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A complete guide to funeral plans

Justin Cole - Life business director.

Justin Cole

Life Business Director

Last updated 17th January 2022

This article explains how funeral plans work and will help you consider their pros and cons and what alternatives are available. Please bear mind it is not financial or legal advice.

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What is a funeral plan?

Funeral payment plans allow you to arrange and pay for your funeral in advance with either a lump sum, in instalments, or with monthly payments. Having a pre-paid funeral helps reduce the stress and financial strain on your loved ones and can lock in the cost of a funeral at today’s price.

A pre-paid funeral plan can be organised directly with a funeral director or a plan provider. You can decide on a specific type of funeral and can sometimes pick what extras you’d like for your funeral, such as the type of service or coffin.

How do funeral plans work?

A funeral payment plan is a provision people put in place that covers the cost of chosen funeral services. If you choose to use a funeral plan, your family will have to use a nominated funeral director or one from an approved list.

There are several payment options for funeral plans - you can pay for your plan in a lump sum, monthly instalments or as part of your life insurance plan.

1. A lump sum

If you decide to pay with a lump sum, you will choose your funeral package and pay your plan provider upfront. They will then organise your funeral and support your family when the time comes. A typical lump sum funeral plan will cost between £3 – 5k.

If you decide to pay in a lump sum, this usually means that you secure the funeral you want at today’s prices, so inflation will not take its toll.

2. Instalments

Funeral payment plans vary by provider, but companies often allow you to stretch the payments out over several years, depending on the type of plan you choose. The full costs of your plan may not be covered until you have paid all of the instalments.

Typically for instalment periods over 12 months the total amount you will pay will be more than the lump sum amount. For example, taking a plan that would cost, say, £4,000 as a lump sum may cost £5,000 if you choose to pay in instalments over 5 years.

3. Monthly payments into a life insurance policy

Some providers use plans that are covered by insurance policies. When you die, the insurance payout goes to pay for your chosen funeral services. There are two types of life insurance backed funeral payment plans.

The first is provided by funeral directors. The premiums you pay the funeral director are used by the funeral director to pay for a life insurance policy that pays out to them when you die. The money the funeral director receives from the life insurance policy is then used to cover the cost of the funeral services that you have requested. This product is regulated by the Funeral Planning Authority.

The second is provided by life insurance companies such as SunLife. You own the life insurance policy and agree that when you die the payout can be used to pay the funeral director for the funeral services you requested. This product is regulated by the Financial Conduct Authority and is covered by the Financial Services Compensation Scheme (FSCS) protection.

With life insurance backed funeral plans you will not be covered for the full costs of your chosen services until after you have been paying into the plan for a certain length of time, typically one or two years.

Premiums for life insurance backed funeral payment plans are usual payable until 90 years old or until you die. This does mean that you could end up paying more than the cost of a lump sum funeral plan depending on how long you live.

older couple looking at ipad.

Funeral Plans Guide download

If you prefer, you can download a PDF version of our Complete Guide to Funeral Plans which has been awarded the Fairer Finance Clear & Simple Mark. This mark of excellence is only given to companies that communicate clearly with their customers.

What do funeral plans cover?

What’s included in a funeral payment plan will vary between providers and the type of plan you choose. Some providers will allow you to choose from a wide range of options to create a completely bespoke service just for you whereas other providers offer just the most popular options to make your choice simpler.

Not all funeral payment plans guarantee to cover the cost of your funeral. This is because some costs are not under the control of the funeral director, for example, medical fees and cremation fees. In circumstances where a funeral plan does not guarantee to cover these costs, an allowance will be built in to your funeral payment plan to cover these costs. However, any shortfall would be charged to your estate when the time comes.

Be sure to check with your provider exactly what it is your plan covers, as this could be a big deciding factor on whether a pre-paid funeral plan is right for you and indeed which provider you choose.

Funeral cover providers normally offer a range of three or four different plans that start with a basic funeral and get progressively more expensive as more services such as limousines are included in the plan. When comparing funeral payment plans, the key is to spot what services are not mentioned rather than being drawn to the ones that are.

Below is a simple list of the things that are involved in delivering a funeral service which you can use as a checklist. Please note, this is just an example, and this will vary greatly between providers and plans.

What may be covered:

  • Guidance and advice on funeral arrangements
  • Funeral Director’s costs
  • Doctors’ fees
  • Recording of special requests
  • Coffin
  • Collection and transport of the deceased (hearse)
  • Care of the deceased until the burial or cremation
  • Cremation or burial fees
  • Minister’s fees
  • Religious service fees

What might not be covered:

  • Bereavement support
  • Use of Chapel Of Rest
  • Family viewing
  • Limousines
  • Funeral to be held on a weekend
  • Transportation if death occurs whilst on holiday or away from home
  • Burial plot
  • Headstone
  • A venue for the wake
  • Any catering for the wake
  • Funeral flower costs

One of the big areas of difference in funeral payment plan providers is whether or not they guarantee to cover the essential costs of a funeral that are not under their control, for example, cremation fees.

