What Are Pre-Paid Funeral Plans, How Do They Work, and Are They Worth It?

Ian Lewis[1]

Ian Lewis

Money Savings Advice Truth About Funeral Plans

It’s never easy to think about death or what happens after we’re gone.  Your funeral might be an event that you’d rather ignore. Sadly, your loved ones will suffer the effects if you bury your head in the sand.

Preparing with a funeral plan takes the stress and strain away from other people. With a funeral plan, the costs will be covered at the end of your life. Other people don’t need to find the money to give you the send-off you deserve. You can also express what you want your funeral to be like if you’re so inclined.

Before you get started, why not read through our comprehensive guide to funeral plans? We’ll help you understand what the best plans include and where you should be spending your money:

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How Do Pre-Paid Funeral Plans Work?

A pre-paid funeral plan is a little bit like life insurance. Whilst you’re alive, you pay into your plan and build up your pot of money. After your death, this money is used to pay your funeral costs.

In some cases, your funeral is carried out by the company that you’ve held your plan with. During life, you’ll have chosen your ideal funeral and agreed to a final total cost. In other cases, the funeral plan pays out to a different provider. You might not have planned every detail in advance, but the money you’ve saved can be used to cover all or part of your funeral costs.

A good pre-paid funeral plan covers things like the funeral director’s fees, as well as extras that you want for the event like your chosen coffin, headstone, and a more extravagant vehicle.

You’ll have the option to make monthly payments, and this is how most people choose to pay into their plan. However, unlike life insurance, a funeral plan usually has a specific financial target. You don’t just keep paying until your death, but until you’ve paid for your plan in full.

Some people choose to add extra money here and there, whilst others pay up-front in full. However you pay, you’ll have peace of mind when you know that you’ve planned for your funeral.

Why Should I Get a Pre-Paid Funeral Plan?

There are many different reasons to get a pre-paid funeral plan. Most people don’t buy these when they’re younger but tend to consider a funeral plan if they’re ill or in their later years.

What Are the Benefits of Pre-Paid Funeral Plan?

There are many benefits of funeral plans. Most people like that they’ll have some control over their final send-off. As you prepare your funeral plan, you can express your wishes and desires and choose your own funeral features. This sense of control can be a great comfort, especially if you think that other people might not know what you’d prefer. Some people might prefer a basic plan with a relatively simple coffin and burial. Others might have specific song requests or want a higher quality coffin or a limo for their loved ones.

Money that you’ve paid into a funeral plan isn’t part of your estate, so once you die, it’s separately secured and can’t be used to pay off any debts. It isn’t subject to inheritance tax, unlike money that you might have saved elsewhere.

Peace of Mind Having a Funeral Plan in Place

A funeral plan can lock in the price of your funeral arrangements. If prices rise, you’ll know that yours is already covered in full. 

As well as locking in the price of your funeral plan, some providers will pay out in full even if you don’t live long enough to complete your payments. So, you’ll know that your funeral is covered no matter how long you have left. Whilst some people choose to pay up-front for their plan, others spread the costs over anything from 12 months to 50 years.

Financial Security for Your Family by Having a Funeral Plan

By paying into your own funeral plan, you take the strain away from your family. When you die, they don’t have to find the spare money to pay for your funeral. The loss of a loved one is already traumatic, without the additional financial burden it can bring.

Prepaid Funeral Plans – What Options Are Available to You?

Typically, people plan for burial or cremation. You’ll be able to find an appropriate funeral plan, either way.

Burial Prepaid Funeral Plans

If you’re choosing to be buried, it’s worth noting that your plan might not cover all your costs. These plans don’t include a burial plot, which could cost up to £10,000 at current rates. Burial plot prices are likely to increase, as cemeteries and churchyards run low on space. You may be able to separately secure and pay for a burial plot, but if you can’t, then this becomes an expense for your family to deal with.

If you wish for a burial, your funeral plan is likely to contribute an agreed amount towards your burial costs. This agreed amount won’t necessarily cover all that you need to pay. This money can cover internment – the cost of preparing the grave – and in some cases will pay towards the burial plot itself. It’s very unlikely to pay the full price of a burial plot and is even less likely to cover the cost of a headstone.

For your own peace of mind and your family’s security, you may be able to secure a burial plot whilst you’re still alive. You can pay in advance to reserve your space, even choosing where you’ll be buried. If you wish, you can pay for a joint plot with space for two or three people. This may be your preferred option if you wish to keep loved ones together.

