Prepaid funeral plans are becoming more common: as the Funeral Planning Authority’s statistics suggest, the number of sales increased from around 46,000 in 2002 to just over 112,000 in 2011.
So what is a funeral plan and why are they popular? Basically, a funeral plan allows a person to prepay the cost of their own funeral and so eases the worry of insufficient funds and that of becoming a burden on the family in connection with funeral expenses. It may also protect costs against inflation – once the plan is paid for, the money is put in a trust fund and then invested to generate interest which would cover the increase of funeral costs in future. It may also give peace of mind to the subscriber in that their funeral will be carried out following their exact wishes.
However, a funeral plan is not as straight forward as it might seem – there are several matters that should be carefully considered.
If you do not compare prices carefully, funeral plans can be very expensive, depending on the range and standard of services included. As opposed to a tailor-made one, a cheaper basic plan may not not cover everything you wish for. Typically, it would include the costs of cremation service, a simple coffin, lined and fitted with basic materials, care of the deceased including embalming, transport to the place of rest, hearse, cards and flowers. A basic plan may not cover costs of a burial, or may only pay a proportion of such costs. It will not pay for a grave and a headstone, nor for a limousine. Also, a typical plan will not cover removal of the deceased at night – if you wish such an option to be available, it will be at an extra cost. Remember that disbursements will not be paid out under the plan – your executors will need to pay them out of your estate.
Since the payment up front may be a difficulty for your cash flow, there are more questions to ask. Normally, a plan includes commission and administrative charges. If you decide to cancel your plan within a cooling-off period, these may be non-refundable - check the terms of the plan carefully. Some plans offer an option of payment by instalments to ease financial pressure. If the subscriber dies before the plan is fully paid off, the family would still need to pay the outstanding balance.
Also, consider the following. Does your plan guarantee the cost of the funeral directors’ service? What happens if your provider becomes bankrupt? Will it be possible to amend the package if you change your mind as to arrangements? What happens if you move to another part of the country? Will the body repatriation costs be covered in case you die abroad? Do not assume that a service will be paid for however reasonable it seems!
Make yourself familiar with the provider’s complaints procedure in case something goes wrong. It is a good idea to choose a provider who is registered with the Funeral Planning Authority (FPA) – this will guarantee an extra protection against possible financial loss. Note that providers of funeral plans are not legally obliged to register with FPA, so it is for you to check.
Last but not least, if you decide to take on a plan, let your family know about it and provide them with full details. There are cases when families end up paying twice, just because the plan is discovered after the funeral!
As with any type of long term financial commitment, researching your options and considering terms and conditions carefully will prevent a potentially beneficial investment turning into a disaster.