Explained: Funeral Plans

WHAT IS A FUNERAL PLAN?

A funeral plan is one way of planning ahead by pre-paying for your funeral so that particular burden does not fall on your loved ones. It essentially saves your family worry and expense and helps make things easier at what is a difficult time.

Moreover, they are used as a prudent way to beat the continuing rising cost of funerals. You simply choose the funeral plan you want and pre-pay for the cost of your funeral director's services, at today's prices.

You have the choice of either paying for the plan in one go or by monthly instalments.

A funeral plan will guarantee the funeral director's and services costs are covered, no matter how far in the future it’s needed.

Importantly, a pre-paid funeral plan will sit outside your estate, so there's no delay for your family in activating the plan when they need it.


WHAT DOES A FUNERAL PLAN COVER?

Funeral plans come in various flavours, but a common theme is they generally only cover the costs of the funeral director's services and the cremation/burial fees.

Expenses can include some or all of the following:

  • Funeral director's fee and services (including the care and presentation of the deceased)
  • The coffin
  • A hearse and bearers
  • Transfer of the deceased to the funeral home/chapel of rest
  • Organising the service
  • Funeral procession from home
  • Selecting the time of the funeral
  • Visiting the chapel of rest
  • Following limousines
  • A contribution towards disbursements/3rd party fees

WHAT DO FUNERAL PLANS NOT COVER?

It is important to note pre-paid funeral plans do not generally cover:

  • The cost of repatriation of the body from outside of the UK
  • Medical certification
  • Embalming
  • A burial plot
  • Headstone
  • Wake/reception.

HOW DOES A FUNERAL PLAN WORK?

With a funeral plan, you arrange and pre-pay for your funeral in advance. You can buy a funeral plan for your own funeral or for someone else’s, as long as the funeral will be held in the UK.

You have the choice of either paying a lump sum or by monthly instalments over one to ten years. One-off payments usually range between £1,800 to £5,000 depending on the plan.

Whilst most providers guarantee that with their plans there won’t ever be anything extra to pay towards the funeral directors fees and services, depending on circumstances, when the plan holder dies, there may be additional costs to pay towards disbursements (also referred to third party fees).


WHAT ARE DISBURSEMENTS?

The total cost of the funeral can be split into two types:

  1. funeral director's costs
  2. disbursements

Disbursements are third part fees incurred by the funeral director for any additional services they cannot provide themselves. Theses include:

  • Cremation or internment (digging or opening of the grave) fees
  • Doctors’ certificates
  • Minister’s/Celebrant’s fee for committal service at crematorium (or graveside, if burial)

HOW CAN PAYMENTS BE MADE?

There are several ways to pay for your funeral plan in advance, all of which fixes the cost of the services included at current day prices.

Clearly a lump sum involves a commitment of money up front, whereas instalments allow you to spread the cost.

Plan-holders who choose to pay with a single one-off payment have the benefit of being immediately covered. In the event of their death, those charged with organising are under no obligation to further finance the funeral.

Customers, who wish to spread the cost can do so normally over 12 up to 120 months along with an initial deposit. 

Moreover, payments by monthly instalments might also attract an additional fee, commonly known as a handling charge, which covers the cost of administering the monthly instalment transactions.

It is important to note that with an extended payment period, your funeral director’s costs are not covered until the final payment has been made, but money paid in can be used toward the cost of a funeral should the plan holder die before the final payment is made (providing a certain number of payments have been made). Each plan provider will determine the specifics.


WHAT HAPPENS TO MY MONEY?

When you decide to purchase a pre-payment plan, your money (normally excluding the initial management fee) is held securely and ring-fenced in a trust fund. The money is then made immediately available to your funeral director when required and cannot be used for anything else.

A trust is a financially separate entity to the plan provider and as such, is run by an independent board of trustees.

The sole purpose of the trust is to manage the plan holders' payment fund. The money for your funeral plan in the trust fund is ring-fenced and not accessible by the plan provider or any funeral director until required. Moreover, the money is not lent to any organisation or individual, therefore the provider never needs to rely on another party in order to meet the obligation to all plan holders.

At the time of the plan holder's death, the money is paid directly to the appointed funeral director and not to family members, friends or appointees. Unlike an insurance policy, a funeral plan can only be used to pay for the cost of a funeral.

The Financial Conduct Authority doesn’t directly regulate funeral plans, but it does have rules to safeguard your money if your plan provider operates a trust.


WHAT ARE THE BENEFITS OF A FUNERAL PLAN?

There are a number of benefits to having a plan, but perhaps the most important are:

  • Minimum age of 18, but no upper limit
  • No medical or health questionnaires and acceptance regardless of age
  • Freeze the cost of your funeral no matter how many years go by
  • Choice of paying in full at the start or by instalments
  • Relieves loved ones from having to guess what you would have wanted
  • Protecting your loved ones from possible financial pressures they cannot meet
  • Prompt payment of funeral costs without having to wait for probate to be completed
  • Fully covers your funeral director's costs

HOW WILL THE PLAN PROVIDER KNOW ABOUT MY DEATH?

It's highly recommended you discuss the plan you have purchased with your family or your executor.

You should also make sure they know the details of the plan and who the plan provider is as they will have to inform the funeral planning company in the event of your death.


CAN I CANCEL MY FUNERAL PLAN?

Most plan providers offer this facility. You can cancel the plan at any point within a cooling off period from the Plan Effective From date specified on the plan certificate. You will receive a full refund of all monies paid.

If the plan is cancelled after the cooling off period from the Plan Effective From date. a refund will be issued of whatever monies have been paid, minus a possible cancellation charge.


CAN A PLAN BE TRANSFERRED FROM ONE PERSON TO ANOTHER?

Some providers allow a plan can be transferred into the name of an alternative person.


DO I HAVE TO PASS A MEDICAL?

No, you do not. Funeral plans are not like insurance products.


ARE THERE ANY AGE RESTRICTIONS?

Plan holders must be at least 18 years of age, but there is no upper age limit.


CAN A FUNERAL PLAN BE BE PURCHASED FOR SOMEONE WHO HAS ALREADY PASSED AWAY?

Some providers allow this. It is ideal when a funeral needs to be arranged immediately and a plan is cheaper than dealing directly with the funeral director.