If you are considering buying a prepaid funeral plan and have done your research online, you may have come across some discussion around problems bereaved families have experienced with the funeral plan when it has been activated.
The purpose of this article is to address, with complete transparency, the three most common prepaid funeral plan issues. We will also look at the causes of those problems and how you can avoid them.
Who is this guide for?
The truth about prepaid funeral plans problems
At Before You Go, we are passionate about the benefits of funeral plans. We have first-hand knowledge of arranging funerals at people’s time of need and have seen the financial and emotional difficulties families face when the funeral isn’t planned. That’s why we’ve made it our mission to be the best impartial funeral plan comparison website and educator of prepaid funeral plans in the UK.
As we delve into the problems people have experienced with funeral plans, in the spirit of complete transparency, we would like to stress these ‘problems’ are both rare and often completely avoidable.
What do we mean by ‘rare’?
The Competition & Markets Authority report 2020 commented that the Funeral Planning Authority dealt with “a small proportion” (0.02% to be precise) of all financial product complaints resolved by the Financial Ombudsman Scheme (FOS) that same year.*
We want to share this information with you in the hope you and your family will never end up experiencing the same difficulties and problems.
The 3 most common funeral plan problems and solutions
- 1The funeral plan didn’t cover the cost of the funeral
- 2The funeral plan didn’t cover the cost of the funeral extras
- 3More money was paid into the funeral plan than the funeral plan eventually cost!
The funeral plan didn’t cover the cost of the funeral
It’s important to understand that a prepaid funeral plan is made up of two parts:
1. the funeral directors fees; and
2. the third-party fees (also known as “disbursements”), e.g. the burial or cremation fees.
A prepaid funeral plan guarantees to cover the cost of the funeral director’s service, no matter how much these costs may rise in the future.
Costs for third-party services are outside the funeral director’s control. They aren’t included in all funeral plans.
What’s included in the funeral director’s service?
What are the common issues?
The details of what is and is not included in the funeral plan have not been correctly communicated by the seller. This could happen unintentionally – by an inexperienced staff member.
The seller is acting on behalf of one plan provider that pays them the highest fee.
Lack of knowledge
The buyer has little or no experience of arranging a funeral and it's not evident what elements may be missing from the plan that they had assumed would be covered.
Not sharing the detail
The buyer has missed the crucial step of sharing the funeral plan details and the fact that there will or may be some additional costs to pay at the time the funeral is needed.
Why don’t funeral plan providers include third-party cremation or burial fees as standard?
The reason why some funeral plan providers choose not to include third-party cremation cover, and most funeral providers choose not to include burial cover, is that these fees differ so widely throughout the UK.
A UK-wide funeral plan price could unfairly penalise people in areas where these cremation or burial fees are lower. It would also make the core principal of a funeral plan (i.e. to cover the funeral director's fees) too pricey.
To make funeral plans affordable, funeral providers offer three types of plans that will pay all, some, or none of the third-party fees. Otherwise known as "Guaranteed", "Contribution" and "No contribution" funeral plans.
Third-party fees example (2020)
Beckenham crematorium £1,070
Belfast crematorium £392
Kensal Green cemetery £1,550
Belfast cemetery charges £608
Source: Cremation Society – Jan 2020
What’s the solution to ensuring the funeral plan covers the full cost of the funeral?
Buy a 'Guaranteed' plan.
If you want to ensure the funeral director's fess and the third-party cremation or burial costs are covered, you will need a ‘Guaranteed’ funeral plan.
You should be aware that some cremation plans don’t always include the doctors’ cremation certification fees, because they aren’t always needed – it depends on the circumstances surrounding the death. (Doctors’ fees aren’t applicable in Scotland).
If you can’t afford a ‘Guaranteed’ funeral plan, your next best option would be a ‘Contribution’ plan.
