How do prepaid funeral plans work? this is a very common question and one the FPA is very happy and able to answer.

Prepaid funeral plans work by paying a monthly fee or a lump sum. This money is then used by the provider to organise and deliver the funeral on the death of the named individual. 

People can often get the terminology wrong too and say “how do prepaid funerals work?” whilst it may feel as though a prepaid funeral plan is a prepaid funeral is it not. In some cases the plan will cover certain aspects but not all of a funeral so its important to understand which is which. 

While prepaid funeral plans are very popular a lot of people still don’t fully understand how they work. Understanding how a prepaid funeral plan works is very important when considering one for yourself or someone else. This guide is designed to give you all the information you need to be able to understand the process by which a funeral plan is paid for, pays out, and how the entire plan is designed to bring peace of mind to anyone looking to prepare for their funeral financially.

What is a prepaid funeral plan?

A funeral plan is an arrangement that allows a customer to pay in advance for their own or
another person’s funeral.
The plan is a contractual arrangement with a provider, who assuming the plan has been paid for,
is then responsible for arranging the funeral when it is required and paying for those elements
covered by the plan.

Why do prepaid funeral plans exist?

Prepaid funeral plans allow you to choose and agree the arrangements for the sort of funeral
you wish to have in advance. This allows you and your family if you wish to shop around and
make sure you buy what you want at a time when it is easier to do so. Plans allow you to fix
the cost of most elements of the funeral, and protect you from future inflation of funeral related

These financial issues are one part of why people choose to purchase prepaid funeral plans.
However, for many the main reason for buying a plan is more to do with putting their affairs
in order. Customers say they simply want peace of mind that everything is taken care of with
regards to their funeral, and that they don’t want their families to have to worry about it when
they pass away.

Is a prepaid funeral plan the same as an over 50’s plan?

Some life assurance policies which provide a cash amount on death are sometimes referred to
as funeral plans. However, they are not, for a number of reasons.

Firstly, the money paid out can be spent by the beneficiary on whatever they wish at the time.
Secondly, the money paid out may not be enough to cover the expense of a funeral. It may also
be less than what you paid into the plan.

Finally, there isn’t a contractual arrangement with a provider who is responsible for arranging
the funeral. If you purchased an over 50’s plan, and intended to use the funds for a funeral, your
loved ones would still need to make the necessary choices and arrangements with a funeral
director after your death.

What happens to your money and how is it protected?

The rules around the regulation of funeral plans mean that the money to provide the funeral is set aside in something called a ‘whole of life policy’, or held in a trust that is separate from the funeral plan provider. Either method means the funds are kept separate from the provider company until the time that the funeral is needed.

A key part of the FPA’s checking process is to ensure these arrangements are in place, which helps to ensure that your funeral plan is protected and the money you’ve invested is available to provide the funeral when it is needed.

Following the death of a loved one, their estate will likely be subject to inheritance tax. A big benefit is that funeral plans are not subject to inheritance tax as they are not counted towards your estate, unlike savings which will be liable to taxation following your passing.

Planning what you want from your funeral

Thinking about your funeral can be difficult, but if you’re considering purchasing a funeral plan
it gives you an opportunity to have practical and rational conversations about what you want
your funeral to be like.

Buying a prepaid funeral plan allows you to choose the various elements of your funeral, for
example whether you would like a burial or cremation. Many customers say they prefer to
have planned everything out in this way so that their relatives don’t have to do it after they’ve

What happens when you die if you’ve purchased a funeral plan?

We recommend that customers tell their loved ones when they’ve purchased a funeral
plan, where they’ve purchased it from, and if possible they should let them know where
the paperwork is stored. This makes it much easier for relatives to contact the provider in
question and start arranging the funeral. Once they’ve made contact, the process should
be quite simple as the customer would have agreed all of the arrangements when they
purchased the plan.

If you think a loved one has purchased a funeral plan, but you’re not sure where from, or if it
was a funeral plan at all, we offer a plan tracing service. This is free to use via our website; you
just have to enter a few key details. Click here to visit the plan trace page.

How does a prepaid funeral plan work?

This guide outlines the reasons why funeral plans exist, the key differences between them and other products like over 50's plans, what happens to your money and how the plan works when you or your loved one passes away.