We take a look at the journey of how prepaid funeral plans work. Starting from the moment you buy to when the plan is redeemed by your loved ones.
Who is this guide for?
Reading time:
5 mins
How do prepaid funeral plans work?
Here's an overview of how prepaid funeral plans work. For a more detailed description, click here.
Please ensure you read your plan provider's terms carefully before you buy.
How do prepaid funeral plans work when you buy from a Funeral Planning Authority registered member?
1. The funeral cost is fixed at today's prices
When you buy a prepaid funeral plan (for your or someone else). You're paying the cost of the funeral director's fees up-front, fixed at today's prices. Protecting loved ones against future price rises, which have historically risen beyond inflation most years since records began in 2004.
As well as prepaying the funeral director's fees, you can also choose a funeral plan that includes the necessary third-party cremation or burial fees.
Finally, you will pay the funeral plan provider either in a single lump sum or in monthly instalments. Also the is no charge for spreading the payments over 12 months which can help spread the cost. Alternatively, you pay a lower fixed monthly amount for life or until you reach a specified age (usually age 90).
Average UK funeral cost in 2021
Basic funeral £4,184
Includes the funeral director's fees and the average cremation and burial fee.
Comparable basic prepaid funeral plan £3,946
Includes the funeral director's fees and the average cremation and burial fee.
Sources:
(1) Cost and definition of 'Basic' funeral as referred to in the 2021 SunLife Cost of Dying Research report.
(2) The average price of a 'Traditional' type funeral plan (comparable with the SunLife 'Basic' definition) from a Funeral Planning Authority registered provider listed on Before You Go. Price includes the necessary third-party cremation or burial fees.
2. Your funeral director is appointed
Usually, when you purchase a plan from a funeral plan provider registered with the FPA, the funeral director is appointed at the time you take out your funeral plan. It's also good to note that the contract to deliver the funeral at the agreed price is legally binding.
Furthermore, all funeral plans compared on Before You Go ensure that should you move home, your funeral plan will be transferred to another local funeral director.
3. Your funeral money is put in trust or used to buy a life insurance policy
To remain compliant with the Financial Conduct Authority (FCA) exemption rules*. The funeral plan provider must set aside the money to pay for your funeral into a whole of life insurance policy or trust which meets certain conditions. With the funds being released to pay the funeral director at the time of your funeral.
Also any fee that the funeral provider deducts from the amount you pay for your funeral plan. ( For example for administering the plan), does not affect the funeral service being provided. As your funeral plan is a legally binding contract.
*Financial Services & Markets Act (Regulated Activities) Order 2001 (RAO). https://www.legislation.gov.uk/uksi/2001/544/article/60
4. You receive your funeral pack within 30 days
You will receive your funeral pack from the funeral plan provider within 30 days from your application being processed. The pack will confirm the content of your plan.
Following this a second pack will be provided. Which you should pass this on to the person you trust. (Your "representative", e.g. next of kin or executor of your Will), who will oversee the funeral arrangements. The pack will contain instructions on what they need to do when your funeral is needed.
Lastly, the funeral plan will cover the broader elements of your funeral, such as whether there will be a funeral ceremony, the standard of coffin etc. For the finer detail, consider writing your funeral wishes down in this free Funeral Wishes Planner. We would advise leaving a copy in the funeral pack for your representative to pass on to your funeral director. You can get your free copy of the Funeral Wishes Planner, by clicking the button below.
5. Get 100% refund if you change your mind within 28 - 30 days
If you change your mind after you've bought your funeral plan, you have between 28 and 30 days in which to cancel for a full refund. However, if you cancel after this time, you may receive a refund minus a cancellation fee, or in some cases you may lose the money you have paid to date entirely.
This is because terms vary between plan providers. So check the plan provider's terms and conditions before you buy to ensure you are fully aware of the implications if you should want to cancel.
Good to know
If you die before all payments have been made, your loved ones will have to pay the balance unless the funeral plan carries a 'price promise'. In this instance, the plan provider promises to pay your funeral after 12 or 24 months of consecutive instalments. If loved ones are unwilling to pay the balance, the payments are typically returned less a cancellation fee.
6. How do prepaid funeral plans work when you need to activate them?
In the event that the funeral plan needs activating, your representative calls the number in the pack, which will either go through to the appointed funeral director or the plan provider. They will take care of the funeral arrangements from that point.
However, if the plan did not include full cover or an allowance towards the third-party cremation or burial fees, these would need to be paid from your Estate or by your personal representative before the funeral can go ahead.
Finally, it is important to understand that a funeral plan is not an investment with a financial return. Instead, the plan delivers the funeral service.
Funeral extras
Depending on the terms of the plan and how you pay for it (i.e. in instalments or fixed monthly payments), extra services can often be added to the plan during the lifetime of the plan or at the time of the funeral arrangement.
