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Funeral insurance vs funeral plans


Planning for the future is a sensible move for anyone, and planning for the most inevitable thing in all of our futures can save a lot of hassle, especially for loved ones.

Ensuring that all funeral costs are covered is something that many people look to do, giving everyone the additional peace of mind that, when the time comes, there won’t be any unexpected bills or situations where a loan or credit card may need to be used to pay for any ceremonies, legal fees or doctor’s bills.

Many people opt to pay for their funeral by taking out a prepaid funeral plan while they are still alive, or paying for funeral insurance that will cover certain costs if they pass away. But what is the difference between a funeral insurance policy, what is a prepaid funeral plan and which is best? Here we explain the options available to you and weigh up funeral insurance vs. funeral plans. 


What is funeral insurance?

Many people will be used to insuring their home, car, or other valuables, and funeral insurance is fairly similar, with a few key differences. You pay a premium, usually a monthly figure, that goes towards a lump sum that is paid out upon death. This lump sum varies depending on which funeral insurance plan you opt for and isn’t necessarily just for funeral costs. It can be used for pretty much any costs, such as settling bills or even debts, but is primarily designed to pay for the funeral. Unless stated, the death doesn’t need to be unexpected or accidental and the figure will be paid out regardless of what happens.


What is a prepaid funeral plan?

Rather than getting a lump sum paid out upon receipt of a death certificate, prepaid funeral plans cover the cost of a pre-arranged funeral. Usually, the person or family of the person chooses the kind of funeral they’d like, and the provider will supply a package or a figure that will often cover funeral costs, including the service, coffin, transportation and other related costs. A payment plan is agreed and once the plan has been paid for, no further instalments are required.


What is the difference between life cover and funeral cover?

Both funeral and life insurance pay out a lump sum in the event of your death. Funeral insurance tends to pay out a smaller amount though, with the intent to cover funeral expenses.


What are the advantages of both?

Funeral insurance

With funeral insurance, you or your family / friends will be paying into a plan that gives out a lump sum of money that can be used for pretty much anything once the insurer or service provider has been issued with a death certificate. Depending on the amount paid out, this can be used for not just the funeral, but potentially to settle any costs related to the management of the person’s estate, such as fees incurred with home sales, bank charges and unsettled debts. Funeral cover can also potentially be used as a type of inheritance, but there are tax implications of passing money on from funeral insurance to relatives, friends, or even charities.


Funeral plans

The biggest advantage of a prepaid funeral plan is the peace of mind that it can provide and unlike funeral insurance, it will cover an agreed amount. No matter how much funeral prices may rise in future, there will be no more to pay for the services covered in your plan when the time comes. Once a death certificate has been provided, the funeral will be ‘ready to go’, taking away a lot of stress and hassle for those organising. By using a prepaid funeral plan, relatives or organisers will know exactly which funeral provider will be sorting everything out, leaving them to focus on their close ones at a difficult time.

The other big advantage of a prepaid funeral plan is that the amount that needs to be paid off will be a fixed sum, with an end date. This means that once the funeral plan is fully paid for, which could happen many years before the person dies, there won’t be any more payments required, unless explicitly stated by the provider. Please note that both prepaid funeral plans and funeral insurance may be subject to interest charges and additional fees, so always check the paperwork.


What are the biggest disadvantages?

Prepaid funeral plans are an excellent option for those who want to spread the cost of their funeral, so monthly instalments are the most popular way of paying for the plan. The disadvantage here is that it’s likely that there may be some interest rates associated with spreading the cost, so you or your family may end up paying a little more for the funeral than you would by paying upfront. If the money is available, then remember that a prepaid funeral plan can be paid for straight away, removing this disadvantage. With Simplicity, it should also be noted that you can pay for your funeral plan within 12 months without incurring any interest on the total cost of the plan.

With funeral and life insurance, the disadvantages can be slightly bigger. Funeral insurance can be something of a gamble – the fixed lump sum that pays out once the person has died doesn’t grow if more payments are made, so if the person ends up living longer than anticipated, or the funeral insurance plan is taken out earlier in their life, they may end up paying much more into the policy than the amount that is paid out once the person has died.

The other big disadvantage of funeral insurance is the fact that a funeral will still need to be arranged once the lump sum has been paid, so family members or friends will be adding another job to the list during what can be a very difficult time.


Choosing the right option

Paying for a funeral can be a burden, especially for those who don’t have a plan in place, but it’s worth checking the finer details when taking out funeral insurance or looking at prepaid funeral plans before deciding which will work best for you. Instead of funeral insurance, it can sometimes make more sense to put cash into a savings account designed specifically for paying for a funeral, especially if you or the person you’re buying it for is still young. You’ll avoid overpaying and potentially pick up additional interest as time progresses. On the other hand, the lump sum you get could be more than you end up paying in if you die soon after the plan is taken out, so it’s a bit of a gamble depending on how long you or the person will live.


If you’re beginning to think about making life easier for loved ones once you’re gone, or are interested in spreading the costs of a family member’s funeral, then don’t forget to check out our selection of prepaid funeral plans, available from £1,495 or £15.97pcm. As well as having everything organised and ready to go when the time comes, we provide an excellent range of free services and information, including help with grieving and tips on how to arrange the funeral itself.

Ready to buy a funeral plan? You can buy online or contact us for more information.


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