Prepaid funeral plans vs over 50s plans – How could your client cover funeral costs?

Who should consider a funeral plan?

A funeral plan is ideal for clients who:

• Want certainty that the cost of their funeral will be covered when the time comes
• Have specific wishes regarding the type of funeral they want to have and how it’s carried out
• Are worried about how their loved ones will cope planning a funeral and finding the money to cover the cost at an already stressful time
• Have the funds available to pay for the plan upfront or to pay over 12 months to avoid instalments fees

Funeral plan key pointers

Funeral plans seem to provide a simple solution to covering funeral costs in advance. Whilst this is mostly true, there are some key things that your client should look out for.

Firstly, if they pick a plan and decide to spread the cost in affordable monthly instalments, then they may have to pay additional instalment fees for the convenience.

Usually, if the payment term for the funeral plan is over 12 months, then the additional fees will apply. This means the total amount they end up paying will be more than what the plan is worth.

However, if the payment term is less than 12 months or they pay for the plan in one lump sum, then they can avoid these extra charges.

Some funeral plan providers offer an additional benefit which is a guarantee that they’ll cover the client’s funeral services after a set period, such as the first one or two years.

In which case, if the client passes away after this initial period, then they may end up paying less than what the plan is worth, and their family won’t have to cover the remaining balance.

Another key pointer is that a funeral plan won’t cover everything for a funeral. Some costs such as doctors’ fees, a burial plot and flowers won’t be included, meaning your client’s family will still need to pay for these when the time comes.

If the client is closer to the age of 50, then they may be able to secure a sum assured with an over 50s plan which will help to pay for these additional expenses.

What are the pros and cons of an over 50s plan?

The main pros and cons which you may highlight to a client are as follows:

Advantages

• Provides peace of mind that their loved ones will receive a fixed cash lump sum after their death
• Monthly premiums can be really affordable, particularly for clients in their 50s
• Pay out could be sufficient to cover funeral costs as well as additional expenses, particularly if the client is closer to the age of 50
• Can be written in trust to protect the pay out from inheritance tax (IHT) and probate
• Regulated by the FCA

Disadvantages

• Pay out may not be sufficient to cover the total cost of a funeral, particularly if the client is older
• Depending on how long your client lives, they could pay more into the policy than what’s paid out (as premium payments are required until the age of 90 or until death)
• Pay out isn’t protected against inflation
• Policy can be cancelled but your client won’t receive any money back.