Some providers will only guarantee a contribution up to a set amount usually around £1,000. Once these costs exceed this amount then your estate or family will have to pay the difference.

These contributions are a set amount that the funeral directors hope will cover these costs in the future. As nobody knows how much the cost of an average funeral will change in the future, you should think carefully about whether you want the funeral plan to guarantee to cover these costs or not.

Why choose a funeral payment plan?

Thinking about your funeral might not be your highest priority right now but having something in place can give you peace of mind. After all, it’s one of the only sure things in life – we’re all going to need a funeral one day.

And with the cost of funerals at over £4,000, it can be useful to think ahead and let your family know that you’ve made a plan.

Anything you can do to ease the financial and emotional strain on your family will be a big help at a difficult time.

Here are five popular reasons why people get a pre-paid funeral plan:

1. Funerals can be expensive

The average cost of a basic funeral now stands at £4,056*, more than double what it was in 2004. Using a funeral plan could ensure that all of these costs are covered, irrespective of whether funeral costs increase in the future.

It’s important to remember that the cost of a basic funeral does not include any extras, such as a headstone, flowers or a wake.

Even if you are aware of how much funerals cost today, there’s no way of knowing exactly how much they’ll cost when you die, and your family could be left to cover the shortfall.

If you plan ahead, you can manage the cost of the funeral you want and avoid leaving a bill for your loved ones by buying the right funeral plan.

*represents the average of the cost of a burial and the cost of a cremation in the UK. For more information about funeral costs by type and region, please see our Cost of Dying report.

2. It helps your family – not just financially

Having a pre-paid funeral plan in place is one of the final ways you can make a difficult time for your family a little easier. Reducing the emotional stress for your loved ones is a huge factor in getting a funeral plan for a lot of people.

With the funeral arrangements already decided by you and money worries out of the way, your loved ones can spend more time together to grieve and celebrate your life.

3. You can make your wishes known

Telling your loved ones what you’d like is the best way to ensure that your wishes are honoured.

Perhaps you want to be cremated wearing a specific item of clothing or with something that means a lot to you. Or maybe you don’t want a traditional funeral but would prefer a direct cremation. Either way, you can rest assured knowing your wishes can be met in as much detail as you want.

4. You have independence until the end

None of us want to be a financial burden to anyone, let alone our children. Leaving a plan for our funeral ensures that our final act of independence is carried out – something that’s important to many people. For those of us with children, it gives peace of mind that we’ve been parents until the end.

5. You can ensure you’ll have a proper send off

Whether you want a traditional funeral with cars for your family and a memorial wake afterwards, or whether you’ve got some unique, weird and wonderful funeral requests, you can make sure that your wishes are met.

For some people, making sure they have a proper send-off is important. With funeral cover in place, you can choose the celebration of life that you want.

*SunLife 2021 Cost of Dying Report

Advantages and disadvantages of funeral plans

As with anything, funeral plans have advantages and disadvantages depending on what you’re looking for. Be sure to consider all options to make the best decision for you and your family.

Funeral plan advantages

  • Your family won’t need to fund the whole cost of your funeral
  • You will lock in the cost of your funeral at today’s prices avoiding funeral inflation in the future
  • You take away any worry your family might have about arranging your funeral by making the choices today
  • You get to plan the type of service you want
  • You can shop around and pay the price you want to pay
  • Anyone can take out a funeral plan, regardless of your health as there is no medical involved
  • If you choose a national plan provider, you will probably be able to move within the UK and have your plan move with you
  • You can pay however you would prefer – in instalments, in full or with an insurance-backed policy
  • Research and selecting a funeral provider can happen at a time without grief

Things to consider

  • If you decide to pay for your plan using instalments, you may not be covered for full funeral costs until you have paid all the instalments due
  • If you use an insurance-backed policy, you will need to go through a waiting period before you are fully covered
  • If you cancel your funeral plan you may not get any money back or get back less than you paid in
  • Some funeral plans won’t cover every aspect of a funeral and some don’t guarantee to cover costs such as the cremation fees but only pay a contribution instead
  • Unless you decide to choose a life insurance-backed policy, your provider will not be regulated by the FCA
  • Not all plans include financial protection by the FSCS
  • Not all plan providers are a member of the Funeral Planning Authority
  • Most plans will not provide cover if you move or die abroad
  • Payments need to be maintained until they are complete, or you risk losing your cover
  • Pre-packaged funeral plans might include things you don’t want but are still having to pay for, such as a more expensive coffin, but may exclude things you really do care about, such as a family viewing

What happens if I cancel my funeral plan?

Funeral plans are intended to be bought and to remain in place for the remainder of your life but sometimes circumstances change, and you may need to cancel a funeral plan. The good news is that typically you can cancel a funeral plan. What happens will depend on which funeral plan you have and which provider you have chosen.

Funeral cover that has been purchased using a lump sum or via instalments can normally be cancelled but you may incur an administration charge. These can run into hundreds of pounds, so it is worth checking this when you buy just in case things change and you do need to cancel.

