Pros and Cons of Pre-Paid Funeral Plans

Newly_retired wrote: »

Correct me if I'm wrong but isn't there a possibility that if you live a long time you could end up paying far more into a plan than the actual costs of the funeral?

No - most of them are fixed price, payable either as a lump sum or by instalments. You don't keep paying the latter once the plan has been paid for.

frugalmacdugal wrote: »

Hi,

Stuart_W wrote:

My wife and I (both in our 30's) are currently paying monthly instalments for a funeral bond and will have soon completed this.

just can't see the point of somebody so young taking out this kinda plan,

What everyone seems to be missing in this thread is that the costs of funerals are currently constantly rising well in excess of inflation or interest rates, and have been consistently for a long time.

The average cost in 1997 was £1,230, in 2001 it was £1,688 and in 2008 £2,549. It is predicted that it could be £4,017 in 2017. Continual upward cost pressures on crematoriums and cemeteries is a major cause behind this price inflation.

£1,230 put in a savings account in 1997 earning 5% interest would now be worth £2,353 today and £3,337 in 2017. And that's if earning 5% (gross) throughout that time is possible, without faffing about regularly to chase the best rate.

It may provide "a better return" than a savings account, it may provide a similar return. I'm not particularly bothered by either. The main thing is that it provides a guaranteed return - of paying funeral costs, whenever the need arises.

I maintain it is a good way to ensure this side of things is covered, no matter what else may happen financially to the rest of our affairs, this is something sorted, providing a little piece of mind to the family members dealing with matters at a very difficult time.

Third party charges including cremation fees, doctor's fees and minister's/presiding official's fees are covered in the plan I have, and in most plans that I'm aware of offered by the co-op.

Perhaps this is why the overall costs quoted appear inflated, as the co-op include third party costs.
http://www.co-operative.coop/funeralcare/funeral-plans/Choosing-the-right-Funeral-Plan/Important-factors-to-consider/

Am I being dim here? It covers all possible future increases in costs - this is, for me, one important point of plan. It is by ensuring these costs are covered that such a plan is able to provide the peace of mind that it does.

The_Co-operative_Funeralcare_Website wrote:

Third party charges (also known as disbursements) are payments the Funeral Director will make on your behalf. They include cremation or burial costs, Doctors’ fees and the Minister or Officiant’s fee.
When comparing funeral plans from different providers, it is important to read the small print carefully to see if the plan includes a ‘contribution’ or 'allowance' towards third party charges.
The Co-operative Funeralcare fully guarantees all third party charges specified in the Plan. This means that your family will have no more to pay for these items, even if prices increase in the future.

I prefer to have funeral costs paid out of my estate. I would only consider such a plan if I had no savings but still had an income larger than I needed, something I find hard to envisage.