#3 : Make sure it is affordable
Funeral plans typically cost between £3,000 – £4,000. Funeral plan providers offer a number of different ways to pay for their funeral plans. One lump sum, installments over periods from 12 months to 30 years and via a life insurance policy. If you are in good health and have the money saved then we would always recommend paying as a lump sum, with funeral inflation running above the level of interest it makes sense to do this.
If you don’t have the lump sum or have a chunk of it saved then paying by instalments might be an option. Remember that many funeral plan providers will charge you an administration fee – the equivalent of an interest charge – if you want to pay by installments over a period of more than 12 months. Most don’t charge you anything extra to pay over 12 months or less. Some of these administration charges can be quite high so make sure you know what you are being charged before making your choice.
The key thing to remember is that the funeral plan is only paid for once you’ve finished paying the installments – if you were to die part way through your installments period your family would need to pay the remainder of your installments in order to have your funeral. Bear this in mind, particularly if you decide to pay installments over a long period of time. The only advantage of paying by installments over simply saving the money up in savings account is that you lock in the cost of your funeral at today’s prices.
If you decide that the installments options are not affordable then you could choose to pay using a life insurance plan. This can be a good option if you are in poor health and you expect to live at least two years, as once you have lived for two years your funeral cost will be covered by the proceeds of the life insurance plan. The downside of these plans is that depending on how long you live you could end up paying in more than the cost of the funeral plans – so if living to a ripe old age runs in your family then this payment options may not be for you.