What are funeral plans?

When you think ahead to the way you want events to turn out, you also need to give thought to the cost of making sure your wishes are carried out.

Funeral plans may be summed up this way in a nutshell – they let you plan all the arrangements you want to made for your final farewell to family and loved ones, but they also take into account the fact that those arrangements need to be paid for when the time comes.

There are two broad ways in which you might approach this objective – each of them are relatively simple and straight forward, generally available to you through an application online.

Prepaid funeral plans

Probably the most clear-cut way of ensuring that your last wishes are respected and that there is sufficient money to cover the costs, is through the purchase of a prepaid funeral plan.

Just as the term suggests, this gives you the ability to plan your funeral and to pay for those arrangements in advance. Naturally, the particular nature and extent of any arrangements determines the cost, but you may pay for them in advance at today’s prices, rather than those which apply perhaps many years from now.

Prepayment is an important consideration since it offers an opportunity to beat the inevitable effects of inflation in the cost of funerals – which, according to a Cost of Dying Report compiled by insurers Sun Life in 2016, have doubled in the past ten years or so (in other words, far outstripping the general rise in inflation).

Provided that the prepaid funeral plan provider you choose is registered by the Funeral Planning Authority (FPA), you may rest assured that the money you paid over in advance remains sufficient to cover the costs of the funeral service you chose. This is done by the provider keeping the funds in a separate, independent trust fund or by the purchase of a whole of life insurance policy in your name.

Over 50s life insurance

Of course, not everyone is able to pay all of those funeral expenses in advance.

But an alternative exists by saving a little each month through the purchase of a special form of life insurance policy for the over 50s. In return for the payment of a monthly premium, this whole of life insurance policy pays out a guaranteed cash benefit upon your death. You may express your wish that the settlement sum is used by the beneficiaries of the policy for the payment of the whole or a part of the funeral service you want.

Acceptance is guaranteed and there is no medical required for over 50s life insurance.

Since it is an insurance policy, providers are regulated by the Financial Conduct Authority (FCA) rather than the Funeral Planning Authority (FPA).

You might want to keep in mind that the sum for which you seek a guaranteed settlement in the end might not be sufficient to cover the whole cost of the funeral services you require – because of the effects of inflation on those costs.

It is also important to remember that premiums are payable for the rest of your life (or until you reach the age of 90 or so). Depending on how long you live, therefore, you may have paid more in premiums than the policy eventually pays out.