What are the pros and cons of prepaid funeral plans?

Many people in the UK have arranged and paid for their funeral in advance with a prepaid funeral plan.

Whilst there are many benefits to having a funeral plan in place, there are also some drawbacks to consider.

Here are the main prepaid funeral plans pros and cons:

PROs of prepaid funeral plans CONs of prepaid funeral plans
Peace of mind Ties up funds
Lock-in today's funeral prices Can only be used to pay for your funeral
Can be personalised to include final wishes Not all funeral costs are covered
Flexible payment options Most plans can't be taken overseas
Protect life insurance or savings May not be worth it if death is close
Some plans pay out even if you die before completing all your payments Not yet regulated by the Financial Conduct Authority (FCA)
Guaranteed acceptance (UK residents)  
Regulated by the Funeral Planning Authority (FPA)  


Below we look at each of these funeral plans pros and cons in greater detail...

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PRO: Peace of mind

One main pro of a prepaid funeral plan is peace of mind.

Planning a funeral is a difficult responsibility, particularly whilst coping with grief after losing a loved one.

Covering the cost is also an additional concern for many families. Finding the money to pay at short notice means delving into their own savings, using a credit card, or getting a loan[1].

A prepaid funeral plan is one way to ensure that everything is taken care of for your funeral ahead of time.

It can give you peace of mind that when the time comes, your loved ones won’t have to deal with the financial or practical challenges of arranging your funeral.

PRO: Lock-in today’s funeral prices

A prepaid funeral plan has the key benefit of locking-in today’s funeral prices- unlike other types of funeral insurance, such as an over 50s plan.

In the last 16 years, the average cost of a funeral has risen 128%, from £1,835 in 2004 to £4,184 in 2020.

It’s predicted that prices will continue to soar at a similar rate each year, so paying for your funeral today with a funeral plan could save your family money in the future.

They won’t have to pay a penny more for the services included in your plan, even if the cost of these has increased when the time comes.

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PRO: Can be personalised to include final wishes

A funeral plan allows you to make the important decisions for your funeral in advance as well as record your final wishes.

You can personalise the plan with special requests such as which hymns, music, and readings you’d like for the service.

You can even advise on the type of flowers you’d like or the charity you want donations to go to.

Making your wishes known for your funeral can help to alleviate any uncertainty over these when the time comes.

PRO: Protect life insurance or savings

By taking out a funeral plan, you can protect your life insurance pay out and any funds from your estate, such as savings, from increasing funeral costs.

This is because a funeral plan can freeze today’s funeral prices, whereas other investments aren’t protected from inflation.

Having a funeral plan in place can also help to free up the proceeds from a life insurance policy, or funds from your estate, so that loved ones benefit from a larger cash lump sum.

A funeral plan is also not considered part of your estate, which means it will be free from inheritance tax when the time comes.

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PRO: Flexible payment options

One pro of funeral plans is that you can choose the payment option that suits your budget.

You can pay the total cost in one go if you have the money available, or you can spread the cost in monthly instalments.

No matter how you choose to pay, your funeral costs will be locked-in at today’s prices.

Funeral plans arranged through Reassured have the following flexible payment options:

  • Fixed monthly payments over 6 or 12 months (fee-free)
    Spread the cost over 6 or 12 months without additional charge
  • Monthly instalments up to 25 years (plus fees)
    Spread the cost in low monthly payments up to 25 years. Instalments must be completed by your 80th birthday
  • One single payment
    Provides immediate cover and peace of mind

PRO: Some plans pay out even if you die before completing all your payments

If you choose to pay for your prepaid funeral plan by monthly instalments over a long payment term, then there’s a risk you could pass away before completing all your payments.

Fortunately, some funeral plan providers will still carry out your funeral as agreed in your plan if this were to happen - as long as the plan had been in place for at least 12 months and your payments were up to date.

Furthermore, if you pass away due to an accident within the first 12 months, the provider will still honour your plan.

Other funeral plan providers will require that your family or estate pay the remaining balance so that the funeral can go ahead as agreed.

Reassured can help you arrange a funeral plan that will guarantee to pay out even if you pass away before finishing all your payments, so get in touch today for your free quotes.

PRO: Guaranteed acceptance to UK residents

When you buy a funeral plan, there’s no need to answer any health or lifestyle questions and acceptance is guaranteed.

Anyone aged over 18 can arrange a funeral plan through Reassured and there’s no maximum age limit.

Although it’s important to note that if you choose to pay by monthly instalments then your payment term must be finished by your 80th
birthday.

A funeral plan is a good alternative if you're unable to secure affordable life insurance due to age or health factors.

Contact Reassured today to discuss your available options.

PRO: Regulated by the Funeral Planning Authority (FPA)

The FPA regulates 95% of funeral plans in the UK, with the primary aim to ensure that funeral plan customers receive the funeral they’ve paid for when it’s needed[2].

Under the FPA rules, registered funeral plan providers must keep funeral plan funds secure in a whole of life insurance policy or independent trust fund.

This ensures that if anything were to go wrong with your provider, the money to pay for your funeral would be separated and ring-fenced.

All funeral plans arranged through Reassured are FPA approved.

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CON: Ties up funds

The first con of a funeral plan is that it will tie up funds that could be spent elsewhere.

For example, you may rather have the money to enjoy whilst you’re living and/or to save for other big expenses in the future, such as home adaptations or care home fees.

