It’s never nice to think about, but planning how you’ll pay for your funeral now can take a lot of the financial stress away from family members in the future.
Most funerals will need to be paid for at the time of the event, often using the proceeds of the estate, which may involve family members seeking to release funds from the deceased’s bank account. If there isn’t enough money left, the funeral organisers (usually family members) will be expected to foot the bill. Some funeral directors may accept payment in instalments, and for those struggling to pay, there are charities or the Government’s Funeral Expense Payment that may be able to help, but it’s often recommended to plan in advance.
Funerals can easily run into the thousands of pounds – the average, according to SunLife, is £4,417, not accounting for additional send-off costs such as flowers, limo hire and the wake, which together can add another £2,000+ to the bill – so it makes sense to start planning now. This is where prepaid funeral plans can come in.
Funeral plans allow you to pay for your funeral in advance, either in a lump sum or instalments. Your money will either be held in an insurance policy or invested in a trust fund, and will be used to pay for the funeral at a later date.
Plans are available from most funeral directors, and at the time of buying you’ll be able to choose the kind of funeral you want – all plans include the basic services of a funeral director and a coffin, as well as provision for third-party disbursements (such as the cost of a minister or doctors’ fees), but you may be able to include extra services as well, such as limo hire. Plans may also differ in terms of the quality of coffin, times when loved ones can visit the chapel of rest and even cortege routes, with a whole range of options to suit different budgets.
The list of inclusions will also change depending on whether you’re opting for a burial or cremation, and most plans won’t include the wake or flowers (though some will allow you to put aside extra money to cover these costs). Whatever kind of funeral you’re looking for, however, the basic elements of a funeral plan remains the same – you pay the funeral director now, specifying your choices, and when the time comes, everything will already be taken care of and paid for.
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Yes, you can. While most plans will allow you to pay in a lump sum, for those who wish to spread the cost, it’s perfectly possible to pay in monthly instalments. The options will of course differ depending on the funeral director and plan you choose, but you’ll typically be able to choose the term – often from as little as six months to 30 years – with the monthly payment and overall cost varying accordingly.
As a general rule, the longer the term, the lower the monthly payment will be – but it doesn’t necessarily mean it’ll equate to the cost had you paid upfront. This is because most providers will levy an additional charge for paying in instalments, so for example, you might be able to find a plan that costs £3,000 upfront, but charges £20 a month over 25 years, which equates to an overall cost of £6,000. You’d therefore be wise to think carefully about your budget, and whether lower monthly payments will be worth it in the long run.
For those worried about their loved ones having to pay for their funeral – perhaps if they don’t think they’ll be able to leave much in the way of inheritance – a funeral plan could be a very useful investment.
To begin with, you’re paying for your funeral in today’s prices and are therefore protected against rising costs, so even if funeral prices escalate in the coming years, you (or your family) won’t have to pay any more. There’s also the benefit that you’ll be able to plan the send-off you want, safe in the knowledge that your family won’t have to cover the cost. But perhaps one of the biggest bonuses is that once your funeral plan is paid for, it doesn’t count towards your estate, so any money held within it is excluded from inheritance tax calculations.
However, there’s the risk that, if funeral costs were to decrease in the coming years, you could have over-payed for your funeral. It’s also wise to exercise caution if you’re considering paying in monthly instalments, as if you’ve chosen to spread your repayments over a particularly long term, you could end up spending far more in premiums than your funeral is worth. Not only that, but if you die before the end of the repayment term, your family could be asked to cover the remaining cost, effectively cancelling out much of the benefit.
As with any kind of insurance policy, it’s a trade-off between cost and risk. But, provided you’ve done your research and chosen the best funeral plan for your needs, there’s no reason why it can’t be worth buying, if only to give you and your family peace of mind.
Yes, your loved ones could use the lump sum payout from your life insurance policy to pay for the funeral, so this could be another option for those wanting to plan in advance.
However, whether this is feasible or not will depend on the size of the payout and the other commitments the money is intended to be used for – if it needs to pay off a mortgage, for example – which could mean there’s not much left over to pay for the funeral as well. Then there’s the potential time delay – insurance payments are typically made a month after the policyholder dies, according to the Association of British Insurers, or longer if there’s an issue, which could come too late for the funeral and will mean other payment options will need to be considered.
This will depend on your individual requirements, both in terms of your funeral preferences, your budget and preferred method of payment. The best funeral plan for your needs might include one with a solid wood coffin, three limousines and full personalisation of hymns and readings, or you might be happy with something more basic that requires less of an outlay.
Whichever plan you choose, make sure it’s with a provider that’s registered with the Funeral Planning Authority (FPM). Many pre-paid funeral plans aren’t currently regulated by the Financial Conduct Authority, but if your provider is registered with the FPM, it’s signed up to a voluntary code of practice and you’ve got more recourse should things go wrong.
Ultimately, finding the best funeral plan all comes down to research, so make sure to spend the time finding the plan that’s right for you and you can be confident that everything will be taken care of when the time comes.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.