Our Guide to How Funeral Plans Work And If You Need One

Len Burgess[1]

Len Burgess

Money Savings Advice Our guide to how funeral plans work

A funeral plan enables you to protect your relatives from unexpected costs when you die. It allows you to pay upfront for key elements of your funeral and have a say in exactly what kind of send-off you would like.

It is not a complete funeral package, and exactly what is included varies depending on the provider. However, essential expenses such as care and transport of the body are included.

Funeral plans can be paid for upfront with a single lump sum or paid for over several years in a series of smaller instalments.

What Is Included in a Funeral Plan

A funeral plan does not include everything you would need for a funeral, but it can significantly reduce the financial burden on a family dealing with the death of a loved one.

Exactly what is included depends on the provider, and it is important to make sure you understand what you are paying for before you sign up.

There are certain things which are not included in funeral plans, either because they are best decided on by family at the time of the funeral, or because their cost or availability is unpredictable.

For example, a burial plot is not included in a funeral plan- because the cost varies wildly up and down the country.

Things which are included in most funeral plansThings which are not included
Care and transport of the bodyBurial plot
Preparation of the body (non-embalming)A headstone or memorial plaque
Use of a chapel of restEmbalming
CoffinWake and related costs
Assistance from the funeral directorFlowers
Orders of service

Some funeral plans may also include a limousine for transporting close family, crematorium fees and payment for the officiant or clergy who will conduct the service.

A small number also include burial fees, but these may be capped, due to the fact that the cost of burials is rising ahead of inflation and varies wildly depending on where you live.

How Do Funeral Plans Work

When you buy a funeral plan, you are essentially pre-paying for the core elements of a funeral from a specific funeral director. By paying for the plan yourself, you ensure that your relatives won’t have to cover these costs themselves when you die.

When you pay for a funeral plan, the funeral director invests your money or uses it to buy insurance, with the aim of protecting the value of your purchase so that it can eventually be used to pay for your funeral.

When the time comes to arrange the funeral, the funeral director who sold the plan helps your family organise your service and provides all of the parts you have already paid for. 

Funeral plans do not include everything, and exactly what is included in your plan may vary depending on the funeral plan provider and the plan you choose.

This means that your family and loved ones may still need to pay for certain things outright or certain top-up costs. They may do this using their own money or funds from your estate.

How Much Do Funeral Plans Cost?

Most funeral plans cost between £3000-£5000, but the exact cost depends on the provider, how you choose to pay for the plan, and what is included in the offer.

It is possible to get a fairly comprehensive funeral plan for a mid-market price. This would include all the standard elements as well as a capped contribution to burial fees, a limousine to transport the close family to the service and nation-wide transport of the body of the deceased to the funeral location.

Opting to spread payments over more than 12 months can increase the overall cost of a plan by around 10%. However, it may make sense if you have a low income but still want the peace of mind of knowing that your funeral expenses are largely taken care of.

As an added bonus, funeral plans are protected against inflation. This means that if you buy a plan for £3000 which is actually worth £6000 at the time of your death, you still get the same service and your family won’t have to pay any extra.

Funeral plans are also excluded from inheritance tax, which means the cost of your funeral is not counted as part of your estate.

However, even though a funeral plan can help to reduce the financial burden faced by your family when you die, they do not cover everything needs for a funeral.

How Do You Pay for a Funeral Plan?

There are several different ways you can pay for a funeral plan, making them accessible for people with a variety of financial circumstances.

Upfront: Paying up front in a single lump sum is the cheapest way to pay overall, and guarantees your plan straight away.

Pay in under 12 months: Many funeral directors will allow you to spread the cost of a funeral plan over several months. If you can pay it all off in under 12 months, you are unlikely to have to pay any additional fees for the benefit of spreading your payments. Instalments over 1-25 years:

If you can’t afford to pay for a plan upfront, you can choose to spread the cost over a longer period of time up to 25 years. The plan provider may charge you around 10% extra overall to allow you to spread your payments. If you die before you have paid for the plan in full, your family will need to

Who Can Get a Funeral Plan?

Most funeral plans are aimed at the over-50s. However, there are a small number of providers who offer plans to adults of all ages.

It is never too late to purchase a funeral plan, though you should be aware that if you decide to pay in instalments and die before you finish paying for the plan, your family will need to top up the remainder in order to use your funeral plan.

Is Your Money Protected?

Funeral plans are not currently regulated by the Financial Conduct Authority, which oversees most financial products in the UK. This means that, unlike savings accounts, the money you pay to a funeral provider is not protected if the company goes bust.

However, funeral directors can volunteer to sign up to the UK’s Funeral Planning Authority (FPA), which sets minimum standards and ethics for providers to adhere to. If an FPA member goes bust, the organisation will work to make sure that another provider takes on your plan, so your investment isn’t lost.

You can check to see whether a provider is a member of the FPA here.

What Happens if You Die Before You’ve Paid in Full?

In cases where someone pays in instalments but dies before they have completed the payment plan, their family can top up the remaining balance to get access to the full plan.

They may do so using their own money, or cash from the estate of the deceased. There is no need to wait for probate to formally begin to do this because funeral expenses are free from inheritance tax. This means that families can use assets left by their loved ones to pay for an outstanding funeral plan right away.

However, there is no obligation to continue with a funeral plan put in place before someone died.

Most policies come with an exit clause, which allows family members to forgo the plan and recover the money paid in by their loved one after paying a small lump sum to the funeral provider.

What Happens if You Change Your Mind?

If you change your mind at any point, you may be able to recover most of your investment. Most plans come with an exit clause, which allows the family of the deceased or the plan holder to cash in the funeral plan and forgo the services for a fee.

The fee may be anything from £100-£800 and varies depending on the provider.

What Happens if You Die in Another Part of the Country?

Many people start to think about funeral plans while they still have plenty of years ahead of them- and it is not uncommon for someone to move to another part of the country years after they first took out their plan.

In some cases, this could cause an issue. Many smaller funeral directors impose limits on the distance they are willing to drive in order to collect a body. Nation-wide providers may be more willing to relax these limits, however many still have caps.

Higher-end funeral plans are less likely to have restrictions like this in place.

If you travel widely up and down the country or expect to move house in your later life, it is important to ask a prospective plan provider about any such limits.

What Are the Pros and Cons of Funeral Plans?

Funeral Plan ProsFuneral Plan Cons
Gives you peace of mind that your family won’t struggle to fund your funeral serviceIf the cost of funerals reduces, funeral plans may end up being poor value for money
Avoid the possibility that your family could be talked into a poor deal while they are grieving and emotionally vulnerableFuneral plans are not protected by the FCA, so there is no legal guarantee of protection if a provider goes bust
Allows you to decide what you would like your funeral to be likeYour family will have to organise the funeral with the director whose plan you have paid for
May save money in the long run, as funeral plans are protected against inflationBecause they are tied to a specific director, your family may face several weeks wait before the funeral if they are heavily booked at the time of your death
Can make funeral provisions more affordable by allowing you to spread the cost over a number of years

How Can Money Savings Advice Help You With a 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 Len Burgess

Len Burgess

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

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