The Pros & Cons Of A Funeral Plan

Many people arrange and pay for their funeral in advance either with a prepaid funeral plan or a seniors’ life insurance policy.

With the average cost of a burial funeral in the US now standing at $7,848 and at £4,927 in the UK, it is easy to see why so many people in later life are exploring ways of covering these rising costs to avoid burdening loved ones. Get detailed information about the best way to sort out things when there are hundreds of visitors to an event, on this website:

Even a cremation funeral, which is generally considered a more cost-effective option costs on average $6,970 and £3,765 respectively. Remember, these figures do not incorporate all the associated costs of a funeral service, such as the wake venue hire, transport, flowers and food.

Whilst there are many benefits to having a funeral plan in place, there are also some key drawbacks to consider too.

The main prepaid funeral plans pros and cons are as follows:

Pros of a funeral planCons of a funeral plan
Peace of mindTies up funds
Lock-in today’s funeral rateCan only be used to pay for your funeral
Arrange your funeral according to your specific wishesNot all funeral costs are covered
Flexible payment optionsMost plans can’t be taken overseas
Doesn’t form part of your estate (avoid/minimise 40% IHT in UK)May not be worth it if death is close
Guaranteed acceptance for UK residents (age restrictions may apply)
Regulated by the Financial Conduct Authority (FCA)

Below we explore the 3 key funeral plans pros and cons in greater detail… 

PRO 1: Peace of mind

One main advantage of a prepaid funeral plan is the reassuring peace of mind in can help provide.

Planning a funeral is a difficult responsibility, particularly whilst dealing with the grief of losing a loved one.

Covering the significant costs involved is also an additional concern for many families. Finding the necessary funds at short notice may mean delving into your own savings, using a credit card, or even getting a loan.

A funeral plan is one way to ensure that everything is taken care of for your funeral ahead of time, giving you peace of mind that when the time comes, your loved ones will not have to deal with the financial and practical challenges of arranging your funeral.

PRO 2: Lock-in today’s funeral rate

Over the past 17 years, the average cost of a basic UK funeral has risen 121%, from £1,835 in 2004 to £4,056 in 2021, whilst the US has seen a similar trend.

With a prepaid funeral plan, one of the key benefits is that it can protect against inflation and lock-in today’s rate.

The amount you pay for your plan remains fixed, even if the cost of the services included increase in the future.

This could potentially save your loved one’s money when the time comes, as they will not have to pay the increased going rate.

PRO 3: Arrange your funeral according to your wishes

A funeral plan allows you to make the important decisions regarding your funeral in advance, as well as record your final wishes.

You can personalise the plan with special requests such as which hymns, music, and readings you would like for the service.

You can even advise on the type of flowers you would like or the charity you want donations to go to.

Making your wishes known for your funeral can help alleviate any uncertainty over these when the time comes.

CON 1: Can only be used to pay for a funeral

As the name suggests, a funeral plan can only be used for the purpose of your covering the costs of a funeral.

After you pass away, the funds from your plan will be paid directly to your nominated funeral director to cover the cost of your chosen funeral services. In short, your loved ones will not be able to exchange the plan for cash.

In contrast, a life insurance policy will pay out a cash lump sum giving your loved one’s greater flexibility. The proceeds could be used as your beneficiaries wish; to leave an inheritance, clear a mortgage/personal debt, meet rising funeral costs – or subject to the cover amount, all the above.

Thus, whilst the benefits of a life insurance pay out may seem more appealing, it is important to understand that unlike a funeral plan the value of a pay out is subject to inflation.

For example, if you take out $35,000 of life cover in 2022, but only pass away in 2044, it is highly likely that funeral costs will have risen significantly, diminishing its real terms value.

CON 2: Ties up funds

Another disadvantage with a funeral plan is that it will tie up funds that could be used elsewhere.

For example, you may rather have the money to enjoy whilst you are still alive and/or to save for other big expenses, such as home adaptations or care home fees.

Although, if you choose to buy a plan, you have the option to cancel if you change your mind or if you find you can no longer afford the payments.

If you cancel within 30 days you’ll receive a full refund, but if you cancel after the 30 days then there will be a cancellation fee (amount depending on the provider).

CON 3: Not all costs are always covered

Funeral plans will not cover every element of a funeral, as some costs are outside of the control of the provider and cannot be paid for in advance.

When buying a plan, it is important to understand exactly what’s covered in the plan and what is not.

For example, not all funeral plans will cover essential third-party fees, particularly the cheaper funeral plans available.

Third-party fees, also known as disbursement fees, are costs paid to third parties for arrangements not provided by the funeral director. They include:

  • Cremation or burial fees
  • Minister fees
  • Doctor’s fees.

Some plans provide an allowance towards these costs, but there may be a shortfall for loved ones to pay if the allowance is insufficient when the time comes.

Other funeral plans will guarantee to cover a cremation or burial, and sometimes minister or doctor’s fees.

There are some elements which are never included in a fixed plan, such as:

  • Flowers
  • Embalming
  • Funeral notices
  • Live music
  • Extra limousines
  • A memorial

Although, with some plans you may be able to pay an additional contribution towards some of these costs on top of the initial cost of your chosen plan.

In summary

If the previous 20 years are anything to go by, it is a pretty safe bet that funeral costs will continue to rise at a pace around the world.

This makes it even more important to consider what we may leave behind and how best to provision for our loved ones after we are gone.

If you only want to cover the cost of your funeral, then a funeral plan is a good cost-effective option. However, if you also want to cover other areas then a life insurance policy provides greater flexibility.

In fact, budget permitting, it does not necessarily have to be a choice of one or the other – as unlike other insurance products it is possible to secure more than one policy.

Regardless of which option you choose, it is vital to compare multiple quotes as costs can vary wildly between providers. For our growing UK audience, award-winning broker Reassured can compare multiple quotes completely free of charge. For our US audience Forbes could be a great option.

Learn more about different types of insurance plans that you can consider for your elders, on this website:

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