Funeral plans and funeral insurance are two different ways of paying for a funeral in advance. Funeral insurance policies are also known as ‘over 50s plans’. Here are some things to bear in mind if you’re thinking of taking one out.
- Why use a funeral plan?
- How do they work?
- What does a funeral plan cover?
- How secure is my money?
- Questions to ask the plan provider and your adviser
- Next steps
- Alternatives to a funeral plan or funeral insurance
- More information about funerals
Why use a funeral plan?
Funerals can be expensive, costing perhaps several thousand pounds, and many people worry that when they die, they won’t leave enough money for their funeral.
With a funeral plan, you arrange and pay for it in advance.
You can arrange a funeral plan for your own funeral or for someone else’s, as long as the funeral will be held in the UK.
But a pre-paid funeral plan is not the only way to pay for a funeral. There are other options and ways to save on the cost of funerals.
How do they work?
You pay either a lump sum or instalments to the plan provider, or to a funeral director.
Your money is either invested:
- Into a trust fund with trustees, or
- In an insurance policy, which is then used to pay for the funeral whenever that turns out to be
The aim of both methods is to safeguard your money until it’s needed, ensuring that it’s used to provide the funeral you have paid for.
What does a funeral plan cover?
Funeral plans usually don’t cover everything that is needed for a funeral.
What’s covered will vary from provider to provider, so you should check the details of any plan carefully before you buy it.
The cost of a burial plot is often not included, and neither are costs that are not usually met by the funeral director, such as the cost of flowers and catering.
Also, some providers will only pay a contribution towards cremation or burial costs, leaving your family to pick up the rest of the bill.
How secure is my money?
The Financial Conduct Authority (FCA) doesn’t regulate funeral plans covered by insurance or trust arrangements.
It does however stipulate rules for each method of investment, so sums paid by the customer are safeguarded and available to pay for the funeral when needed.
If you’re paying for your funeral bill upfront, you could consider paying for part of on your credit card.
When you pay with your credit card, you benefit from Section 75 of the Consumer Credit Act.
This means you can get extra protection if things go wrong with the funeral director.
You could also get this protection if you were to pay at least £100 of the funeral bill upfront, and then pay off the rest of the balance in monthly instalments.
Questions to ask the plan provider and your adviser
- Are there any cancellation charges?
- What exactly is included in the plan and what potential costs are not?
- Could there be any other expenses for the funeral, and what happens if there are?
- Is it possible to cancel the plan if circumstances change, for example if you’ve arranged for your spouse’s funeral but you later separate?
- Does the plan allow you to choose the funeral director?
- What if your chosen funeral director goes out of business?
- What happens if the person the funeral is intended for dies abroad or away from home?
- Can the funeral director arrange a funeral of a different standard from the one you have chosen?
- If you pay by instalments, how long do you do this for and do you have to pay interest?
- What happens if there are outstanding instalments at death?
- What freedom do you have to change the details of your funeral plan?
- How does the funeral planning company know about the plan holder’s death?
For more information about funeral plans, costs and help figuring out if you need one, visit the Which? website.
Funeral insurance or over 50s insurance
Another way to pay for your funeral in advance is to take out funeral insurance (sometimes known as an ‘over 50s plan’).
This is an insurance policy that will pay out a fixed sum towards the cost of a funeral when you die.
These insurance policies often offer poor value for money.
You have to keep paying the monthly premiums until you die (or in some cases, until you turn 90) by which time you might well have paid in more in premiums than the fixed sum that will be paid out on your death.
Also, if you miss a single premium, the policy will not pay out. And because it’s an insurance policy, not an investment, you can’t get the money you have paid in back, and you might have to pay a fee if you want to cancel the policy.
It might be better to pay into a standard savings account to pay for your funeral instead of taking out funeral insurance.
If you take out a funeral plan or funeral insurance:
- You should receive written confirmation of your cover – keep this in a safe place.
- Make sure your next of kin knows you have already paid for your funeral and what the details are.
- Check to see that the plan provider has a clear complaints procedure.
Alternatives to a funeral plan or funeral insurance
You can pay for your funeral in advance without taking out a funeral plan or funeral insurance policy.
It could be as simple as leaving money in a bank account and letting your solicitor and next of kin know that the money is set aside for your funeral.
Whoever is organising your funeral will also be able to claim back funeral expenses from your estate.
If you’re expecting your estate to be over the inheritance tax threshold, this can be a good way of reducing your inheritance tax liability.
More information about funerals
Using the links below, you can find more general information about funerals - for example, the different options available, choosing a funeral director, rights, choices and help with costs.
The sources of information differ depending on where you live:
- For England and Wales - visit GOV.UK
- For Northern Ireland - visit nidirect
- For Scotland - visit the Scottish Government website
This article is provided by the Money Advice Service.