Reduce The Financial Burden On Your Loved Ones
In 2017, the average cost of a funeral was £4,078. This is projected to rise to £4,944 by 2022. By taking out a funeral plan, you can ensure that some of these costs are covered in advance.
Exactly which of your costs are covered depends on which plan provider you choose, but most providers guarantee to cover the funeral directors costs for arranging and conducting the funeral. It is important to compare funeral plans carefully to choose the best one for you.This means you can fix these costs at today’s prices, meaning the sooner you take out a funeral plan, the more money you are likely to save.
There are also additional costs associated with a funeral, such as cremation or burial fees. Different plan providers treat them in various ways. For instance, some providers only offer a contribution towards costs associated with Cremation and for Burial a contribution that doesn’t rise in line with the Retail Price Index. Likewise, some providers can guarantee to cover these costs, while others exclude them completely.
Planning ahead also helps save your friends and family additional worry when you die. A funeral presents a large amount of money for your loved ones to find when you’re gone. With a prepaid funeral plan, you can rest assured knowing that you are helping to reduce the financial burden on your loved ones.
It also relieves your family from having to make many of the difficult decisions about your final farewell. Your family can avoid painful deliberations over what your last wishes were and you can avoid them overspending because they are trying to fulfil your wishes.
Funeral Plan or Over 50s Life Cover?
Funeral Plans and Over 50 Life Insurance have a few key differences:
- With a funeral plan you are organising and financing your funeral in advance at today’s prices. When you die, your family activate the plan and everything is taken care of by the funeral director in accordance with your wishes.
- With an Over 50 Life plan, your family will receive a cash sum that can help them pay for the funeral.
A prepaid funeral plan lets you arrange and pay for your funeral services in advance at today’s prices. You save money by bypassing future inflation and removing the financial and emotional worry for your family. They won’t have to arrange and pay for the funeral when the time comes.
With an Over 50s life insurance plan, the amount you get when you die gives your family the flexibility to choose how they spend the money, though this is usually to go towards funeral costs.
A funeral plan gives you certainty that your funeral costs will be covered and your wishes adhered to. So you are safe in the knowledge this is guaranteed. The Over 50s plan only gives a lump sum so downsides are that it might not cover the cost of a funeral in the future and your family still need to organise, plan and pay for the funeral.
When weighing up Life Insurance vs Funeral Plans, remember that with an Over 50 Life Plan, the cash lump sum paid out is usually fixed. Inflation will reduce its value over time.
Also many Over 50 Life Insurance Plans offer a funeral benefit option. This is not the same as a funeral plan, but gives you the opportunity to take advantage of between £250 to £300 extra towards your funeral costs. This will also give you the chance to specify any wishes you may have regarding the funeral arrangements.
As far as budget is concerned there are several options available. Funeral Plans can be paid for with a single payment of between £3,000 to £4,000 depending on your chosen level of service. Or you might choose to pay in monthly instalments of between 1 to 25 years.
Over 50 life plans range from around £4 to £50 a month depending on how much you want to pay and how much cover you want.
So if you have the money available, a Prepaid Funeral Plan could be a cheaper option as you are freezing your costs at today’s prices. If you prefer to stick to a lower monthly budget but want cover soon, then you may prefer life insurance.
What Is An Over 50's Life Plan?
When browsing Funeral Plans you may have come across something called an Over 50’s Life Plan. This is something different than a Funeral Plan.
Over 50s life insurance is a type of life insurance for anyone aged over 50. You pay for this with regular monthly instalments and when you die, it pays out a lump sum. The money could be used towards your funeral costs, to pay off any existing debts or simply as a gift to leave your loved ones.
Many of the big insurers offer Over 50s Life Insurance Plans, which offer a cash sum when you die. The advantage is that you are guaranteed to be accepted. There are no health questions or medicals. This means that if you’re between 50 and 80, sometimes 85 depending on the policy, you will not be turned down.
Over 50s life plan premiums are usually fixed. This means you choose a premium that suits your budget and desired level of cover and it will generally stay the same price. Payments can start starting from around £10 and go up to about £50. However, you MUST keep up the monthly payments otherwise your cover will lapse. This means that if you miss a payment, you will not get any of the money back that you’ve paid in.
Most insurers offer free cover if you live over a certain age (usually 90). This would mean that when you get to that age, you can stop paying your premiums but your policy would remain in force
Reasons Not To Choose An Over 50’s Life Plan
You might end up paying more into your policy than you will receive. If you took out an over 50s life insurance policy at 50 and paid £25 a month for £10,000 of cover, you’d have paid more in than you could receive if you live past 83.
The funeral plans and payment of the funeral is not made in advance so whilst your family will receive a payout they still have to make the arrangements and the cost of the funeral is NOT fixed at today’s prices so will more than likely cost significantly more.
The other disadvantage of a fixed sum policy is that the amount could be negatively affected by inflation. Whilst the lump sum can appear a lot of money at first, it might not be that much at all in 20 or 30 years time.
There are a few insurers that offer life insurance on an incremental scale for over 50s; where the sum insured and the premiums are reviewed every year and adjusted in line with inflation. This type of life insurance is a good benefit, though there is added risk: you need to be certain you can keep up with the increased payments over the years, otherwise the cover will lapse.
Beware: Insurers will almost always insist that you have paid into your over 50s life plan for a minimum of up to one or two years before you can expect the full payout. If you die before this time period, your beneficiaries will usually receive a sum equivalent to the amount you have paid up to that point, but If your death is a result of an accident in the early stages of the plan, you would normally receive the payout in full.
Over 50s life insurance has no cash value and if you decide you no longer want to keep up with the payments, it is worthless. Also, your beneficiaries could be liable for inheritance tax of 40% on the proceeds of your life policy, so in this respect it will be worth a lot less than you had hoped. However, money received from life insurance policies don’t usually attract income or capital gains tax
To try and bypass the inheritance tax issue, you can write your policy ‘in trust’, but you must ask your insurer or financial adviser about how to dot this.
What About Funeral Plans For Under 50s?
The average age of customers buying funeral plans is 55-65 years old. However, if you are able to budget some extra, there are benefits from being able to set some aside for the future, now. Anyone over the age of 18 can usually get a funeral plan. If you do so, the funeral director’s services are guaranteed to be frozen at today’s prices, and protect you against future inflation.
For example, if you buy a funeral plan at 40 and live until 80, your family will be paying the same prices as 40 years previously.
If you take out a funeral plan when you are under 50, whilst you still have many years of a regular income, this can help reduce the potential financial and emotional strains that leaving it until later in life.
You can make flexible payments and by starting so early, you may be able to make smaller monthly payments over a longer period of time. This means less to pay when you’ve retired.
What Do Under 50s Typically Need From A Funeral Plan?
With the exception of a just small number of providers, prepaid funeral plans for under 50 year olds are available from a large number of companies. However, funeral plans for the under 50s may have slightly different requirements. It’s not uncommon now for the younger generation to want to plan for more personalised funerals, in a more pre-planned way.
Cost, however, remains the biggest draw and with funeral prices likely only to go further up, it makes sense that the earlier you can start your plan, the lower the overall cost will be and the easier it may be for your family when the time comes.
The truth is, it seems, there is very little difference in funeral plans whether you are under or over 50 years old. The difference lies within the companies acceptance policies and whether you are eligible to be considered for one. The main benefit of paying for a funeral plan under the age of 50 is that hopefully, you live a long and full life and end up paying a small fraction of what a funeral would cost at some point in the far future.
As long as you carefully compare funeral plans, and know what you are paying for, they are definitely a superb way of easing the burden on your family and saving money in the future.