Figuring out funeral plans

You’ve likely heard of funeral plans and maybe even thought about getting one. But you probably have a lot of questions too.

What exactly are they? Is it the same as over 50s life cover? How do you weigh up the pros and cons? And what do you need to consider before you buy one?

We’re here to give you the answers.

What are they?

A funeral plan lets you pay for your funeral in advance (if you’re 50 years or more) so you don’t leave your family with hefty fees when you die. It also means you can decide what kind of funeral you want and can document your wishes so your family don’t have to worry about giving you the send-off that you wanted.

(source: money saving expert)

All plans are different so be sure to check with your provider.

How do they differ from over 50’s life cover?

They’re basically the same thing aren’t they? Well, no.

It’s a common misconception but they are actually very different. Although both can help towards a cost of a funeral, that’s where the similarity ends. Life cover provides a cash lump sum on death but this can be used for any purpose. It doesn’t include details about the funeral or what you may want.

Here’s a quick summary of their main features

Prepaid funeral plan Over 50s life cover
Set amount to pay. Can be a lump sum or spread over a longer term e.g. 12 months. Continuous premiums, pay more the longer you live. Some end at a certain age e.g. 90 years old
Once paid, the plan guarantees to cover the costs of the services in the plan The plan may pay out less than is paid into it.
Can only be used for the funeral Cash lump sum for any use
Pays for the funeral at today’s prices so protects against inflation May not cover the full cost of a funeral
Money immediately released to funeral director May take time to receive the pay out depending on circumstances
Can claim full amount as soon as fully paid Usually have to pay for 1-2 years before can claim the full amount

Funeral plans - what are the pros and cons?

The pros

  • Choosing your own funeral and making your wishes clear so your loved ones don’t have to worry about making those decisions for you at a distressing time
  • Paying for your funeral to protect your family from the expense
  • Fixing the cost of the funeral services at today’s prices to protect against inflation
  • Funeral plans are exempt from inheritance tax liability and depending on your council, may not be counted towards care cost calculations either, unlike savings accounts

The cons

  • Paying up front – you need to have the money available. Can be a lump sum or paid over 12 months (some longer terms)
  • Not all costs are guaranteed to be covered – some costs have an allowance against them but if the costs rise above that, the rest will have to be paid at the time. Other costs will be guaranteed in full, regardless of inflation
  • Not all costs included – most plans do not include headstones, memorial, flowers or catering

What should I consider before buying a funeral plan?

  • Choose a reputable company
    Funeral plans aren’t covered by the Financial Conduct Authority (FCA) although HM Treasury has proposed plans to make this happen in the future. Currently, there is a voluntary organisation set up by the industry to regulate providers called the Funeral Planning Authority (FPA). Make sure your provider has registered with this body as they then need to abide by the rules and codes of practice.
  • Be clear on what’s covered, and what’s not
    Different providers include different options so be sure to shop around. Some costs will be guaranteed to be met whereas others will have an allowance against them, meaning if the costs rise above this, it will need to be paid by your family.
  • Can you choose your own funeral director?
    You may have a local funeral director that you or your family have used before and are comfortable with. Check with your provider if you’ll be able to use them.
  • Are you planning on moving to a different part of the country?
    If you’re likely to move and want to change your funeral director, check if your plan allows this and if there are any additional costs.

Did you know?

The average cost of funerals increased by more than 30% between 2012 and 2018