What is a prepaid funeral plan?

A prepaid funeral plan is a simple and straightforward concept:

  • it is a plan in so far as it sets out what arrangements you want to be made for your funeral; and
  • gives you the opportunity to pay for those arrangements in advance – either through a single lump sum payment or spread over a number of monthly instalments.

The benefits

A prepaid funeral plan gives you the chance to set out clearly and unambiguously what kind of funeral service you want when the time comes – rather than leaving those potentially difficult decisions to your mourning family and friends.

Just as importantly, of course, funeral plans such as this are also paid for in advance, so that none of the financial strain needs to be taken up by your survivors as you have already paid for the services you have chosen.

Inflation is affecting the cost of funerals more severely than many other areas of essential expenditure. Citing comments from the Funeral Planning Authority (FPA), the Funeral Service Times reported in September 2016 that 41% of survey respondents are already worried about how they are going to pay for the funeral of a loved one.

Prepayment may effectively beat the effects of inflation and you have the comfort of knowing that the money you have paid over to a provider registered with the Funeral Planning Authority is protected by its being held in trust or backed by a whole-of-life insurance policy in your name.

The Bereavement Advice Centre recommends that when choosing your funeral plan provider, you check to make sure that any Will/trust deed makes explicitly clear that the funds are to be used for funeral expenses in case those you leave behind are unaware of the plan.

Over 50s life insurance

Funeral plans are not only limited to the prepaid type – many people may find it difficult to pay the whole amount in advance, even when spread over a number of instalments.

In these circumstances, you might instead choose a whole of life insurance policy for the over 50s. By way of a regular monthly premium (payable for the rest of your life, or commonly until you reach the age of 90), such a policy guarantees to pay out a fixed lump sum cash benefit to your designated beneficiaries when you die.

You may make it your clear intention and wish that these proceeds are used for meeting the whole or at least part of the costs of your funeral.

Insurers offer guaranteed acceptance for over 50s life insurance and require no medical declaration or examination.

It is in the nature of this form of saving, of course, that the insured sum you have reckoned to cover the costs of your funeral at today’s prices, may not be sufficient to meet the costs for the same level of funeral service in the future – there is no protection against inflation in funeral costs other than your best estimate of the movement in prices over the years to come.

Since you may also be paying the insurance premiums until you reach the age of 90, it is possible that the amount you have paid exceeds the settlement sum upon your death.