Funeral pre paid plans

Cyrill18

Just wanted to warn others my mother in law took out a plan to cover her funeral costs she took it out in 24.11.2000 and has paid £12 each month since then she has recently passed and the policy only pays out £1480 it’s absolutely shocking! £3348 paid she is down £1868!

Keep_pedalling

These plans are not great value, but like all insurance policies some people pay in a lot more in than the policy pays out to offset those policy holders who die early and pay in less. I would rather be in the former group of policy holders. 

We currently pay into a policy that will pay nothing if we don’t both die in the next few years, but it will cover IHT on some gifts we have made a couple of years back. I am really hoping it is money wasted rather than needed.

WYSPECIAL

Cyrill18 said:

Just wanted to warn others my mother in law took out a plan to cover her funeral costs she took it out in 24.11.2000 and has paid £12 each month since then she has recently passed and the policy only pays out £1480 it’s absolutely shocking! £3348 paid she is down £1868!

You probably had to pay in for a minimum of 12 months. That means someone else only paid in £144 to get £1480. But they missed out on 22 years of living. 

Spendless

I think it depends on what you purchase. My Mum bought one for my Nan in 2015 when she went into a care home. She paid £5K for it. At the time a funeral in our area was about £3.5-£4K, so she bought at 'tomorrow's prices'  Nan lived a further 8 years and Mum was told she'd had the equivalent of £7k worth of funeral costs at todays prices. Some things still had to be paid for eg the wake, but I believe this cost on top of the plan was  around £250.

Having the plan in place meant some of Nan's estate was saved as buying a funeral plan is not counted as DOA. Without it all Nan's funeral costs would have come from what she had left.

If Nan had died not long after going into care, quite a possibility since Nan was by then 91 with dementia, Mum would have paid over the odds for the plan compared to just paying Nan's funeral from her estate. . She took a gamble and it paid off.

BooJewels

There's also the peace of mind aspect - if your mother-in-law felt at peace knowing that it was paid for and would save family that worry or potential expense, then she got good value from it as she went along - sounds like a bargain at just under 22p per day (excess paid of £1,868 / 8497 days since she took the policy).  Would you - or perhaps more importantly your wife - have been happy if she's got a better deal, but had died in late March 2011 - as that's how long ago she would have 'broken even'.

Like others have said, we all pay for insurance hoping that we're throwing money away.  Your warning is a bit like saying 'don't renew your house insurance, as if your house doesn't burn down, you'll have wasted money'.  There are some aspects of life where not getting value for money is a good thing - I think you'll be much happier about it if you shift your thinking and rejoice that she lost money on this occasion!

WYSPECIAL

There is also a big difference between a sum assured policy which will pay out a specified amount on death and a pre paid plan where you have already paid for certain services in advance at an agreed price.

Nearlyold

Sounds like your MIL didn't buy a prepaid funeral plan but rather took out life insurance- perhaps one of the "Over 60s plans" you see advertised in back pages of the Daily Mail etc. You need to die fairly promptly after taking them out to get the best value from them.