Should you have a funeral plan in place?
Funeral plans and funeral insurance provide two different ways for you to pay all or part of your funeral costs in advance. This will mean that your loved ones will have a much smaller financial obligation when you pass away. In this guide we’ll be explaining how funeral plans work along with other useful information that you’ll want to be aware of before buying.
Funeral insurance is also sometimes referred to as an ‘over 50s plan’. If after reading this guide, you feel that you would benefit from having this insurance policy in place, we recommend comparing providers at Utility Saving Expert. It’s quick and easy to get a FREE no obligation quote in minutes. You can filter plans by price and also see what key features each policy includes.
Why should I have a funeral plan?
How much a funeral will cost you and your family will depend on how you wish to be sent off. Some funerals can be very complex and cost thousands of pounds, while others can be very simple and cost far less. For example, you may want horses, a beautifully constructed coffin, a marble tombstone and hundreds of guests. Alternatively, you may just want to be cremated. What you choose will depend on your personal and religious beliefs.
No matter what plan you have in mind, lots of people are concerned about how much it will cost their family when they die. By having funeral insurance, you can plan and pay for it in advance, this means your loved ones may not have to pay the entire cost themselves. You can buy a funeral plan for yourself or someone else, but the funeral must take place in the UK.
It’s important to know that a pre-paid funeral plan isn’t the only option to pay for a funeral in advance. You do have other options, some of which we have listed below:
Savings account – You can deposit money into a savings account, either in one lump sum or monthly instalments.
Paying from the estate – Anything you own such as a property or possessions could be auctioned or sold off to cover the costs.
Death in service through an employer – Some companies will pay out an amount to your next of kin if you die whilst you are still employed. While useful, this doesn’t cover those that are retired.
Life insurance policy – If you have a life insurance policy in place, any lump sum received by your family could be used to pay for the funeral.
How does a funeral plan work?
Simply put, with most traditional funeral plans, you will be expected to pay in advance. This could either be through monthly instalments or a payment in full. The money will go directly to the provider, or to the funeral director responsible for this event.
It’s worth looking into what each plan offers before buying, as they are not all the same. Some may not include a religious service, and others may only partially cover burial costs.
The money you pay will be invested into a trust fund or into an insurance policy. Regardless of which option is selected, your money will be safeguarded until the day that it is required. This will ensure that it is only used for the purpose of paying for the actual funeral.
How does an Over 50s plan work?
An Over 50s plan is just another insurance scheme, any money you pay into the scheme, you will not be able to withdraw. One of the key advantages is that these plans do not require any medical underwriting, this means that the amount paid out will not be based on any pre-existing health conditions.
However, it’s worth knowing the disadvantages to this insurance type. Failure to make a payment or not keeping up to date with payments may mean that the policy could be cancelled and you will not be able to reclaim anything you’ve already paid in. Other drawbacks include the following:
Some plans do not increase the pay-out based on inflation.
A life insurance policy could potentially pay out an additional 40% according to online consumer magazine Which?
Normally, you will need to live for more than two years to receive the full payment on this policy type.
Will my money be safe?
It’s worth noting that the FCA (Financial Conduct Authority) does not regulate funeral plans that are covered by an insurance policy or through a trust arrangement. Some policy holders recommend paying by credit card, if you’re paying in advance, whether it be in part or full. This is because you will be protected by Section 75 of the Consumer Credit Act.
If you do decide to take out a funeral plan, make sure you read the terms and conditions in full so you’re aware of what is covered, along with any policy limitations and exclusions. Keep your policy documents in a safe place and inform your next of kin along with letting them know that you have already paid for this.
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