Pros And Cons Of Funeral Plans

Pros and Cons of Funeral Plans

This page was last updated on 1 October 2021

Pros and Cons of Funeral Plans In 2021

With funeral plans you get the chance to cover the full cost of your funeral in advance. However, like with many insurance policies they are not perfect solutions. 

In this article the pros and cons of pre paid funeral plans will be revealed. We also look at when funeral plans might be a good idea, and when other options might be better for you. 

In addition to the pros and cons, you need to think about the financial risks of a plan and the type of plan you want.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

Are funeral plans a good idea?

Funeral plans are a great idea if you or your loved ones want to avoid inflation and secure the price of your funeral ASAP. You can plan all the details of your funeral within your budget, and then relax knowing it is all in place. 

Another reason why funeral plans are a good idea is that they take the emotional strain off of your loved ones. When you pass away, things will already be tough enough for your family members. Having a funeral plan arranged stops them having to worry about the funeral arrangement or funeral ceremony. 

Finally, a pre paid funeral plan relieves your loved ones of funeral expenses. The final cost of a funeral can really add up, and if the costs fall to your family they might find themselves struggling to cover the funeral cost. 

However, if you take out a pre paid plan your family will not have to worry about whether they have enough money to pay for the funeral you want.

So, funeral plans are a good idea if you want to relieve the emotional and financial burden planning might have on your loved ones. When you pass away, your family simply get in touch with the named funeral director who has details of your wishes and arranges everything.

Here is a vide on the pros and cons of funeral plans.

Which is better: a funeral plan or life insurance policy?

Ultimately both plans and insurance policies have their strengths and weaknesses. So, what is better really depends on your unique personal situation, and what you hope to gain from the product. 

When you purchase a funeral plan you basically take care of your funeral costs in advance. This is either done in one lump-sum settlement, or by setting up a payment plan. 

When you die, the plan providers deliver every funeral service that was included in the plan. So, essentially, you cover the costs in advance. 

However, life insurance is a more generic product. Again, you make monthly  deposits until you pass away or the contract ends. Then, when you pass away the plan provides a lump-sum payout. 

Therefore, a life insurance plan can be used as a kind of ‘funeral insurance’. When you pass away, the money can be used by your family as a way of paying for the funeral. Your family could also choose to spend the payout on other things, too. 

So, life insurance plans (normally over 50s plans)  are good for those that want a kind of ‘savings account’, so their family can pay for their funeral and other things such as mortgages and holidays. 

However, if you simply want to cover the cost of your funeral and are not concerned about other savings than a pre paid funeral plan might be best. 

This is because life insurance premiums can be high. You might pay more in policy premiums than funeral services cost! Or, you might not save enough to cover the cost of the funeral. 

Pros of prepaid funeral plans?

The pros of prepaid funeral plans are: 

  • You can secure the price and protect yourself from rising funeral costs
  • Your loved ones won’t have to find the money for your funeral 
  • If you have savings, your family won’t have to use their inheritance to pay for your funeral 
  • You can preplan the fine details of your funeral 
  • UK residents are guaranteed to be accepted to plans
  • There are a range of payment options to suit your needs
  • There are many different plans available so you can find one in line with your budget
  • Your money is safe with a FPA regulated provider

"When you purchase a funeral plan you basically take care of your funeral costs in advance. This is either done in one lump-sum settlement, or by setting up a payment plan. "

What are the disadvantages of prepaid funeral agreements?

As with any financial product there are disadvantages of a prepaid funeral to consider. These include :

  • Having to pay out a lump-sum or agree to a payment plan. This may reduce your disposable income.
  • The savings you accrue can ONLY be used for things related to the funeral, unlike with other types of insurance plans 
  • Your policy cannot be transferred if you move abroad 
  • Almost all providers won’t include your burial plot, should you want one
  • Most plans fully cover funeral director fees, but they may only partially cover other services 
  • They are not regulated by the Financial Conduct Authority, though protection is offered via the FPA
  • Funeral costs could fall in the future, so you may have overpaid with a plan
Prepaid Funeral Plans

Is it worth paying for your funeral in advance?

There are a few reasons why people buy a plan for their funeral cover. For example, a funeral payment plan might be worth it if:

  • You want to give your family financial peace of mind. 
  • You want to secure specific details of your funeral, such as the funeral provider.
  • You want to free your loved ones from the stressful experience of planning a funeral whilst grieving. 
  • You want to keep funeral costs down, by paying now rather than waiting for prices to rise with inflation. 
  • You do not want a traditional funeral so want to organise it in advance.

Whilst funeral plans help many people out, they might not be best for you. Be sure to consider the advantages and disadvantages in relation to your and your family’s current situation, before deciding if a funeral plan is right for you. 

What will happen if my funeral plan company goes bust?

As long as your funeral plan provider has membership with the Funeral Planning Authority (FPA) then your funeral payment and plans are safe. 

The FPA ensures that companies follow a strict code of practice and set of rules. One key rule is that funds must be kept in a safe trust. So, if providers registered with the FPA go bust then the FPA either transfers the funds to new plan providers, or refunds them to your estate. 

Pre Paid Funeral Plans

Should I take out a funeral plan? 

If you are considering taking out a plan you need to think about what you want, and what a funeral plan provider can offer. Some funeral plan providers will cover all costs, but with other funeral plan providers there might be hidden fees added on that your family are billed for when you die. 

