Want to leave money for your funeral costs?
Here are some options to think about
Escalating funeral prices mean that all of us should be thinking about how our funeral will be paid for, when the time comes. It’s not a subject most of us what to think about, but it is important to do it.
Funeral poverty in the UK- the gap between the average cost of a funeral and the average amount of money people leave behind to pay for it – is growing every year. In fact the 2014 cost of dying report from SunLife states that funeral poverty now stands at a whopping £200m in the UK.
So, if you don’t want to saddle your family with your funeral bill, what could you do?
Typically, there are three main options for people to leave money behind for their funeral:
1. Putting money away regularly into a savings account
2. Taking out an over 50s life cover plan or similar
3. Buying a funeral plan
Each has its own pros and cons so let’s take a look at each one in turn.
Saving for the ultimate rainy day, the affordable and flexible way to leave money for your funeral
The key benefits of saving regularly are flexibility and affordability; you choose how much to pay in each week or month and in most cases, you can access the money whenever you need it. This is simple to set up and easy to manage. If something unexpected crops up, you can always dip into the money when you need it. And, if you’ve managed to save more than is needed to pay for your funeral, then the rest can be left as a legacy.
The downside, and it’s a big one, is that you can never know how much money you’re going to be able to leave for your funeral costs because you don’t know how long you’ll be able to save for and you don’t know how many times you’ll need to dip into your fund for other things.
Also, whilst you’re saving, the costs of funerals are going up every year. (Of course, we don’t know what will happen to funeral prices in future years, but it’s probably a fair bet to say that they won’t be coming down).
So, you could be leaving a gap between what you’ve saved and the cost of your funeral, a gap your family will have to find the money to fill.
Over 50s insurance – the affordable way to give you certainty about what you’ll be leaving behind
These types of funeral plans usually offer low monthly premiums, making them affordable and generally, you don’t have to answer any health questions or take a medical as you’re cover is guaranteed, so they’re easy to take out.
Once you’ve been paying in to the plan for a year, or in some cases, two years, your full insurance cover will be payable, and as you can’t dip into the money, this all means that you’ll have the certainty of knowing exactly how much money you’re leaving behind towards your funeral costs.
The biggest draw back of these types of plan is that you have to keep paying your premiums, either until you die or sometimes until you’re a certain age, like 90, so depending on how long you live, you could end up paying more in that the plan pays out. Also, the pay out is usually fixed and so doesn’t keep up with rising prices so the real value of your pot goes down over time.
Sometimes, there is an arrangement you can take with these plans where you assign the pay out to a funeral provider and they agree to deliver a certain type of funeral. This means that you are effectively fixing the rice of your funeral at today’s prices, and putting some basic arrangements in place so that will make it a bit easier for your family when the time comes. For more information on Over 50 life insurance guide for more information.
Taking out a funeral plan – all planned and all paid for!
If you can afford it, taking out a funeral plan is probably the best option as the cost to you is certain, you’re fixing your funeral at today’s prices and all the arrangements are in place, as you want them, so your family just has to make one call when the time comes.
There are lots of funeral plans to choose from and also different payment options. But be careful, if you choose to pay in installments, any duration over a year attracts a significant additional cost (sometimes 25% more, funeral plan providers call it an administration charge but it is basically interest) and also, your funeral isn’t guaranteed until you have paid in full.
The other thing to check is what is included, some plans can appear cheaper, but they often won’t include all the costs, so your family could still be facing a bill. Check our funeral plan comparison and funeral planning guide for more information.