If you’ve heard the expression “prepaid funeral plans”, the following brief guide might provide some useful additional information.
The origins of funeral plans
For a long time, many people have saved for their funerals.
There’s nothing morbid in that. It is just a way of trying to ensure that we don’t leave our loved ones facing a mountain of potentially unpayable bills upon our death.
However, the traditional savings account approaches have been struggling to cope due to the rapidly rising cost of a funeral in the UK. Currently running at around £4,000 for an average funeral, costs have been rising at a rate (some sources suggest 80% over 7 years or so) that simply outstrips any chance many of us might have to save the sums involved.
To put it bluntly, if you’re saving modestly monthly amounts and getting perhaps 1.5% interest, then your funeral costs will be running away from you year by year unless you’re able to constantly increase each year how much you’re putting away.
So, prepaid funerals have arisen as a way of dealing with this thorny problem.
The idea is elegantly simple:
- you purchase your funeral director’s services in advance and at today’s prices;
- a substantial proportion of your funeral costs are therefore inflation-proofed and can’t rise – even if it’s many years until you die;
- to avoid a major hit immediately on your savings or other finances, you can pay the agreed amount in monthly installments.
Prepaid funerals are popular because they provide the peace of mind that our death won’t leave funeral debt problems behind us for our families to deal with.
The plan is based around the funeral directors and other related costs. For example, some plans won’t cover the minister’s costs though some may. Burial plots or cremation niches typically may not be included and neither may miscellaneous costs such as flowers or wakes.
Within the definition of “funeral costs” though, there is considerable scope for variation. For example, some plans might not include limousine costs for family members or others might do but under limited journey point-to-point terms. Some plans may offer crematorium costs but others may not.
So, it’s very important to ensure you carefully compare prepaid funeral plans in order to be sure that you’re getting what you consider to be the funeral support you’d like to leave in place behind you.
Selecting a provider
It’s always sensible to think about your plan and provider carefully, rather than simply become fixated on the lowest cost.
It’s also advisable to only use professional plan providers who are regulated by the Funeral Planning Authority (FPA) and who have a verifiable track record in the plan provision. That’s a common-sense approach with any financial engagement that involves a service provider in the event of your death or serious illness.
Points to note
Remember that prepaid funeral plans are NOT:
- an investment. Their value will typically not increase or decrease over time though some elements of some plans might be adjusted for inflation (e.g. those that cover burial services). However, over time and as funeral costs increase, their de-facto value to your family should logically increase;
- insurance or assurance.
Some over-50s life policies might also have a role to play in your funeral planning.
If you’d like to know more, contact a professional provider of funeral plan services.