Pre-payment and Funeral Insurance

Funerals can cost thousands of pounds to arrange and may be difficult for loved ones to fund. Make sure that your loved ones can afford to arrange your funeral by taking out funeral insurance or arranging a funeral pre-payment plan with your chosen funeral director.

Why take out a pre-payment plan?

Taking out a pre-payment plan has a number of advantages in addition to the main financial benefits. When you choose to take out a pre-payment plan, you will be given the opportunity to discuss aspects that you may or may not want to be included in your funeral. Having the opportunity to discuss this with a trained funeral director can help you to ensure that your life is celebrated in the way that you want. Having taken the time to answer these questions during your life also means that your loved ones will be faced with fewer tough decisions in the difficult period after your death. This can really help to make things easier for your loved ones during the first few days.

Of course, some people do not feel comfortable talking about funeral plans before death, or they do not feel as though it is appropriate for the deceased to make all of the decisions about how their life should be remembered. In these cases, it is possible to ask the funeral directors to set aside a certain amount for the funeral, but to leave all of the planning and important decisions to those who ultimately arrange the funeral.

Pre-purchasing a funeral package can also help you to save money in the long run for your family. If you buy and pay for a funeral package now, you will pay current prices. For most people who choose to buy their package now, this is an inflation beating-strategy. Be aware that not all plans will allow you to purchase all of your options at today’s prices. You are most likely to make a saving if pay for specific choices in advance.

Your chosen provider may also allow you to pay for your plan in a number of different ways, including spreading the payments out over a long period of time. Paying for your funeral in multiple instalments will allow you to add lots of extras to your funeral package without the need to find large amounts of cash in one go. However, it is worth remembering that if you die before paying for the whole plan, the rest of the funds will need to come from somewhere. If there is enough money left in your estate, the funds can come from here, but if there is no money in the estate, your loved ones may have to pay or they will have to compromise on your plans.

What is funeral insurance?

Funeral insurance is a type of insurance policy which pays out upon the death of the named policyholder. The funds which are released by this insurance may go directly to the funeral directors, so as to ensure that the funds are used for their intended purpose. Funeral insurance can be purchased separately or it may be integrated into a life insurance policy. Funeral insurance is slightly different from a pre-payment plan, in that money does not sit with one particular funeral provider. There is much more freedom for the person who is arranging the funeral to be able to choose their own funeral director.

Funeral insurance plans normally require holders to agree to pay a fixed sum every month for the rest of their life. In return for this, a lump sum will be released to the funeral directors when that person dies. If the policyholder stops paying into the scheme, they may be unable to get the money back. If they are unable to meet the monthly premium, the plan may be suspended and will not pay-out upon death. The cost of the premiums will normally be based on the age and health of the policyholder at the time that they chose to take out the plan. Failing to declare pre-existing health problems is a type of insurance fraud and must be avoided.

If the policyholder dies a short time after taking out the policy, they plan will offer a good return on investment. However, if the person lives for a long time after taking out the policy, then the lump sum payment may actually be much less than the total sum of all of the insurance premiums which were paid into the account. Some insurance providers will include a caveat in their policies which states that if the holder dies within a year of the policy being taken out, all of the premiums will be returned to the estate of the policyholder. This means that the funeral directors will not receive the lump sum payment.