For example, a plan provider might agree to pay a contribution to the costs of cremation services rather than paying for the full thing when the time comes.

Furthermore, it is rare to find prepaid providers that include burial services. Normally, burial plots have to be purchased separately. Alternatively, you could take out burial insurance. 

Should I pay for a funeral plan all at once or monthly?

Monthly payments work well for those that cannot afford to buy a funeral plan outright. You can spread the cost of a prepaid funeral out, so that you still have enough money for your mortgage, bills, and recreational activities. 

However, paying your prepaid funeral off monthly normally works out more expensive in the end. It might take policy-holders a number of years to pay it all off, too. So, if you have the money to spare it might be smarter to make a lump-sum payment. 

funeral plan provider

How detailed can prepaid funeral plans be?

There are general services included with all prepaid funeral plans. Normally, these are cremation and costs related to funeral directors. However, the cheapest prepaid funeral plans are direct cremation plans, at which there is normally no funeral director. 

If you want extras such as limousines or cars in addition to the hearse then you can add these on. Remember, these extras increase overall prepaid funeral costs, though. 

Depending on your prepaid plan provider, some extras may not be officially added. Instead, when you plan your funeral you can state specific preferences that you have. Then, funeral directors can execute your preferences. 

Can I change the details of my prepaid funeral once agreed? 

Normally there will not be admin fees for making changes. However, the cost of admin fees is something you should confirm by looking at your contract. We recommend asking the company about administration charges BEFORE you sign the agreement. 

Remember, if you decide you want to add things on after your initial funeral planning then you will need to pay more for this. If you are paying with monthly instalments your monthly payment price will rise to account for the new additions. 

If I make changes to my funeral wishes in my will can they override the official funeral plan?

Normally, if the will differs from the pre paid funeral plan then the official funeral plans are followed. This is because pre paid funeral plans are arranged to cover the cost of a specific set of services. 

The executors of pre paid funeral plans, in some cases, will choose to follow the will. However, this is at their discretion as they have to cover any additional funeral costs that crop up as a result. 

pros of prepaid funeral plans

Is my money secure in a funeral plan? 

Of course, if you are going to take out pre paid funeral plans you want to be sure you are protected. 

At the moment, most pre paid funeral plans are overseen by the Funeral Planning Authority (FPA). The FPA are a voluntary organisation, that set rules members must follow. One of these rules is that your money must be stored in an independent trust fund, to keep it safe. 

So, to ensure peace of mind, be sure you select a provider that is on the Funeral Planning Authority register. We recommend checking this before you start looking at the pros and cons of a company’s specific plans. 

What happens if customers die before making all their monthly payments for their funeral plans?

Unfortunately, if you die before completing all of your monthly payments most companies still require payment. 

Therefore, if your estate cannot cover the rest of the costs, the financial burden might fall onto your family. 

However, there are some companies that will foot the bill themselves, essentially giving you a sort of insurance policy. So, if you are worried about your family being billed we recommend finding providers that offer this ‘insurance policy’ with their plans. 

What type of funeral plan should I get?

There are 2 main sorts of funeral plans:

  1. pre need plans 
  2. final expense plans. 

Pre need insurance is bought from an individual funeral home. When you agree to the plan the home agree to cover the full cost of the services you want when the time comes. No extra costs fall to your loved ones.

Final expenses plans, however, are normally bought from insurance companies. A payout is made to beneficiaries who can then decide how to pay for different elements of the funeral. 

Therefore, if you really want to be protected against the rising cost of UK funerals we recommend pre need agreements.

buy a funeral plan

Can a pre paid funeral plan help me avoid inheritance tax?

One other advantage of a pre paid funeral plan that you should consider, in addition to the pros and cons above, is reducing inheritance tax. 

This is because funeral plans, including a monthly funeral plan, are a way of investing money before you die. 

Without a plan your family might need to use money they get from your estate to pay for the service. This could be problematic for a loved one for two reasons.

Firstly, what they get from your estate could be taxed, if it is over the threshold. Investing it with prepaid funeral plans reduces the likelihood of your estate exceeding the threshold when the time comes. 

Secondly, your loved one has to use some of the inheritance that perhaps they planned to spend in other ways. With a prepaid arrangement the costs are already covered, giving them financial peace of mind and freedom to spend their inheritance how they wish. 

Article author

Katy Davies

I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch.   I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.

Outside of work, I love the snow and am a keen snowboarder.  Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.

Email – katy@helpandadvice.co.uk

LinkedIn – Connect with me

Frequently Asked Questions

Are funeral plans a good idea?

Funeral plans are a great idea if you or your loved ones want to avoid inflation and secure the price of your funeral ASAP. You can plan all the details of your funeral within your budget, and then relax knowing it is all in place. 

Which is better: a funeral plan or life insurance policy?

Ultimately both plans and insurance policies have their strengths and weaknesses. So, what is better really depends on your unique personal situation, and what you hope to gain from the product. 

What will happen if my funeral plan company goes bust?

As long as your funeral plan provider has membership with the Funeral Planning Authority (FPA) then your funeral payment and plans are safe. 

How detailed can prepaid funeral plans be?

There are general services included with all prepaid funeral plans. Normally, these are cremation and costs related to funeral directors. However, the cheapest prepaid funeral plans are direct cremation plans, at which there is normally no funeral director. 

 

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