Cremation Prepaid Funeral Plans

Cremation funeral plans, if you’re sure about your choice, are often more affordable options. You can cover cremation costs with a burial plan, but if you know for sure that you want to be cremated, then you have the option to save money. Cremation is cheaper, and cremation costs are often covered by your funeral plan.

With a cremation funeral plan, you’ll still have some decisions to make. The cheapest plans cover a discreet cremation with no funeral service, whilst paying a bit more will cover the costs of a full-length service if you want one. Usually, these plans include a simple coffin and a simple container for the ashes. It’s typically assumed that a fancy coffin’s not required for such a short time.

Who Are Pre-Paid Funeral Plans Good For?

Your age, and stage of life, should impact your choice of the funeral plan. It’s best not to rush into any decision until you have read all the small print.

Families Looking for Pre-Paid Funeral Plans

Younger parents, with growing families, don’t often think about funerals. Usually, they only become a concern for those faced with a terminal illness. If you are faced with the possibility of a funeral before your children have grown, it may be wise to choose a plan that will pay out even if the total costs aren’t met. That way, you’ll know that the costs are covered no matter what the future holds.

If you’re planning ahead but not likely to need a funeral in the next decade, then you might find that you’re too cautious. Whilst instinct might tell you to be prepared for any eventuality, and whilst a funeral plan could lock in current prices and protect you against rising costs, this is one area where being too eager might not work in your favor. If you wish to move to a different area, your funeral plan might not cover your new location. If you’re planning far in advance, use a national company that covers the whole country – and hope that the same company is still around to pay out in the end.

Despite guidance to be cautious and not plan too far ahead, it is possible to purchase a Family Funeral Plan. These are usually purchased for grandparents, whilst also covering potential costs for their children and grandchildren. Older relatives might choose this option, as they’re the most likely to need the pay-out, though these plans will pay for whichever family member is first in need.

Couples Looking for Pre-Paid Funeral Plans

Couples might choose to be buried together, so you might decide to pre-purchase a funeral plot with space for two people. You can also choose a Joint Funeral Plan, which will pay out upon the death of the first person.

With a Joint Funeral Plan, you’ll pay for one funeral with two different names on the plan. As a result, whichever partner outlives the other will have peace of mind. The first to pass away has their funeral covered, so their surviving loved one doesn’t go to any extra expense. This plan offers peace of mind for a loving couple, so both partners know that their loved one won’t be left with extra costs or admin when they’re grieving.

Older Parents Looking for Pre-Paid Funeral Plans

Older parents will want funeral plans so that their children aren’t left with the worries and costs of preparing funerals for Mum and Dad. With a funeral plan, you can ease the burden on your loved ones.

If you’re potentially leaving behind younger loved ones, like your own children and grandchildren, then you may want a plan that covers the costs of a proper funeral ceremony. Rather than a discreet and private funeral, you might want an event where younger loved ones have a chance to say a proper goodbye.

Over 50s plans are popular with older parents. These are like shorter-term life insurance policies, paying out an agreed amount after your death. These plans can cover funeral costs but don’t give you the option to prepare and design your own funeral. You’re not securing a funeral price, and the pay-out doesn’t rise with inflation, so if you live a long time, then these can be extremely poor value. That’s especially true as most require you to make monthly payments indefinitely.

Your Future With a Pre-Paid Funeral Plan

A funeral plan can help you prepare for the future, saving money in the long run. When you choose a plan, you secure the price of the funeral you want. After your death, your funeral is covered with no additional costs.

Funeral prices are rising. A funeral today is likely to be cheaper than the same event in 10 or 20 years. If you secure a price with a funeral plan, you know that the costs are covered regardless of how much prices increase in the meantime.

How Are Pre-Paid Funeral Plan Priced and What Is Included?

Before you choose a prepaid funeral plan, it’s important to make sure that you understand exactly what you’re getting for your money. Most providers have several different plans, so you can see at a glance what’s included and what isn’t.

What’s Included in a Pre-Paid Funeral Plan and What Isn’t

Check various providers and all their packages to see what’s included in each plan. Most basic plans include a basic coffin, restricted cortege routes, and small (or non-existent) funeral gatherings. You might also be restricted to off-peak times for your funeral, so it’s more likely to be during the week when fewer people can attend.

The more you spend, the more you’ll get. More expensive packages can include bigger funerals at the most in-demand times, limousines for family transport, and a much more extravagant coffin. You’re also more likely to be able to tailor your funeral to meet your requirements.

What Is the Average Cost of a Pre-Paid Funeral Plan?

If you want a very basic funeral, expect to pay between £2,500 and £3,500 for your funeral plan. The most extravagant packages usually cost around £4,500. Cremation plans may be cheaper. A simple cremation, without funeral guests, could cost as little as £1,500.

