Over the past few years, more and more people have been looking for ways to pay for their funeral in advance. This has led to a big increase in the number and types of funeral plans available.
In this in-depth guide, we’ll look at what a funeral plan is, how it works and what you should consider if you’re thinking about taking one out.
How do funeral plans work?
With a funeral plan, you can pay in advance for the cost of your funeral or cremation. This means your family are not left to worry about the cost. A pre-paid cremation plan can cover your own funeral or someone else’s.
Exactly what is covered will vary depending on the funeral plan you choose. You should consider what you would like to be included in your funeral service. That way, you can ensure your funeral plan is tailored to your needs and your wishes are outlined. Making your preferences clear to your family will make arrangements easier for your family when you pass. You are free to be as detailed as you want with your special requests.
1.5m
people protected to date via a funeral plan ^1^
Anyone over 18 in the UK can take out a funeral plan. There are no medical questions to answer or checks on your health. You can simply choose your plan, select your payment preferences, and relax knowing things are covered when you pass away.
How much are funeral plans
As well a making your wishes for your funeral service clear to your family, a funeral plan will also help with cashflow. Pre-paid funeral plans are not subject to inheritance tax. The payout will be used to pay for the cremation or burial costs, as well as the funeral director fees. These will cover the expenses for arranging the funeral service, such as transport, the coffin, and floral arrangements.
If you decide to go for a direct cremation plan, the pre-paid plan may not include costs for a service, as the cremation will be unattended. These are a more affordable option. They give your family the option to organise a memorial service in a way and at a time that suits them.
£4,184
The average cost of a traditional funeral in the UK^2^
The cost of your plan will vary depending on the type of service you want, the level of cover and the funeral provider. It’s always a good idea to shop around and compare funeral plans to make sure you are choosing the right one to suit you.
Most plans offer the option of paying in one lump sum or in monthly instalments. They are guaranteed to cover the costs listed in the plan. Another benefit of a funeral plan is that they protect you against future increases in funeral costs. This can provide peace of mind for both you and your loved ones.
128%
The increase in funeral costs since 2004^2^
How do I know a funeral plan will cover the costs?
Whatever type of funeral works best for you, the first thing you need to do is make sure the plan covers all the services you require.
For a simple direct cremation, the services guaranteed to be covered should include:
- Collection and care of the deceased
- Help with the legal paperwork
- The cremation fees
- A simple coffin
- Notification the cremation has taken place
- An urn
- Scattering of ashes
If you are considering a traditional funeral, extra services to cover may include:
- Funeral directors’ fees
- Hearse and pallbearers
- Limousines
- Celebrant’s fees
- Organist or musician
- A choice of coffin
- Burial fees
- Flowers
The cost of your plan, whether in a single lump sum or in monthly payments, will reflect the level and number of services you want. You should check exactly what is included in your plan before taking one out. If you are unsure, don’t be afraid to ask for further details. With Distinct Cremations, you can also upgrade your plan after you have taken it out if you wish.
If you want to add some extra details (such as a particular musical performance), you may be able to specify these in your plan. However, it’s best to let your family know your wishes. By doing so, they can be prepared if there is any extra to pay.
How secure are funeral plans
You should check that your funeral plan funds are secure. Your payments should be managed independently. The terms of the plan should also comply with the Financial Services & Markets Act 2000 (Regulated Activities) Order 2001 Chapter 14.
Funeral plans are strictly regulated. The funds for the funeral are protected either in a Trust Fund or in a Whole of Life policy. Regardless of how they are set aside, the rules state that the funeral plan provider must keep these funds separately from their own.
What's the difference between life insurance and a funeral plan?
Life insurance and funeral plans are very different to each other. Each product offers its own benefits, so you’ll need to understand the distinctions to know which is right for you.
With a pre-paid funeral plan, your money is invested in a secure Trust Fund or Whole Life Policy, depending on the provider. It should guarantee to cover the funeral services listed in the plan.
Life insurance provides a cash sum if you pass away during the policy term. There are different types of policies to suit different needs.
A basic life insurance policy can be used by your loved ones in a way that suits them. They may use it towards your funeral costs, to clear debts and pay off the mortgage or spend on other things. How high your premiums are, and the size of sum paid out will depend on factors like the type of policy and your health. Some people take out life insurance policies to pay bills and outstanding debts, plus a plan to cover their funeral.
Over 50s plans are another form of life policy. These are specifically designed to cover funeral expenses. A payout is guaranteed after you pass and the cost of premiums and payout do not depend on your health.
What happens when I take out a funeral plan?
You may have shopped around and found the right plan to suit you. But what happens once you’ve contacted the provider and signed up?
You’ll be sent a Planholder Pack within a few days of completing your plan. This will contain everything you need to know about your plan. Contents will vary depending on the provider, but the Distinct Cremations pack includes useful items to share with your family including:
- Summary of the plan’s benefits with a record of your payment(s)
- Record of wishes outlining your wishes and any special requests
- Plan certificate with your unique plan number
It’s worth bearing in mind that the Will is unlikely to have been read by the time the plan comes into effect. That’s why it’s important to let the family know of the plan’s existence, what it contains and where to find it.
After taking out your plan, there’s a cooling off period of 30 days. If you change your mind, you can cancel during this period without paying cancellation fees and get a full refund. Remember if you wish to change your mind after 30 days, you can but there may be a small admin fee depending on provider.
What happens when the funeral plan holder dies?
Once a doctor has issued the death certificate, the deceased can be collected from the hospital, care home or home by the chosen funeral directors or direct cremation provider.
If there’s a funeral plan in place, the family should call the phone number that’s given on the plan. If they are unable to find the documentation for any reason, they can complete the Trace Your Plan online form with the Funeral Planning Authority. This will inform them if there is a plan with any of their registered providers.
But even if they only have the phone number of the provider, that should be enough to set everything into motion according to the deceased’s wishes.
Depending on what type of funeral has been allowed for, the funeral directors or direct cremation provider will help take care of the legal paperwork.
With a traditional funeral, there may still be arrangements to make. These may include organising a religious official, a florist, dress hire company, local hotel or pub for the wake following the service.
With direct cremation, there are no arrangements to make. Any celebration can be made at a time, place and in a style that works well for everyone.
Sources
- Funeral Planning Authority (2021)
- SunLife (2021)
