What is a prepaid funeral plan?November 1, 2016
You might find it difficult or a touch grim to think about planning for your funeral – let alone paying for it in advance. But with death as one of the very few certainties in life, there is every reason to plan for just how you want to be remembered. Just as importantly, perhaps, you and your loved ones are likely to spend considerably less money when making the arrangements you have chosen.
Making and paying for those arrangements in advance is the essence of prepaid funeral plans, so let’s see how one works – you might find the economic arguments compelling.
The cost of a funeral
According to information published by insurers Sun Life on the 14th of September 2016, the average cost of dying in the UK at the moment is £8,802 – this includes the cost of the funeral itself, your send-off (flowers, gravestone, venue for a wake or reception) and the administration of probate.
This increase represents more than 16 times the rate of inflation, explains Sun Life, with the cost of the basic funeral alone having risen by 5% since the last time the company conducted a survey of costs in 2015.
The way to beating at least part of those costs is to freeze what you need to pay for the funeral itself. That is the idea behind a prepaid funeral plan.
You make the arrangements you want to be respected, but pay for them in advance, at today’s prices, rather than those which are likely to have escalated considerably when the time eventually comes. The sooner you make the arrangements for a prepaid funeral plan, in other words, the greater the savings are likely to be.
Funeral directors’ plans
You might be wondering what is so novel about prepaid funeral plans – after all many funeral directors offer the chance to pay for their services in advance and, so, help you stave off their increased prices in future.
How safe is that money you might have paid over, though? What if the firm goes out of business before your time comes? There is a risk that you might seriously lose out.
Prepaid funeral plans
With a prepaid funeral plan from a national provider, however, you may be certain of your money being safe until it is needed to pay your chosen funeral director – especially when that national provider is also a registered member of the Funeral Planning Authority (the industry’s self-regulator).
In that case, whatever you pay is kept safely and securely, either in a trust created specifically for that purpose, or applied to the purchase of a whole of life insurance policy, which pays out the guaranteed insured cash benefit to your designated beneficiaries whenever you die.
If your chosen funeral director does go out of business during the interim, your funeral plan provider is typically able to divert the relevant funds to another firm in your area.
In this way, a prepaid funeral plan may give you the reassurance and confidence of knowing whatever amount you have paid remains protected, yet serves to help ward off the financially painful effects of inflation.