Are There Added Extras That Can Be Included With a Pre-Paid Funeral Plan?

For that extra-special send-off, you’ll need to pay a higher price. The most expensive funeral packages typically include features like limousines for mourners, an extended funeral procession, a higher quality coffin, and 24/7 viewing in a chapel of rest.

Your chosen funeral provider can also accommodate special requests, as well as potentially keeping track of any flowers, tributes, gifts, or donations.

Different Pre-Paid Funeral Plan Packages From the Main Providers

Some of the most well-known names are Dignity, Co-op, and Golden Charter, though there are many other funeral plan providers, you’re able to choose from.

Dignity’s most basic plan does not include coordination of gifts and tributes, nor does it include a funeral procession to a separate funeral service site. Chapel of Rest viewings is only available by appointment and during office hours. Only a basic coffin is included. There are restrictions in place for the days and times of funerals. Dignity’s most expensive package costs £1,000 more. For this, you get a high-quality coffin, two limousines, 24/7 viewing at the Chapel of Rest, and a procession that goes to the service and then on to a crematorium or burial site.

The most basic Co-op plan has a fixed cortege route, restricted funeral dates and times, and viewing only during office hours. Their highest package has a more extravagant coffin, customization of the cortege route, full-service personalization, and two limousines for mourners. There are also more dates and times for viewings and the funeral service.

Golden Charter’s most basic package includes a budget coffin, only suitable for cremation. They have a slightly more expensive package with a better coffin for burial. These plans include a small allowance for third party costs but otherwise only provide transportation to a funeral director. This provider’s most comprehensive package includes a funeral procession with two limousines, a funeral service, and a list of mourners that sent flowers and tributes in advance or on the day of the funeral.

With so many different providers, all with several different packages, it’s very important to ‘shop around’ and compare each funeral plan.

What Are the Benefits of Having Pre-Paid Funeral Plans for Different Age Groups?

Whatever your age, you might decide that it’s time to invest in a prepaid funeral plan. At each stage of your life, you will want to look for different plan benefits and features.

Pre-Paid Funeral Plans for the Over 30s

If you’re relatively young, you might want a prepaid Funeral plan that’s been designed to adapt and meet your needs.

At this stage, you may still have many years before your funeral. It’s good to find a national plan, rather than one with a local provider, so you can still use your funeral plan if you decide to move somewhere new. Life could take you all over the country, so it helps to have a funeral plan that will follow you everywhere.

As funeral plans are typically a set price, and you can pay upfront or make monthly payments, there aren’t any immediate financial benefits for getting a head-start and planning your funeral early. Unlike life insurance, which gets more expensive as you age, a funeral plan will cost roughly the same if you’re 30 or 70 today. That said, funerals are only getting more expensive. Starting early will lock in a price that could be much higher in a decade or two.

If you hope to have a long time before your funeral, be cautious when choosing your favorite funeral plan. What financial protections are in place if the company you’re with goes out of business? You need to depend on your plan being active for, potentially, more than 50 years.

Pre-Paid Funeral Plans for the Over 50s

It’s usually at around 50 years old that people start to think about their future. Many life insurance providers advertise theirs Over 50s plans, which might make you feel old!

Planning for your funeral at 50 years old is a wise thing to do. This is a great age to start, as you’ll lock in a price and have time to plan your funeral carefully. Hopefully, you’ll live another 20-30 years at least, but at this stage of your life, you’ve likely settled into the area you live in. This gives you more flexibility and a wider choice of plan providers.

It can take about ten years to pay a funeral plan in full if you opt for the highest level plan and choose to pay for it monthly. Starting at 50 means your funeral’s covered by the time you reach retirement age.

Pre-Paid Funeral Plans for the Over 70s

It’s never too old to start a retirement plan. If you’re over 70, you should still be able to choose and pay for any plan you like. Realistically, however, plans that take ten years to pay off might be a bit of a risk.

At this stage of life, it may be best to take a few extra precautions. You can choose to pay for your funeral plan in full so that you know it’s all dealt with. You might choose a simple funeral, which will be a lot cheaper, or you might take some time to look for a provider that will pay out at any stage. Some funeral providers will still cover your costs if you die before you’ve finished paying, so if you’re over 70, then this type of plan could give you some extra peace of mind.

Hopefully, you’ll continue to live a long and healthy life, but with an Over 70s funeral plan, it never hurts to be a bit more careful.

What Are the Differences Between a Pre-Paid Funeral Plan and Life Insurance?

