Funeral plans are supposed to act as a sort of savings scheme to make sure that people’s funeral costs are going to be covered. More than 200,000 of them are taken out each year, with these numbers constantly rising, showing there’s a huge group of people in the UK eager to make sure their families aren’t saddled with debt when they die.
But how well does this totally unregulated market work for consumers? Fairer Finance (commissioned by the funeral company Dignity) have taken a peak into the sometimes murky world of funeral plans. They say “the combination of a fast growing market fuelled by high pressure sales to a potentially vulnerable customer base is creating a perfect storm”.
At Fair Funerals, we say that if you’re on a low or uncertain income but want to plan ahead for your funeral, you might be better off avoiding funerals plans altogether. Instead we suggest taking out a savings account. This way, you can pay in whatever you can afford. We suggest considering credit unions, as very often they will pay out a sum to your next of kin when you die. Of course it’s important you tell your next of kin about this, as well as what kind of funeral you’d like.
Funerals are expensive, and most people don’t want to leave their family saddled with debt. With 1 in 7 of us struggling hugely to afford a funeral, these are very real concerns. So we encourage people to plan what kind of funeral they want and how they’re going to pay for it. But we also have to protect ourselves from ruthless sales tactics and from buying a funeral plan that isn’t good value for money.
Will the plan cover the full cost of the funeral?
Third party costs (also known as disbursements) are prices outside the control of a funeral director, including doctors’ and crematorium fees. From 2015-2016, third party costs rose by over 8%, whilst the amount funeral plans will pay out for these was uprated by a meagre 1.3%. This fails to take into consideration that funeral prices and third party costs have risen way above inflation for 30 years now (with no sign of slowing down). Fairer Finance’s report points out that “many consumers buy under the mistaken belief there will be nothing more for their family to pay”. You should find out whether or not your plan covers third party costs, and if it covers them, whether or not it commits to keeping up with inflation.
Losing your money if you miss a payment
If you ever find yourself unable to make a payment for whatever reason, whether you’re on a low or uncertain income, or you just can’t afford it that month, there is a chance your funeral plan could be cancelled. Many plans have strict rules where, even if you’ve paid in non-stop for 5 years, one delayed payment will cancel everything you’ve paid into it. Make sure you read the small print on missed payments.
A widespread call for regulation
It’s difficult for people to differentiate between a funeral plan and an insurance product because from a consumer’s point of view, they look the same. What goes unsaid, however, is that funeral plans aren’t regulated by anyone, and so there are no safeguards or ombudsmen should the worst happen and the company go bust. This also means there’s no statutory redress for unfair terms and conditions. There is a voluntary scheme for providers from the Funeral Provider Authority, but many of the funeral plan providers haven’t signed to its code of conduct. We agree with the call being made by Fairer Finance, that funeral plans be fully regulated by the Financial Conduct Authority, in the same way as any other financial product.
Buying a funeral plan? Use this checklist
If you’re thinking about buying a funeral plan, always shop around and always read the small print. Use this checklist to help you make sure what you’re buying is right for you:
Does the plan restricts you to one particular funeral director? Are you happy with this? What happens if the company goes bust?
- How much does the provider pay towards third party costs? Will your plan keep up with these costs if they rise above inflation?
- What happens if you miss a payment/payments? Will your plan be cancelled?
- When do you have to start paying interest on your plan, and how much will it be?
- Does the plan guarantees to cover the entire cost of the funeral or just a lump sum that won’t change, even as funeral prices go up?
Don’t wait until it’s too late
Don’t wait until you’re grieving until you start thinking about funeral costs. We support many people who’ve been left unable to pay for a funeral when their loved ones have died. Think about what kind of funeral you want and how you’re going to pay for it. Talk to your family and encourage them to do the same. Research the prices of local funeral directors – you’ll be shocked by how much they differ for the same goods and service.
Ten tips for an affordable meaningful funeral