Buy a 'Contribution' plan
A ‘Contribution’ plan sets aside an amount for the third-party cremation or burial costs. The amount grows, typically in line with Consumer Price Index (CPI), until the funeral.
Each funeral plan provider sets their own level of UK-wide contribution. This is the amount they feel would most likely cover the cremation or burial costs at the time the funeral is needed. Any shortfall would need to be paid from your estate or by your next of kin at the time of your funeral.
If you live in an area where cremation or burial costs are particularly high, depending on the plan you buy, you may be able to top up the contribution amount. and this may provide a better rate of return than putting money aside in a regular savings account. (Please note, this does not constitute financial advice).
'Price promise' plans
Another option would be to consider a funeral plan that promises to pay the full benefit of the funeral plan once a certain number of repayments have been made, e.g. 12+ months.
If you die before the qualifying period, and (for some plans) the death is not accidental, the balance of the funeral plan would need to be paid from your estate or by your personal representative.
Bear in mind, if you do end up paying the plan in full, the cost of the ‘price promise’ funeral plan could be more expensive than a plan without a price promise.
Have the conversation
Whichever funeral plan you settle on, make sure you give your family or representative a copy of your funeral plan pack and let them know if they can expect to pay a balance at the time of the funeral.
Problem: Cost of funeral plan doesn’t cover the cost of the funeral.
Solution: Buy a guaranteed plan. Alternatively, consider a contribution funeral plan or a plan with a price promise. Let your family know the type of plan you have bought and if they can expect to pay some or all of the third-party cremation or burial costs at the time of the funeral.
The funeral plan didn’t cover the cost of the third-party funeral ‘extras’
Third-party funeral ‘extras’ are the non-essential items often bought at the time of arranging a funeral, e.g. floral tributes, order of service stationery and funeral notices.
The majority of extras aren’t normally included in set funeral plans, because not everyone wants them. To include them would push up the price of the funeral plan. Extras you may find included are the scattering of cremated remains and a set of thank you cards.
What is the common issue?
A problem occurs when the funeral plan buyer assumes third-party extras are included in a funeral plan.
What’s the solution to covering third-party funeral 'extras'?
Depending on the funeral plan you choose you may be able to add a contribution to your plan towards the cost of the extras. You choose the amount you would like to add to the plan to cover these costs, or your funeral plan advisor can guide you.
The contribution will grow in line with the Consumer Price Index (CPI) or in some other way, until the funeral is needed. If there’s a shortfall, the balance will need to be paid at the time of the funeral to the funeral director from your estate or by your representative.
Problem: The funeral plan didn’t cover the cost of the third-party funeral ‘extras’.
Solution: Pay a contribution towards the extras.
More money was paid into the funeral plan than the funeral plan eventually cost!
If you paid for your plan through the lower Fixed Monthly Payment (FMP) option (i.e. payments up to age 90 or for life), depending on when you took out the funeral plan and when you die, you might end up paying more into the plan than the value of the funeral when it’s needed.
What’s the solution to not paying more into a Fixed Monthly Payment funeral plan than the funeral is worth?
Look for a funeral plan that includes a rebate on the overpayment.
The overpayment amount is the difference between the total amount you have paid into the plan and the sum paid out to the plan provider to fund your funeral. If the plan is deemed to be in a state of overpayment, your estate will be eligible for a rebate of the overpayment of up to 100%. The amount will depend on the type of plan and age of the plan holder at the time the policy is taken out and the date of death.
Golden Leaves is currently the only funeral plan provider to offer an Overpayment Rebate Promise. Terms apply.
Problem: More money was paid into the plan than it paid out to the funeral director.
Solution: If you're going to pay for your funeral plan with the Fixed Monthly Payments (FMP) option, consider buying a plan that includes an Overpayment Rebate Promise.
What is a set funeral plan?
A set funeral plan is a package of all the funeral director’s services you would need. Amendments to a set plan can often be made at the time of taking out the plan or at the time of the funeral.