Should you choose life insurance, a funeral plan, or an Over 50s life insurance plan? Should you have more than one of these? Learn more about the differences between them:

Difference Between a Pre-Paid Funeral Plan and Life Insurance

A funeral plan gives you a way to prepare and pay for your own funeral. It doesn’t cover all the costs, like a burial plot and headstone, but covers the costs of most essentials like transportation, storage, and a funeral service.

Usually, you’ll pay a set price for your funeral, chosen from one of several packages. You can pay upfront or split the cost into monthly payments. Once you’ve paid the full price, you can stop making payments, and you’ll know that you’ve prepared for your funeral. Buying a funeral plan provides peace of mind but also locks in a funeral price that won’t rise once you’ve purchased your plan.

You can purchase a funeral plan alongside life insurance, so your funeral costs are mostly covered separately, and your insurance money is freed up.

Difference Between Life Insurance and a Pre-Paid Funeral Plan

With a life insurance policy, you keep paying in for as long as the policy is running. If you stop paying, the policy becomes null and void. If you pass away during your policy’s term, the insurance provider will pay the agreed amount. This money can be used to clear your debts as part of your estate, to cover funeral costs, and – if there’s money left over – be given as a gift to your loved ones.

Many people think about life insurance when they start their own families, as the life insurance pay-out can provide their loved ones with financial security. The money can be used to clear a mortgage or put their child through education.

The sooner you start paying for life insurance, the lower your monthly payment. This is because you’re more likely to survive to the end of your policy. Your policy’s active from the very first day, so even if you sadly died the following week, your insurance would pay out in full.

If you choose a 50-year policy but survive 51 years, then you’ve made 50 years of payments for nothing. This is the drawback of any life insurance policy. People who pay for life insurance in their 20s have peace of mind throughout their adult life but are much more likely to reach the end of their policy.

The later you start paying for life insurance, the more chance you have of your policy still being active when you pass away. As a result, your monthly payments will be much higher. For insurers, you’re more of financial risk, and they need to get more of your money. Being in poor health, at any age, will also raise your insurance premiums.

Difference Between a Pre-Paid Funeral Plan and Over 50s Life Insurance

If you had life insurance throughout your adult life, there’s a good chance that by the time you’re over 50, your policy’s already reached its end. You might also have lived without life insurance until you reached this point.

Over 50s life insurance is designed to meet the needs of older people. It includes a guaranteed pay-out that can, like any other life insurance pay-out, be used to cover all sorts of costs.

Whilst younger families might need to cover the mortgage and set their child up for life, by the time you’re over 50, there’s usually a lot less to worry about. Your house is likely already paid for, your children are already grown, and you’ll only need to prepare enough money for a funeral and smaller cash gifts. So, most over 50s life insurance policies are for smaller amounts of money – up to £25,000 at most.

Like all life insurance policies, Over 50s insurance is subject to inheritance tax. If you only plan to use it for funeral costs, then a funeral plan could be better. If you want to leave money for your loved ones or to pay off any debts, then an Over 50s policy could be the most suitable option.

Pre-Paid Funeral Plans Are Becoming Regulated

In the past, funeral plans weren’t regulated by the Financial Conduct Authority. They were also not under the remit of the Financial Ombudsman. As a result, if you had a complaint, you couldn’t take action through these routes. Instead, plans were regulated by the Funeral Planning Authority.

After concerns that some funeral plans were mis-sold because many people didn’t realize that their funeral plan didn’t cover the full cost of their funeral, it was decided that the FCA should take on the role of regulation.

Pre-Paid Funeral Plans Are About To Be Regulated by the FCA

Once funeral plans are regulated by the Financial Conduct Authority (FCA), the protections in place should be even more robust than before. It’s expected that this will be finalized by the end of 2021.

Until funeral plans are FCA regulated, they will continue to be regulated by the Funeral Planning Authority (FPA).

Once the FCA regulation is finalized, you will be able to make complaints to the Financial Ombudsman.

Is My Money Safe in a Pre-Paid Funeral Plan?

If you already have a funeral plan, don’t worry about the planned changes. When the FCA takes over-regulation of this industry, your funeral plan will switch with it. From your perspective, unless you need to complain, nothing else will really change.

When you purchase a funeral plan, your chosen provider (if FPA registered) will put your money into a ring-fenced trust for safe storage. That way, if your provider ceases trading, your money is still safe somewhere else. In that situation, the money is released to an independent trustee when you die. Then, the funds will be released back to your estate. This money will be returned minus the independent trustee’s fees and will only be a return of the money you paid into your plan. In short, if your funeral plan is guaranteed to cover the full costs if you died before you’d finished making payments, that would no longer be the case.