It’s also worth noting that you will lose the fixed funeral price you originally agreed to and may have to pay more for your funeral due to funeral inflation.

Alternatives to funeral plans

Using a funeral payment plan is a popular way to put provisions in place, but it’s not the only way to do it. Other options might be better suited to you, so make sure you research everything to decide what might be best for you.

Over 50 life insurance

An over 50s life insurance plan pays out a set amount of money when you die. This sum of money will be left to your chosen beneficiary or estate and can then be used to pay towards your funeral.

This can be a good option for people that want to put some sort of provision in place, but don’t want to consider the specific details of their funeral just yet.

With this type of plan, you pay a monthly premium, which along with your age, will decide the cash paid out on your death. It’s worth noting that these plans and their cash payout do not increase with inflation. See our over 50s life insurance guide to learn more.

Savings and investments

If you decide to use savings or an ISA to pay for your funeral, and you pay into it regularly, you might benefit from savings rates that increase the amount of money saved.

The downside of this is that savings rates might not increase at the same rate as funeral inflation, and there’s no way of guaranteeing the money you save will be enough to cover the full cost of your funeral when you die.

Paying from your estate

Funeral costs can be paid for from your estate after you die. Some banks will release funds to pay for a funeral from the person’s account who has passed away, if they are given an itemised bill from the funeral director and a copy of the death certificate.

If your bank won’t accept this and you haven’t made other arrangements, your family may need to pay for the funeral themselves and get reimbursed when the Probate process has been completed.

It may take a while for the money to be released from your estate, as the Probate process can take weeks and even months, depending on the size and complexity of the estate.

State support

If you’re entitled to state benefits, you may be entitled to financial support from the Government to help pay for your funeral. The support likely won’t cover all the costs, but it might be able to help in some areas.

What happens with the funeral plan when I die?

Make sure your family know you have a funeral plan and where the documents are kept. Then, when the time comes, they will know where to go to begin the next steps.

Sometimes people decide to store the information about their plans with or in their Will, with a solicitor or at their bank.

Are funeral plans safe?

To determine whether a chosen funeral plan is safe, be sure to check the provider is registered with the Funeral Planning Authority. They are an industry body with strict rules and regulations for funeral plan providers. This helps to reassure and protect customers buying funeral cover.

The money you pay as either a lump sum or as instalments will be held in one of two ways. Either as an insurance policy which is then used to pay for the funeral when the time comes, or it will be invested into a trust fund with trustees.

The aim of both methods is to safeguard your money until it’s needed, ensuring that it’s used to provide the funeral you have paid for.

Funeral plans that use a trust fund are not currently authorised or regulated by the Financial Conduct Authority (FCA) or by the Financial Services Compensation Scheme (FSCS).

Insurance-backed plans however do fall under FCA regulation and your plan will be covered by the FSCS.

Questions to ask your provider

Here are some questions that might help you when considering which provider or plan to go with.

Never be embarrassed to ask questions. It’s important to find out all the information you’re looking for before making any decisions.

  • What is included in the plan? What are potential costs that are not included?
  • What happens if you go out of business? How is my money protected?
  • What happens if I die abroad or away from home?
  • Am I able to make any changes to my funeral once I have taken out the plan?
  • Am I able to pick a specific funeral director?
  • If I decide to pay monthly, how long will I be paying for and how much will this cost each month?
  • What happens if I die whilst there are outstanding charges on the payment plan?
  • Are there any cancellation charges?
  • Is this an insurance backed policy?
grandparent and grandchildren working in the kitchen

How to buy a funeral plan: a step by step guide

Buying a funeral plan is a big decision and you should research each option thoroughly before committing to it. If you decide it’s right for you, here’s the step-by-step process you can expect:

Step 1: Think about the best option for you and your family that would lessen any worry or stress when you pass away, discuss with your family what option might be best for everyone.

Step 2: Research different policies and talk to your loved ones about what might be right for you. Don’t simply compare plans for their costs. Cheaper plans will typically be cheaper for a reason. Research different providers’ reputations and accreditations.

Step 3: Make sure the plan you are considering has enough cover to include everything that you want for your funeral – our funeral arrangements checklist can help. Most plans cover what you will need for a basic burial or cremation, whilst others will exclude things like doctors’ fees and headstones and may not guarantee to cover things like cremation fees.

Step 4: Pay for your funeral plan, either in full or using a monthly scheme. Remember to compare the overall costs as you will be charged more for paying in instalments and insurance backed funeral plans may cost more than a lump sum funeral depending on how long you live.

Step 5: Record the information of your plan and store it in a safe place. Inform a family member of your choices and let them know where the important documents are kept.

Where to get funeral cover advice

Use the links below to find out more information about funerals and funeral plans. You’ll be able to read more about your rights, the choices available, and any help with costs that you might be eligible for.

MoneyHelper – Funeral plans and funeral insurance

Citizens Advice – Arrange a funeral

Which? – Funeral plans explained