In the end, it pays to be wise
Funeral plans are now regulated, but there are many drawbacks, says Paul Lewis.
Are funeral plans worth it? I generally say no. And that’s still my view even though they’re now regulated by the Financial Conduct Authority and if a firm goes bust in the future, your money wouldn’t be lost. (The FCA took them over after some spectacular failures, which customers of those firms are still recovering from.) Now you just have to decide if they are value for money.
They’re sold like this: you pay a funeral firm for your funeral now, before you die. It then guarantees that it will provide the funeral you have chosen for that price, however long you live and however much funeral costs have risen. But I remain cautious.
The plan will not cover everything. Exclusions include, among others: a burial plot, some cremation costs, a headstone, embalming, flowers, catering, a second car for mourners and recovering your body if you die a long way away. If you move house then you may have trouble finding a local firm to take the plan over. And if the firm does go bust then you – or your relatives – will have to get your money back from the Financial Services Compensation Scheme and start again. Many plans are sold on an instalment plan – these are not a good idea, as you’ll often end up paying more, and if you die too soon the cost may not be covered.
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If you’re tempted by a funeral plan, ignore the sales pitch and research the subject carefully before committing yourself. I would instead suggest paying into a high-interest savings account labelled “funeral” (either regularly or in a lump sum) and letting your relatives decide how to spend it when you die. Funerals are for the living, not the dead.
One thing is absolutely certain. Never buy an over 50s life insurance plan where you pay a small amount each month for life. They are often marketed as providing money for your funeral, but they are not funeral plans and most people pay more in than their relatives get out when they die. Ignore celebrity endorsements, free pens or £100 cash back. They are very bad value for money, and the longer you live the worse they become.