Prepaid funeral plan vs funeral insurance – which one is better for me? What option is safer? And do I really need one? In 2020, the average cost of a funeral was £4,184 in the UK – and that didn’t include professional fees or send-off costs. Altogether, you’re looking at roughly £9,263 in funeral expenses, according to the latest SunLife “Cost of Dying” report. Over the last decade, these funeral expenses have more than doubled. To be precise, they have risen 62%.
In light of those numbers, it only makes sense to plan ahead financially. The last thing anyone wants to do is leave their loved ones with the burden of having to figure out how to pay for their funeral. There’s more to it, though: By making end of life part of life and planning for it just as we plan any other major life event, we gain peace of mind. Knowing that all our affairs are in order, allows us to focus on the present moment and live life to the fullest.
There are several different options for how you can cover your funeral expenses: According to the SunLife “Cost of Dying” report, a majority of people (51%) use money from savings and investments*. However, the report also states, that “1 in 7 families who had to organise a funeral said it caused them notable financial difficulty.” Outstanding amounts were settled with credit cards or by borrowing money from relatives or friends. 35% of people – or 1.3 million Brits – have opted for a prepaid funeral plan. And 17% are holders of a so-called funeral insurance, or “over 50s life insurance”. This blog post looks at the latter two options. We will explain what a prepaid funeral plan is, how funeral insurance works, and the differences between the two as well as weigh the pros and cons of both options.
What are Prepaid Funeral Plans?
Simply put: A funeral plan allows you to pay for your funeral in advance. It freezes the funeral costs at today’s value – meaning, no matter how much the prices go up and no matter the inflation rate, the services you paid for will always be covered.
This option also means that you will make the most fundamental decisions about your funeral – would you like a cremation or a burial? – when you purchase the funeral plan. It further gives you the opportunity to pre-plan your funeral in greater detail and leave a record of your wishes for your final send-off with your funeral plan provider. It will relieve your family and loved ones from having to make these decisions during an emotionally difficult time and give them the peace of mind that you get the farewell you wanted.
Depending on the provider and what funeral plan you choose, different key features will be included. Usually, a funeral plan covers two essential funeral expenses: The services of a funeral director and the cremation or burial fees. Some plans include an allowance for third party costs, such as fees for the doctor issuing your death certificate, a minister, celebrants or the cemetery. You can pay for a funeral plan in full or opt for a payment plan from 12 to 300 months. The latter might involve paying handling charges and interests.
When the time comes, all your family has to do is call the funeral plan provider. They will notify the funeral director who will take it from there.
What is Funeral Insurance?
A so-called funeral insurance is actually an “over 50s life insurance”. You take it out for the insurer to pay your family a previously agreed upon lump-sum when you die. The lump sum can be used to contribute towards your funeral. However, the money might not even cover the essential funeral expenses and it is not purpose-bound either. That means that your family has the freedom to use the money from your funeral insurance to pay off debts or go on a holiday instead.
If you haven’t talked to your loved ones about what’s important to you in regards to your final send-off, they’ll be left to make these decisions when the time comes as well as having to organise and arrange the funeral.
If you opt for a funeral insurance, you pay a monthly premium towards the agreed-upon lump sum from the time you take out your funeral insurance until your death. Some funeral insurance providers cap the age for monthly premiums at 90 years. Just like with a prepaid funeral plan, you normally won’t be asked about your medical history or pre-existing conditions when buying a funeral insurance.
What is the difference between the two?
Over 50s life insurance can be an affordable way to leave a guaranteed cash sum to your family or loved ones when you die. This can be a cash gift, used towards your funeral costs, or used to help with other expenses. However, it’s important to remember that it is up to your family to decide what to do with the money. If you want to make sure your funeral is paid for in advance, though, with nothing for your family to pay, then a funeral plan is the only way to do that. When you die, it pays for the services that were included in your plan – regardless of how much the funeral prices have risen since when you initially bought it. Most prepaid funeral plans take inflation into account for any third-party allowances and the payment options are more flexible than those of a funeral insurance. Once you have paid off your prepaid funeral plan, neither you nor your family will be asked to pay extra charges. If you have chosen a good prepaid funeral plan provider, your loved ones can expect bereavement support when the time comes. You and your family will also have the serenity that comes from knowing that you’ll get the funeral you wanted.
