We Brits tend not to like talking about death. It’s almost a taboo subject for many families, but ‘passing on’ happens to everyone. Unfortunately, many of us fail to make plans for our funerals.
WHAT IS A FUNERAL PLAN?
Funerals can be very expensive, costing several thousand pounds, but without sufficient financial planning they can come as a severe financial burden to the family of the deceased – at a particularly distressing time.
A pre-paid funeral plan can avoid this problem.
You can set up a funeral plan either for your own funeral or for someone else’s; however, bear in mind that the funeral must take place in the UK.
HOW DO THEY WORK?
You can pay either a lump sum to the provider or funeral director or make arrangements to pay by instalments.
Your money is either invested into a trust fund with trustees or into an insurance policy, which is then used to pay for the funeral. Whichever methods you choose, you can rest assured that there will be sufficient funds to cover the cost of your funeral.
However, funeral plans usually don’t cover all the extra costs of a funeral that are needed, so you need to check carefully with your provider as to exactly what costs are covered.
Bear in mind that the cost of a burial plot is usually not included, nor are the costs of flowers and catering.
Also, some providers only make a contribution towards cremation or burial costs, leaving your family to cover the rest of the bill.
HOW SAFE IS MY MONEY?
At the moment, The Financial Conduct Authority (FCA) doesn’t regulate funeral plans; however, this is about to change so that providers have to be more open about exactly what they cover.
This is part of the FCA’s principle of ‘treating customers fairly’, and is long overdue.
But even at the moment, all funds paid by the customer are protected by law so will be available when needed.
A good way to ensure peace of mind is to pay for the cost of your funeral with your credit card.
When you pay by credit card, you are covered by Section 75 of the Consumer Credit Act.
This means you get extra protection if your chosen funeral director closes down or goes out of business.
BEFORE YOU TAKE OUT A FUNERAL PLAN, YOU NEED TO ASK THE FOLLOWING QUESTIONS:
Are there any cancellation charges if I decide to change my mind?
Exactly what costs are included in the plan?
Does the plan allow me to choose my own funeral director?
What if my chosen funeral director goes bankrupt?
What happens if I die abroad or away from home?
Can I change or upgrade the funeral plan at a later date?
If I pay by instalments, what would happen if there are outstanding instalments upon my death?
What freedom do I have to change the details of my funeral plan?
Another way to cover the costs of your funeral in advance is to take out funeral insurance – often known as an ‘over 50s plan’.
This policy pays out a fixed sum towards the cost of the funeral when you die.
One of the many drawbacks is that you have to keep paying the monthly premiums until you die, which means that you could be paying more than the cost of a funeral if you have a long life.
Also, if you miss just one monthly payment, the policy will not pay out.
It might be better to pay into a bond or savings account to cover the cost of your funeral instead of taking out funeral insurance.
Whatever you decide to do, a funeral plan that will cover all the costs of your funeral will relieve the burden on your family of having to pay out thousands of pounds at a very distressing time.