Funeral planning in advance is something that most of us do not want to contemplate. But taking that step to pre-plan will end up alleviating the emotional and financial burden on your family in the future.
There are two typical possibilities to cover the expenses: Funeral insurance and funeral plans. They are similar, but financially, they differ greatly. We will discuss some of the differences to see what suits you best.
What is funeral insurance?
Funeral insurance, alternatively known as over 50s life insurance, is a type of monthly premium insurance that pays a certain lump sum upon death. The concept is that your loved ones may use that money to cover your funeral or anything they might require.
- You tend to pay life premiums on a monthly basis or until you reach a specific age (such as 90).
- The payout is assured, as long as you have been making the payments.
- It is a cash gift, which is not associated with a particular funeral provider.
Financial pros
- Provides flexibility. Your family decides how to spend the payout.
- Eligibility is easy, even with health problems.
Financial cons
- Assuming that you live long, you might find yourself paying higher premiums than they pay off.
- The value of the payout could be degraded by inflation.
What is a funeral plan?
This is a prepaid plan. You prepay particular funeral services, such as the coffin, ceremony, and cremation or burial. It could be in a single payment or in instalments over a fixed time (e.g., 12 to 60 months).
- Funerals With Grace plans are linked to a particular funeral provider.
- You lock in today’s prices, even when costs increase subsequently.
- The plan normally provides the services of the funeral director and major arrangements.
Financial pros
- You are specifically aware of what you are paying towards and what you are getting.
- No danger of paying too much. You won’t have to deal with your loved one receiving unknown bills because a procedure you are covered for was not paid for.
Financial cons
- Does not always include everything, e.g., flowers, headstones, and catering. Family and friends may be left with additional expenses.
- Less flexibility. You are bound to certain services and providers.
Which should you select?
It actually depends on what you consider important and your budget.
A funeral plan can provide you with more control over the particulars of the funeral. It may be preferable if you enjoy securing the costs at the current price.
Funeral insurance may be more appropriate if you prefer to leave your family with cash to spend as they choose. That is, if you don’t mind the ongoing payments.
Some individuals actually opt to have the best of both worlds: A basic funeral plan, but also a small insurance policy to help with the extras.
The bottom line
There is no right or wrong alternative. It is about what will best fit your circumstances. Just by being aware of the distinction, you are already making a considerate action towards alleviating the pressure on the people that you love the most.