It’s not something we tend to think about until it happens to someone close, but funerals can be expensive and quite a shock when someone dies. If you think about it, it’s perfectly understandable why people choose to take out funeral insurance or funeral plans to pay for all or part of the cost of their funeral.
When funeral costs are paid for in advance, it means less for your loved ones to worry about; however, it’s also a cost-effective way of planning for the future.
If you’re not sure whether it’s worth the expense now let’s look at some of the advantages.
The Advantages of Taking Out a Funeral Plan
The main benefits of a funeral plan include:
- You’re paying for your funeral at today’s prices. In effect, you’re freezing the price of the main parts of a funeral.
- Your loved ones won’t be left stressing over where the money is going to come from because the funeral services are already paid for. They won’t have to wait to access money from your estate and the cost of your funeral won’t be paid from your small business assets.
- You get to secure the send-off you prefer, including the music and location. This saves your family from making such decisions while they’re dealing with their bereavement.
The Drawbacks of a Funeral Plan
There are a few disadvantages it’s worth taking the time to understand. For example:
- There is no guarantee that the full cost of your funeral will be covered.
- Extras such as a wake, headstone, and flowers tend not to be included.
- Should funeral prices go down in the future, you may have paid more than the going rate.
- If you choose to pay for your funeral plan in instalments, there will be interest charged on what you owe.
What is a Funeral Plan?
A funeral plan is a way of paying for specific funeral services in advance. When the time comes, it means your family doesn’t have to cover the bill for those services. In addition, they won’t have to decide on certain details of your funeral. The services are paid for at today’s prices. This can be very reassuring, especially with the rising cost of funerals.
There are several ways you can buy a prepaid funeral plan: from a funeral director, a funeral plan provider, or an intermediary. Generally, there will be certain tiers or levels to choose from and this determines the cost and how extensive the services are.
As well as buying a funeral plan for yourself, it’s also possible to purchase one for someone else, such as a parent. Joint funeral plans are also available and can be used when the first partner passes away.
How Does it Work?
When you take out your funeral plan, you’re paying upfront either in one lump sum or in instalments. Payment terms vary but could be spread over as much as 30 years. Bear in mind that spreading payments over longer than 12 months means you’ll be charged interest.
The money you pay is held in trust or paid into an insurance policy. When you pass away, your loved ones must inform the funeral plan provider so that the funeral can be scheduled and carried out and the costs covered by the money set aside.
If you decide to take out a funeral plan, be sure to tell your family about it including the name of the provider and what the funeral plan includes.
What’s Included in a Funeral Plan
Funeral plans tend to have upper limits and exclusions. The provider doesn’t always guarantee to cover the cost of the whole funeral. Also, basic plans tend to vary across the different providers.
To give you some idea of what’s included in most basic funeral plans, here are some examples:
- The services of a funeral director including transport
- A contribution towards third-party fees or disbursements
- The cost of a basic coffin
- A family viewing in a chapel of rest
- A hearse to transport the deceased
- A limited choice of funeral slots
If you choose a premium funeral plan, it may cover the cost of limousines for mourners, a more flexible choice of date, time, and location for the funeral, and a more premium coffin.
What are the Exclusions?
The exclusions will depend on the level of your funeral plan, but generally, you’ll find the following won’t be fully covered or might not be covered at all.
- The cost of the burial plot and embalming
- Orders of service
- Flowers
- A memorial
- A wake
- Newspaper notices
If you want these and similar expenses to be covered, it’s possible to personalize your plan and pay extra. However, it all depends on the funeral plan provider and the level of the plan.
So, are funeral plans worth it for the small business owner? That all depends on how easy you want to make it for your family when you pass away.