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Last updated: 01 June 2021
When you pass away, it will be a difficult and stressful time for your family. The added burden of organising a funeral can seem like one thing too many for those left behind. Funeral plans offer you a way to solve this problem and relieve your family of stress, and a significant financial burden.
This guide looks at the costs of funerals and funeral plans, letting you know what’s included, what you should keep an eye out for when purchasing a plan, and the alternatives that are available.
How much do funerals cost and what is a funeral plan?
Planning a funeral in this day and age can seem daunting and, more importantly, expensive. The average cost of the most basic funeral may be in excess of £4,000. Burials tend to be more expensive, costing up to £2,500, and cremations can be getting on for £1,000. You should also bear in mind that location can be very influential on the overall cost. In London, for example, funerals can cost up to twice as much.
You can organise a funeral independently. However, there are a large number of things to consider, for example transport and leasing of the burial plot, and when things are already stressful due to your bereavement, it’s certainly easier, and possibly cheaper, to purchase a funeral plan.
Funeral plans are an increasingly popular option. They allow you to pay for your some or all of your funeral before you die, relieving your family of a large financial burden at a difficult time. Funeral plans can be purchased either from funeral plan providers or from funeral directors. One-off payments are usually between £3,000 and £5,000, with monthly payments also available. Bear in mind that your next of kin are allowed to pay for your funeral out of your estate following death, and that this money is not subject to inheritance tax.
What do funeral plans cover?
Funeral plans tend not to cover everything you need for a funeral. Whilst you usually have to pay more for extras, e.g. flowers or an urn, even the basics can vary between providers. For example, providers such as Age Concern and Dignity has a set contribution towards the cost of burial but will cover the whole of cremation. The co-operative will cover both, whereas Golden Leaves will only pay a set contribution towards either method. Leasing of a burial plot is usually not covered at all. Anything not included in the plan will have to be paid for by your family.
To make sure you get the best value out of your plan, you need to ensure that you know exactly what your plan covers. You can keep costs down if you shop around and compare life insurance quotes. You should also compare the cost of a plan with the prices of alternatives (see below).
Things to look out for
The first thing to be aware of is the security of your money. Funeral plan providers will tend to place your money either in an insurance policy or a trust fund. Whilst this isn’t directly regulated by the Financial Conduct Authority (FCA), there are rules that govern what they do with your money in each option, so any money paid should be safeguarded and available to pay for your funeral as and when it’s needed.
If you’re paying the total cost upfront, you may benefit from paying some of it on a credit card. If you make a payment of more than £100, the payment is protected by section 75 of the Consumer Credit Act 1974 (if the plan falls through, the credit card company is liable).
There are a number of other things you should check when purchasing a funeral plan. You should find out how you can cancel and whether charges apply, and what happens if you die with some instalments outstanding. This will affect the financial burden placed on your loved ones. As a general rule, you should always make sure you check the terms and conditions of any funeral plan you buy.
Alternatives to a funeral plan
One of the primary alternatives for preparing for your funeral is over-50s life insurance. These are insurance plans that give a pay-out on death. They require no medical checks so the cost won’t be affected by your health, but if you make a mistake or can’t keep up with payments, there is no pay-out.
Outside of funeral plans and funeral insurance, there are still options you can choose to pay for your funeral.
You can try and plan the funeral independently. However, as mentioned this can be very complicated, stressful and in some cases more expensive, so think carefully before trying this.
You could keep it simple and opt for savings you already have, for example those in an ISA or a different bank account, or even just transferring money into the bank account of a loved one. Just be careful to make it very clear that this is what you intended the money to be used for. You could do this by letting your next of kin or solicitor know, and by putting it in your will. If you are near the inheritance tax threshold, making this sort of gift before you die can save money for the beneficiaries of your will.
If you or your family have a lower income and not much in the way of savings, they may be able to claim a government subsidy to help with funeral costs.