Once your money is released back to your estate, it can be used to pay for your funeral. It’s worth bearing in mind that there may not be enough to cover all your funeral costs. Fortunately, though, your loved ones will get back most of the money you paid in.

Buying a Pre-Paid Funeral Plan: Our Step-by-Step Guide

If you’re ready to buy a funeral plan, it’s important to consider several different things before you commit to your purchase. Follow this step-by-step guide to deciding if the time is right and who to choose:

What Would Happen to Your Family Without a Pre-Paid Funeral Plan?

Without a funeral plan, your loved ones would need to cover the cost of your funeral. If you have life insurance, then your life insurance pay-out could be used to pay for the same, but this money isn’t ring-fenced specifically for your burial or your cremation. Life insurance is also subject to inheritance tax, so there are certain tax benefits when you invest in a funeral plan.

If you died without life insurance and without a funeral plan, all financial responsibility would fall on your family. They may have to make heart-breaking decisions about what kind of funeral they can afford and how much debt to get into as they plan for your send-off.

Finding the Best Pre-Paid Funeral Plan Package and Understanding the Associated Costs

It’s always worth comparing plans from several different providers. All providers have different packages at a range of different prices.

Finding the best package may be a case of deciding what’s important to you. Do you want a fancy coffin or full control over your funeral procession route, or are you happy with a very basic funeral?

The higher packages don’t just offer fancy coffins and limousines. In some cases, you’re paying for important differences like a wider choice of funeral dates and times or a service without attendance limits. So, don’t brush off the most expensive package just because you’re happy with a simple coffin.

Look at what’s included in a package, but also consider what isn’t. Most funeral plans to pay for a headstone, though some providers have separate masonry plans. You’ll also need to buy a separate burial plot, as these won’t be included in your plan. Embalming, likewise, can be an additional cost.


Money Savings Advice Tip

If you want to provide additional financial security to your family and loved ones then getting a pre-paid funeral plan in place can certainly provide security. Here at Money Savings Advice we recommend speaking to a funeral plan specialist to get all the details before making a firm decision.


Do You Need Added Extras for a Pre-Paid Funeral Plan?

One of the great things about a funeral plan is how much control it gives you. You can choose whether or not you’d like all the added bells and whistles. How important to you are limousines for your mourners to travel to your service in? Do you want a more extravagant coffin? Do you want your loved ones to have 24/7 access to your Chapel of Rest?

As you’re purchasing a package, you’re likely to find some things you don’t need to be bundled with other things you want. There’s a balance to be found. You may need to ‘shop around’ to find the most suitable package.

Some providers give you the option of buying a lower value package, then adding and paying for extras that you’d like to include. In most cases, though, it’s simply best to choose an existing plan.

Pay for Your Pre-Paid Funeral Plan Policy

Some providers will agree to pay out even if you die before you’ve paid up in full. Others won’t, so it’s important to check the terms and conditions of your plan. If you die before you’ve reached the end of your payments, some providers will simply return the money that you’ve already paid in. Other providers will ask your loved ones to clear the outstanding costs.

Usually, you’ll choose from two options when it’s time to pay for your plan. You can pay in full if you have the money spare, and you’ll have peace of mind straight away. Alternatively, make monthly payments until your plan is fully paid for. Interest will be added if you’re paying monthly, so the total cost of your funeral plan will increase. You may be able to spread your payments over as little as six months or as long as 25 years.

Receive and Read the Documents Carefully

When you receive your documentation, take time to read everything carefully. Even after you’ve agreed to a funeral plan, you have 30 days to change your mind and get a full refund of the money you’ve already paid.

Your funeral’s important, and finding the right plan can save a lot of trouble later on, so don’t rush into any decision until you’ve had time to look things over.

Remember to pay careful attention to what your plan doesn’t include, which is just as important (if not more important) than what you get for your money. Costs like embalming, burial, and a headstone can quickly mount up for your loved ones, so be sure to consider alternative ways to cover these costs on their behalf.

Once you’re happy with your plan, you can commit to making payments. Your funeral plan should give you peace of mind, so you can enjoy the rest of your life knowing that your send-off is covered.

How Can Money Savings Advice Help You With a Pre-Paid Funeral Plan?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Funeral Plan brokers. They have already helped thousands of people get the best Funeral Plan deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.

 

Money Savings Advice Author Ian Lewis

Ian Lewis

Ian Lewis is one of our specialist financial writers. Ian has over 15 years of financial writing experience, having worked for some of the largest financial publications in the UK covering topics from mortgages, equity release, loans and financial claims, to name a few.

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