with funerals have more than doubled in the last 15 years, and funerals are not likely to become cheaper any time soon.
In Simple Terms
You can expect to pay on average £4,417 for a basic funeral at today’s prices, and the average overall cost of dying sits at £9,493 – a significant cost to leave behind for your loved ones, especially if your death is unexpected.
This is where the benefit of a funeral plan kicks in – the plan essentially freezes the price of a funeral at the current cost, allowing you to avoid the future increase in prices. Funeral plan providers guarantee all the services in your plan, irrespective of the prices in the future. This will save your loved ones money when the time comes to say goodbye.
Advanced Planning of Your Funeral
If you have a funeral plan, you have the flexibility to make your own funeral arrangements. Most plans allow you to speak with a funeral director and specify your personal preferences for your plan’s details. You can then be able to choose a funeral plan that provides for all the services you need for your desired send-off.
Not only can you rest assured your family will know your funeral wishes, but it can also relieve your family of a significant burden while they are grieving.
Make Your Wishes for The End of Your Life Known
Many Brits find death an uncomfortable topic to discuss, and this often results in them being unable to express their wishes around their death to their family.
Not only does talking about death assist with the bereavement process, but it can also help prepare your loved ones for the inevitable. Having a funeral plan provides an opportunity to discuss your wishes openly with your family and allows you to prepare them for your death.
Keep Financial Stress at Bay for Your Family
A funeral plan not only relieves your family of the pressure of arranging the funeral, but it also offers financial protection. The price of a funeral can be a drain on family finances, and for families struggling with funds, it can be potentially devastating to their financial security.
Often, families are forced to reduce the cost of funerals by cutting out certain aspects of the service and experience exacerbated stress at having to come up with the cash to pay for it all.
A funeral plan will reduce the stress experienced by your loved ones, during their grief, by ensuring funds are available to pay service providers.
Your Life Insurance and Savings Are Protected
A funeral plan can protect funds in your estate, as well as your life insurance pays out, from rising funeral costs. The funeral plan secures your funeral at the current price, unlike other investment options.
A funeral plan will also ensure your loved ones don’t need to use your life insurance or savings to pay for the arrangements, which will, in turn, ensure they receive a bigger lump-sum payment.
UK Residents Have Guaranteed Acceptance
Another benefit of funeral plans is the fact that there is usually no limit on the age of applicants.
Most plans offer guarantee acceptance to anyone over the age of 18, but some funeral plans are designed specifically for more mature customers. These offerings have a guarantee acceptance only for those who are older than 50.
But That’s Not All
Most funeral plans don’t ask for your medical history, unlike many forms of life insurance. This offers an alternative if you can’t access affordable life insurance because of your age or health.
Keep in mind that there are often limited long-term payment options for those older than 70 who apply for a funeral plan.
Payment Options Are Flexible
Funeral plans usually come with a range of payment options, unlike products such as life insurance paid via a monthly contribution. Funeral plans are typically structured to accommodate your financial circumstances and allow you to choose from a range of payment options.
Payment options could include fixed premiums over 6 or 12 months, or a single payment made upfront. Some service providers also offer a monthly payment structure calculated over a more extended period, up to 25 years. Spreading your payments out over time could incur additional fees.
Plans to Match Your Budget
There are numerous funeral plans available with differing prices, which means you’ll have plenty of choice in finding a funeral plan that suits your budget. Your funeral plan’s cost will depend on what services are included, and the price may increase should you opt for a more extensive range of services. Selecting a plan with more basic services could leave your family liable for any additional expenses incurred after your death.
A set plan can cost between £1,500 and £4,400, but these payments can often be broken down into instalments and paid over an agreed period.
Funeral Plans are Regulated
While many funeral plans aren’t regulated by the Financial Conduct Authority (FCA), the vast majority are monitored by the Funeral Planning Authority (FPA)1. This self-regulating body has set up a strict Code of Practice that governs service providers, ensuring consistent funeral plan market standards. Purchasing a plan from an FPA-approved provider comes with the assurance that your investment will be protected.
6 Cons of Funeral Plans
Your Money Is Tied Up
With the day-to-day expenses of your life, you may have placed planning for your death at the bottom of your to-do list. You’ve most likely earmarked other expenses you would rather spend your hard-earned income on, such as your retirement fund.
But it’s worth taking the time to free up some budget for a funeral plan, especially if you can cut back on unessential costs like magazine subscriptions, unused gym memberships or insurance on your mobile.
A funeral plan can help ensure your family’s financial protection, and most funeral plans offer flexibility to suit your budget.
Your Plan Can Only Be Used on a Funeral
A funeral plan does not offer your loved ones a cash payment, like life insurance, and can only be used to provide a funeral. After your death, the funeral directors will use the funds in your funeral plan to secure the services you’ve requested for your funeral.
In most plans, your family can cancel the funeral plan and access the funds (excluding a cancellation fee).
Did You Know?
Once you’ve purchased a funeral plan, it will stay in place irrespective of how many years you live.
A Funeral Plan Can’t Be Used in Another Country
The average funeral plan won’t give you cover if you pass away while overseas or after you’ve emigrated.
Some plans may make provision to transport your body back to the UK if you should die while on holiday, but this may come at an additional cost. Consider taking out travel insurance to allow for your body’s repatriation if your funeral plan doesn’t offer this service.
You’ll Still Have to Pay for Your Burial Plot
Funeral plans don’t cover your burial plot’s cost, and this will need to be bought separately to your funeral cover.
The amount you’ll need to pay for a burial plot can differ vastly, depending on your location. Cemeteries in cities tend to be more pricey, with London being the most expensive place to buy a plot due to a lack of space.
Another additional cost you will need to cover outside of your funeral plan is the headstone or memorial.
You May Be Liable for Third-Party Costs
Only some funeral plans cover 100% of third-party fees. These charges include the costs over and above those of the funeral director and often make up as much as half of the average cost of a funeral.
Some standard third-party fees, also known as disbursement fees, include doctor fees, minister fees, and cremation or burial fees.
Some funeral plan providers will only pay a portion of the third-party fees, leaving your loved ones to cover the shortfall.
Funeral Plans are Not Regulated by the FCA
The Financial Conduct Authority (FCA)2 does not regulate funeral plan providers as part of its mandate to oversee the UK financial services industry. The FCA protects consumers, ensures stability in the financial sector and encourages healthy competition among financial service providers.
However, the government is currently weighing up whether or not to include funeral plans under the FCA’s regulations. This is due to the growing demand for funeral plans, and should they fall under the FCA, funeral plan providers will have to meet more stringent regulations.
But There’s More
Even though the FCA doesn’t regulate your funeral plan, you are still afforded some protection as a consumer by the Funeral Planning Authority (FPA). This self-regulating body governs almost all funeral plans, and many funeral plan providers are associated with a trust fund or insurer affiliated to the FCA.
A Few Common Questions
Even if you have made other financial provisions for your family after your death, it may still be a good idea to take out a funeral plan. Funeral plans offer you a range of benefits that most other insurance options don’t, and you will have peace of mind that your family will be protected after your death.