Planning ahead is advisable in all walks of life, particularly when it comes to things that incur large expenses. None of us want to leave our families with any unexpected bills when we pass away, so that’s why many choose to take out funeral plans, or funeral insurance, in preparation.
When planning ahead for your funeral, there are plenty of options available that include things like life insurance, prepaid funeral plans and funeral cover. But which is right for you? In this guide, we’ll look at the differences between funeral plans and funeral insurance and what that means for you. We’ll explain exactly what they do and don’t cover so you can make an informed choice.
What are funeral plans?
Unlike other types of funeral cover, prepaid funeral plans don’t pay out in a lump sum. Instead, the full cost of the funeral is covered by being paid for in advance by the planholder. Usually, the person taking the plan out will let their provider know exactly what they’d like for their funeral and a suitable plan will be put together. A funeral plan typically includes things like the funeral service, a coffin, an urn if being cremated and transportation. Remember though, there are different types of prepaid funeral plans available to suit different budgets and requirements, so be sure to check what is and isn’t included before making your decision.
With a funeral plan, once the plan has been paid off there are no further payments required and all your family needs to do is contact the plan provider when the time comes.
What is funeral insurance?
Funeral insurance is no different to other insurance products you might be familiar with, like car and home insurance, and is often included alongside many life insurance policies. With funeral insurance, you pay a monthly premium towards a lump sum that is then paid to your family upon your death. The total amount they receive will vary depending on your insurance plan and can be used for expenses if needed, not just your funeral.
Although funeral insurance is designed primarily to take care of funeral costs, it can also be used to settle bills or debts if needed. Unless outlined in the terms and conditions, a death doesn’t need to be unexpected to qualify.
What are the key differences between funeral plans and funeral insurance?
The key difference between the two is that funeral plans are designed to specifically pay for a funeral and are often taken out with the funeral provider themselves. This means that instead of your family receiving a lump sum payment to use towards the funeral, the funeral has already been paid for in advance.
With funeral insurance as part of a life insurance policy, your family will receive a lump sum upon your passing. Although this is intended to cover funeral expenses, there are no stipulations that the money has to be used towards the funeral.
Funeral plans pros and cons
Funeral plans advantages
The main advantage of a funeral plan is the peace of mind that everything is taken care of. As you’re able to plan and arrange your funeral in advance with your funeral provider which can help to relieve some of the stress your family will be under at what is always a difficult time. With a funeral plan, your family don’t need to worry about making decisions and arrangements relating to the funeral as it’s all already been taken care of.
You’ll also be protected against rising funeral costs. As the total cost of funerals has been steadily rising in the UK for several years,a funeral plan gives you peace of mind that you’ll only ever pay the price that was agreed at the time of taking the plan out.
The cost of a funeral plan is always a fixed sum. This means that they are often paid off before someone dies and provides peace of mind for all.
Funeral plans disadvantages
The main disadvantage of choosing a funeral plan over funeral insurance is that it only covers the funeral and there will be no additional lump sum paid to the family. While this is suitable for anyone who only wants to pay for their funeral, if looking to leave a financial sum behind for loved ones then life insurance may be a better choice.
Funeral insurance pros and cons
Funeral insurance advantages
Funeral insurance pays out a lump sum that can be used to pay for funeral costs as well as settle any other debts or estate management issues. This cash lump sum can also be used as a type of inheritance, although be cautious as there may be tax implications when doing so.
Funeral insurance disadvantages
The major disadvantages of funeral insurance lie when it comes to the funeral arrangements. If you chose to take out funeral insurance over a funeral plan, your family will need to arrange everything following your passing. This can add unnecessary stress during a difficult period.
Another disadvantage is that life insurance policies can be somewhat of a gamble. They don’t grow the more someone pays into them so if they live longer than expected, or the policy is taken out earlier in life, they can end up putting much more in than is paid out.
Prepaid funeral plans vs life insurance: choosing the right option
Whichever you decide, paying for a funeral in advance is always a sensible choice. The debate between which to choose comes down to what you need a plan to cover. If you’re just looking to pay for a funeral and ensure peace of mind for your family, a prepaid funeral plan is probably the better choice as it allows all of the details to be ironed out and put in place. If you or the person you’re buying for is still relatively young you can also avoid overpaying by choosing a funeral plan.
However, if you’re looking to leave a cash lump sum for your loved ones then life insurance may suit you better.
Check our prepaid cremation plans to start planning ahead or contact us for further information.
Distinct Cremations is a trading name of Distinct Cremations Limited I Registered in England, No. 13366310 and Distinct Funeral Plans Limited (Prepaid Funeral plan provider) I Registered in England, No. 13366327 | Registered Office Westerleigh Crematorium, Westerleigh Road, Bristol BS37 8QP | Part of the Westerleigh Group |
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