Funeral plans: What is a pre-paid funeral plan?

What is a funeral plan?

A pre-paid funeral plan allows you to organise and pay for your funeral up front at today's cost. They are often marketed as a way of investing against future funeral costs that have historically been rising significantly higher than inflation. 

We found, however, that with some plans not all costs are fully accounted for or ‘guaranteed', particularly if you are looking for a funeral including a burial - see ‘Not all costs are guaranteed’. It is therefore important to consider your options carefully before committing to a pre-paid plan, as these are expensive. 

Many plans also have steep cancellation fees if you cancel the plan after the first month. See our funeral plans comparison table for more details. 

How pre-paid funeral plans work

Pre-paid funeral plans can be bought in two main ways: from a funeral plan provider or from a local funeral director. Payment is flexible. Most providers allow a one-off payment in advance, or the option to pay in instalments over 12 months to 120 months. 

Paying in instalments for a long time will cost more because of administration fees and interest. While 12 monthly payments amount to the same, paying over 60 months can add between 15% - 26% to the overall cost. One-off payments typically range between £2,949 to £4,135.

Check what’s included in a funeral plan

Before you take out a funeral plan, it’s important to check what’s included. For example, a simple pre-paid plan may not include a church service, limousine or use of the chapel of rest, and may put a limit on the distance they’ll travel to collect the deceased.

Even more expensive plans can leave out important things that you want to include, such as a church service. The only comprehensive plan to include this within its price is from The Co-operative. None of the plans we looked at include a burial plot which can cost on average £725.

The main selling point of these plans is that they claim to ‘freeze funeral costs’ at today’s prices and allow you to plan your own funeral. While it’s true that some of the costs are guaranteed, your family could still find themselves shelling out for some aspects of the funeral not covered by the guarantee see below.

Funeral disbursements (third-party costs)

All the policies we looked at guaranteed to cover funeral directors’ own costs so, no matter how much these costs increase between now and your funeral, the policies should pay out in full. However, cover for the third-party costs (often called disbursements) such as the burial, doctor, church, minister, organists, choir, burial plot and grave-digging don’t tend to be guaranteed – and the amount covered varies considerably between providers. 

There might be cremation fees but, since these tend to be cheaper than burial fees, some providers will fully guarantee these costs. If you are happy to opt for a cremation a funeral plan that fully guarantees the third party costs offer significantly better cover than funeral plans for burials.

For example, pre-paid plans of organisations such as Age Concern and Dignity guarantee the price of cremation, but only pay a contribution towards burial costs that increases in line with the Retail Prices Index (RPI). Golden Leaves, on the other hand, has a set contribution to burial or cremation costs that increases with RPI, while Golden Charter makes only a contribution towards a burial or cremation. The Co-operative and Family Funerals Trust stands out as it guarantees to cover all costs agreed in their pre-paid plans whether for a burial or a cremation, however the cost of a burial plot is not included.

According to Mintel research, commissioned by Sun Life Direct, average burial and cremation disbursements increased by 8.7% and 9.6% respectively between 2008 and 2009, so there’s a good chance that a contribution made to these costs may not cover the entire cost 10 years down the line. If this occurs, relatives are left to pay the shortfall.

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