Although, if you choose to buy a plan, you have the option to cancel if you change your mind or decide you can no longer afford the payments.

If you cancel within 30 days you’ll receive a full refund, but if you cancel after the 30 days then there will be a cancellation fee (amount depending on the provider).

CON: Can only be used to pay for your funeral

A prepaid funeral plan can only be used for the purpose of your funeral.

Unlike a life insurance policy, it won't provide your loved ones with a cash pay out.

When you pass away, the funds from your plan will be disbursed only to allow the funeral director to carry out the services for your funeral.

Although, if your loved ones wish, they can cancel the funeral plan and the funds paid into the plan (minus a cancellation fee) will be refunded.

Once you've paid for your funeral plan, it’ll remain in place until it’s required, regardless of how long it is before you pass away.

CON: Not all costs are covered

Funeral plans won't cover every element of a funeral, as some costs are outside of the control of the provider and can't be paid for in advance.

When buying a plan, it's important to understand exactly what's covered in the plan and what's not.

For example, not all funeral plans will cover essential third-party fees, particularly the cheaper funeral plans available.

Third-party fees, also known as disbursement fees, are costs paid to third parties for arrangements not provided by the funeral director. They include:

  • Cremation or burial fees
  • Minister fees
  • Doctor’s fees.

Some plans provide an allowance towards these costs, but there may be a shortfall for loved ones to pay if the allowance is insufficient when the time comes.

Other funeral plans will guarantee to cover cremation or burial fees, and sometimes minister or doctor’s fees.

There are some elements which are never included in a fixed plan, such as:

  • Flowers
  • Embalming
  • Funeral notices
  • Live music
  • Extra limousines
  • A memorial

Although, with some plans you may be able to pay an additional contribution towards some of these costs on top of the initial cost of your chosen plan.

CON: Most plans can’t be taken overseas

Most funeral plans taken out in the UK won't cover your funeral costs if you emigrate and pass away overseas.

If you're on holiday when you pass away then sometimes the funeral plan provider will fly your body home, at an additional cost, before carrying out the service as arranged.

Transportation of the person who's died may be covered by some travel insurance, so if you have a funeral plan in place, then it may be sensible to ensure you have this additional protection in place before going on holiday.

CON: May not be worth it if death is close

A prepaid funeral plan may not be worthwhile if you’re expected to pass away soon.

As mentioned, some plans will pay out even if you pass away before finishing all your payments. However, you would need to have paid at least 12 months of the plan to guarantee this benefit.

If you were to pass away within the first 12 months, then your family would need to pay the remaining balance, or the funds paid towards your plan will be refunded to your estate.

Other providers won’t honour your plan if you were to pass away at any point during an instalment plan with them, which means your loved ones would still need to fork out for your funeral.

If you’re expected to pass away in the near future, it may be worth considering if paying in advance makes more sense than paying for the funeral at the going rate when the time comes.

CON: Not yet regulated by the Financial Conduct Authority (FCA)

Currently, funeral plans aren’t regulated by the Financial Conduct Authority (FCA).

The FCA aim to provide a degree of protection for consumers of the financial services sector.

From July 2022, the funeral plan industry will come under the scrutiny of the FCA.

Until then, it’s important to ensure that the funeral plan you buy is regulated by the Funeral Planning Authority (FPA) to give you peace of mind that your plan is secure.

Compare FPA approved funeral plans by using our fee-free comparison service.

Pros of taking out a funeral plan early

The earlier you take out a prepaid funeral plan, the more money you could potentially save your loved ones in the future.

As mentioned, the cost of funeral services is increasing every year in the UK, and by 2025 the average cost of a basic funeral could be more than £5,000 (up 20% from 2020).

For this reason, a funeral plan could be a good idea to lock-in today's prices and protect your family from soaring costs.

With some providers, the minimum age to buy a prepaid plan is 18 and with others, they only offer funeral plans for over 50s.

Funeral plans arranged through Reassured will guarantee acceptance to UK residents aged over 18.

Are funeral plans worth it?

Funeral plans are worth it for many people, but not for everyone.

A funeral plan may be worthwhile for you and your family if:

  • You have the money available to cover the full cost of a plan or have the disposable income to pay in monthly payments
  • You have specific wishes for your funeral and want to take control of the arrangements
  • You want to protect your family from the difficult burden of planning your funeral
  • Your family wouldn’t have the money at short notice to pay for your funeral
  • You want to avoid rising funeral costs and lock-in today’s prices
  • You don’t have a life insurance policy or other financial provisions
  • You have a life insurance policy, such as an over 50s plan, but the pay out won't be enough to cover your key funeral expenses

Compare prepaid funeral plans

Protect your loved ones from the rising cost of funerals by taking out a prepaid funeral plan today.

Simply get in touch with our award-winning team to help you secure the right plan, at the best price.

Funeral plans arranged through us are FPA approved, giving you peace of mind that your money is safe until your funeral services are needed.

So, what are you waiting for?

Protect your loved ones from spiralling costs and explore your funeral plan options today.

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Sources:

[1] SunLife (2021), Cost of Dying Report, sunlife.co.uk/costofdying2021

[2] https://funeralplanningauthority.co.uk/

*£19.11 per month pricing includes a £75 discount only available to Co-operative members and is based on a 50-year-old purchasing a Co-operative Simple Funeral Plan at £3,020 over the maximum term available of 25 years (total amount repayable £5,733.40) as of 1st March 2021

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