Many may consider the topic of funerals morbid, but planning is important – for financial reasons and also because it allows decisions to be made on the sort of funeral that is desired. The average cost of a funeral is around £4,000 in the UK, which can be a lot for family or loved ones to find in the event of your death. Prepaid funeral plans are popular as a way of covering this cost in advance, but what considerations should you make when choosing a funeral plan, and are they always the best option? In this guide, we’ll walk you through some key things you need to know about prepaid funeral plans to help you decide if they are the right choice for you.
What are Prepaid Funeral Plans?
A prepaid funeral plan is a financial arrangement that enables you to pay for your funeral in advance by setting aside money, either each month or in a lump sum. The money to cover the cost of your chosen funeral is then held securely in a trust fund or invested in an insurance policy until such time when the services of a funeral director are required. A prepaid funeral plan does not always include everything required for a funeral – precisely what is covered varies depending on the provider you choose your plan with and also what is included in the specific plan type. It is very important that you understand what is and is not included in any plan. Most prepaid funeral plans also allow customers to set out the arrangements of their own funeral now so that when they die, their family are clear on your wishes and have less organisational responsibility to deal with.
Funeral plans can either be purchased directly from a funeral plan provider, from a funeral director or from other agents selling plans on behalf of a provider. These plans can either be paid for in a lump sum, usually ranging from £3,000 to £5,000 (but can be lower for much simpler plan types), or in monthly instalments usually over one to ten years. Prepaid funeral plans are not currently regulated by the Financial Conduct Authority (FCA), although the Treasury has confirmed that it has plans to bring these policies within its remit in the future (currently expected to be mid 2022). In the meantime, it is important that you check the provider is registered with the Funeral Planning Authority who acts as a regulator for the significant majority of the funeral planning market. This ensures that the provider is subject to independent oversight and that specific guidelines and a code of practice is being adhered to.
What Does a Plan Cover?
Funeral plans rarely cover everything required for a funeral so it’s important to check the details of each plan before you make a purchase. For example, the cost of a burial plot is not usually included, nor are the costs of flowers or catering. Some plans include a contribution towards third party costs (also known as disbursements) rather than covering the costs. These third-party costs would include items such as the burial or cremation costs, minister’s fees, and doctors fees. If the actual costs exceed the allowance then your family or whoever is organising your funeral will have to cover the rest of the bill.
What are the Benefits?
Prepaid funeral plans aren’t for everyone, but there are many benefits to opting for this type of plan. Chiefly, buying in advance can help prevent your family from having to deal with the financial and organisational burden when they’re distressed and emotional. By paying for the funeral ahead of time, it relieves the pressure when the time comes to arrange your funeral. It also affords the opportunity to shop around and to think about exactly what you want included in your funeral and by paying in advance the cost is effectively being fixed.
Planning in advance simplifies the financial aspects at a time which will inevitably be difficult as a consequence of the bereavement.. Another benefit is that a funeral plan can be useful if you’re in, or planning to move to, an expensive area, as this can affect the cost of funerals with local companies. By opting for a funeral plan from a national provider that has packages priced to work for larger areas of the UK, you can often keep costs down regardless of where you choose to live. Of course, check any plan before you buy to ensure you’ll be covered if moving elsewhere is a distinct possibility in the future.
What Should You Consider?
As with any financial plan, there are considerations to take into account. Firstly, if the prices of funerals come down, a prepaid policy could wind up costing you more overall. There is currently an investigation into competition in the funeral industry. This could mean that there are future price constraints on funerals which may make plans less attractive.
If you believe that your loved ones will be able to compare prices rationally when the time comes and not unnecessarily incur costs that you would not wish them to then it is possible that they will be able to find a funeral that costs less than a similar plan. This will obviously also partly depend on how inflation impacts the price of funerals over future years. It is also worth considering how much you need the money presently – if you would struggle financially to commit to paying for a prepaid plan, or you can be sure there would be enough from your estate to cover the cost when you die, the funeral could be paid for from that without you needing to purchase a funeral plan.
Prepaid funeral plans are a good idea for some people giving peace of mind. For many, they save money and prevent families from having to worry about rising funeral costs. They also remove an organisational burden at a time when families are distressed. Prepaid plans can also help you to arrange the funeral you want at a more accommodating price. If you’re completely clear about the type of funeral you want and what is included in your plan, prepaid funeral plans can be worthwhile. Just be sure that you use a provider that is registered with the FPA and therefore that they have to adhere to the strict Rules and Code of Practice the FPA has in place.