Funeral plan FAQs

By Elizabeth Summers / August 6, 2018 / No comments
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Are funeral plans and funeral insurance one and the same thing?

Indeed, they are not. There are a number of differences that distinguish funeral insurance policies and funeral plans.

Prepaid funeral plans offer considerably more security and peace of mind than what is generally described as funeral insurance – and, for that reason, the former may prove a greater initial cost.

What are the limitations of funeral insurance?

Funeral insurance is the name often given to over 50 insurance policies.

You can buy one only if you are over 50. In return for a monthly premium which typically must be paid every month until your death, you are guaranteed an agreed cash sum benefit when you die. Since one of the most common uses of that death benefit is expenditure on funeral expenses, the insurance is known as funeral insurance.

It is a typically affordable way of making at least some provision for future funeral expenses, but:

  • you must be over 50 years of age;
  • because you are paying premiums very month of your life (or until you reach the age of 90 in some instances), you might end up paying in more than the value of the eventual death settlement;
  • if you stop paying the premiums that fall due, the policy lapses and there is no cash-in value;
  • although the amount of cash lump sum settlement is assured from the outset, its value may be eroded by the effects of inflation, with the result that it covers less of the eventual funeral expenses than initially intended;

How do funeral plans differ?

Funeral plans are a quite different kettle of fish. You are not buying an insurance policy, but, with a prepaid funeral plan, paying in advance for precisely the funeral arrangements you want to be made – with the sum you paid guaranteed to cover the costs of funeral director’s services agreed.

Not only do you beat the effects of inflation – a rate much higher than average as far as funeral expenses are concerned – but you can rely on the amount you have prepaid to cover the costs of the funeral expenses (the funeral director’s fees) for the kind of service you want.

How can prices be guaranteed in advance?

The costs of funeral services guaranteed by funeral plans are backed by contractual agreements between the funeral plan provider and the funeral director you have chosen.

Is the money you have prepaid safe and secure?

All members of the industry’s self-regulating body, the Funeral Planning Authority (FPA) undertakes to place the money you pay into an independent trust fund (guaranteeing its security) or to purchase a life insurance policy in your name to the value of the funeral plan you bought.

FPA members also promise their best efforts to find an alternative funeral director in your area if your initial choice goes out of business in the interim.

What are the payment terms?

A range of funeral plans is available and each one has its own terms of payment.

Of course, you may generally choose to pay the whole amount upfront when you arrange your plan. But 12 monthly instalments may be a more convenient and sometimes no more expensive way to pay and some providers offer instalment plans stretching for 5, 10 or even 25 years.

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