To help you decide what kind of plan is right for you, this table compares the main differences between over 50s life insurance and a funeral plan:
|Things to consider||Prepaid funeral plan||Over 50’s policy|
|Does it protect against rising funeral costs?||✔️||X|
|Does it help loved ones with funeral arrangements at the time?||✔️||X|
|Does it include the services of a trusted and professional funeral director?||✔️||X|
|Does it offer the option to pay in monthly instalments?||✔️||✔️|
Benefits of a funeral plan vs insurance
Both, prepaid funeral plans, as well as funeral insurances, come with a set of advantages and disadvantages. Depending on where you are at in life, one might make more sense for you than the other. In this section, we will give you a general overview of the most common pros and cons of prepaid funeral plans and funeral insurances. However, it will be up to you to research different providers, carefully read the terms and conditions of the product you are considering and make sure to ask questions if anything is unclear.
So, how does a prepaid funeral plan compare to an over 50s insurance?
Prepaid funeral plans – The PROs:
- A prepaid funeral plan freezes the costs for your final farewell at today’s prices
- There’s no financial burden for loved ones in regards to your funeral
- No health or medical checks
- Flexible: A prepaid funeral plan can be paid in a lump sum or monthly payments
- Payments stop when your plan is fully paid
- Your funeral wishes and personal requests are recorded and will be taken care of by a funeral director when the time comes
- One call by your next of kin and all your funeral arrangements that are included in your plan will be taken care of
- You can choose from a range of funeral plan options to suit your needs and budget
- If you take out a plan with Safe Hands and opt for one with the Safe Hands Guarantee, we can cover the full cost of your plan if you pass away before it is fully paid
- Peace of mind from knowing your affairs are in order and you will get the send-off you wished for without your loved ones having to make any decisions when they’re grieving
Prepaid funeral plans – The CONs:
- Funds can only be used for your funeral, no money will be left to your beneficiaries
- The industry is not regulated, although reputable providers are registered with the Funeral Planning Authority
Funeral Insurance – The PROs:
- Choose a lump sum amount you would like to leave to your loved ones
- Depending on the amount of cover you select, monthly premiums may be cheaper than a funeral plan
- Money can be spent however your beneficiaries wish
- Regulated by the Financial Conduct Authority
Funeral Insurance – The CONs:
- Money you have paid in will usually not be refunded if the policy is cancelled – a single missed premium can lead to the cancellation of your funeral insurance
- You may pay in more than you get out as you’re not paying off a fixed sum, but are paying into an insurance until you die; some insurers cap premiums at 90 years
- Non-transferrable: If a loved one passes away before you do, there’s no way of transferring and using your insurance to get the lump sum and pay for their funeral; this is possible with some prepaid funeral plans, though
- Not guaranteed to pay out immediately after death, especially if there are complications; there’s also a two year “moratorium” period during which only accidental death is covered
- Premium prices depend heavily on your age, lifestyle and health. Health/medical checks may be necessary
- Funeral expenses may exceed the lump sum that is being paid out upon your death. Funeral costs are expected to rise in future years and an over 50s insurance won’t allow you to freeze the price at today’s costs as a prepaid funeral plan does
- The lump sum benefit will not usually be protected from inflation, so inflation is likely to reduce the value of the benefit in the future
- You need to record your wishes for your final send-off independently and your family will be left to find and hire a funeral director and arrange your funeral with them
Safe Hands Prepaid Funeral Plans
At Safe Hands, we see it as our mission to be the best funeral plan provider in the UK. Quality, affordability, flexibility and security are four of our core values. We take pride in the professional, compassionate and caring approach of our customer service. Not only will we go above and beyond to help and provide practical advice when it comes to sensitively planning for the end of your life, but we also have a bereavement team that will support your family when the time comes. Safe Hands Funeral Plans is regulated by the Funeral Planning Authority (FPA) whose firm guidelines we follow to provide a funeral plan you can trust.
As opposed to funeral insurances, Safe Hands Funeral Plans offers very flexible payment plans that range from 12 to 300 months. You could, of course, also pay in full or decide to make one-off extra payments within your chosen payment plan to reduce the number of instalments. Furthermore, we now offer what we call the Safe Hands Guarantee: If you have chosen to pay off your funeral plan over 2 to 25 years and die after 12 months of having paid your monthly instalments we will deliver all the services provided in your plan, with nothing more for your family to pay. And if you ever miss a payment, you have 90 days to reinstate your prepaid funeral plan by paying the missing instalment.
Safe Hands offers 5 different funeral plans that you can choose from (click here to compare our prepaid funeral plans) – 3 of which include a disbursement allowance for 3rd party costs. When you organise your send-off, you might want to add a few things that aren’t in our standard plans. We’ll do everything we can to help you include very personal choices in your Safe Hands plan. If you are interested in discussing what additional options can be added or if you have any questions at all, please call us on 0800 917 7099, send an email to [email protected] or contact us here. We are committed to making sure you’re happy with your choice for end of life planning – regardless of which provider you choose.