Couple on Sofa making decisionA funeral plan works in an essentially very simple and straightforward way: you plan for the funeral arrangements you want to made for you when your time comes, but you also take steps to ensure that the cost of those arrangements is covered in advance.

In that way, your surviving loved ones are not left with the difficult decisions likely to be involved in finding the cash to pay for the arrangements set out in your last wishes.

The cost of your funeral

Make no doubt about it, the cost of a funeral service in England and Wales is rising all the time – at a rate which far outstrips that of general inflation. In a story dated the 31st of March 2016, the BBC reported that the average cost of a funeral service was £3,700. By the 14th of September of the same year insurers Sun Life revealed that the cost had risen to an average of £3,897.

To further highlight how the cost of funerals are outstripping inflation, funeral plans provider Over50choices has a handy funeral cost calculator on their website which estimates how much your funeral could cost your family. As an example, the family of someone aged 50 today who dies aged 82 could expect to pay up to £23,878 for funeral costs.

It is little wonder, therefore, that many families might struggle to find the necessary funds for a decent burial or cremation and the BBC’s findings that many may be driven into debt when paying for even the most basic funeral.

Funeral plans

Funeral plans offer a simple and straight forward solution to just these difficulties, helping to beat the apparently runaway inflation in costs by allowing you to pay for the arrangements you need at some time if the future when your time comes – but at today’s prices.

From the industry’s own statistics, therefore, this might be the difference between paying less than £4,000 now or more than £11,000 by the year 2031.

How they work

To a great extent, there is nothing new in putting money aside now to pay for the funeral you need in the future. It is believed that “burial clubs” like this have been around since Roman times and were the foundation for the growth of the insurance plans offered by the friendly societies which emerged in 19th century England.

The difference with today’s version of the funeral plan, however, is that it allows for the payment of the whole of the funds likely to be necessary for the arrangements made upon your death. By prepaying for the service you avoid leaving any beneficiaries of a life insurance policy the potentially difficult decisions in spending it on your funeral.

Protecting your payment

Traditionally, many funeral directors have allowed you to pay in advance for the services you need from them in the future when you die. By making your payment directly to a particular firm of undertakers, however, you run the risk of their going out of business – and your money being lost – before the time comes.

Today’s national providers of funeral plans protect the payment you make by holding the funds in trust or by applying them for the purchase in your name of a whole of life insurance policy. If the funeral directors you have nominated in your funeral plan become insolvent, your money is still safe and you may divert the funds to an alternative firm.

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