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What’s the difference between a funeral plan and a funeral insurance policy?



When preparing in advance for your funeral, the many different options can make choosing a solution difficult. Take a look at the differences between the two most common preparation methods – the funeral plan and the funeral insurance policy – to help you decide which one would suit you best.

In recent years, it has become much more common for people to plan their funerals in advance, enabled by a payment plan. If you’re considering doing the same thing, you may wonder which planning solution is best for you, so we’re here to help. 

What are they?

Simply put, a funeral plan is a prepaid arrangement that gives you the option to arrange all aspects of your funeral in advance. It allows you to save money by paying for your funeral at current prices, so that your family won’t need to worry about costs when the time comes.

In comparison, a funeral insurance policy – also known as an over 50s life insurance plan – is set up to pay out a fixed amount lump sum when you pass away. Your family can use it in the way they choose. Most often it is used to help with funeral costs.

How do the payments work?

If you’re considering a funeral plan as your chosen advanced funeral preparation, you will be looking at paying for the cost of your funeral fully in advance. This can either be done in one full payment, often equating to around £3,000 - £4,000, over a few months or a longer period in certain circumstances. Whichever way you choose to pay, these costs won’t change over time – they will be fixed from the period you decided them with the organisation managing your funeral plan.

With regards to a funeral insurance policy, you will be required to make annual payments, known as premiums, to insure a certain fixed amount pay out. When you apply for a funeral insurance policy, you will specify the amount that you would like paid out when you pass away. This will then be paid to your loved ones. Payments are ongoing, either until you die or your 90th birthday. It costs anything from £7 to £50 depending on how much you wish to pay per month. It is worth noting that depending on how long you live, it may work out that you pay more in premiums than the lump sum that your loved ones will receive.

What will you receive?

As we have mentioned above, if you choose to invest in a funeral insurance policy, a fixed lump sum will be paid out to your family, which can be used in the way they choose; the sums are most often used to pay for funeral costs. Advantageously, your loved ones won’t need to pay tax on the sum they receive as part of a funeral insurance policy. The funds will often be available 24 hours after you have passed away.

When selecting a funeral plan as your choice of advanced preparation when you pass, your family will not have to organise a funeral for you, since all arrangements would have been taken care of. Funeral plans are flexible. They allow you to control the kind of ceremony you would want and make sure it’s paid for. During the planning phase, you can detail everything from your chosen music to whether you prefer to be buried or cremated.

Reasons to choose a funeral insurance policy

A funeral insurance policy provides a number of features that may be beneficial to have in your advanced plan. Most funeral policies provide accident cover, which means that should something happen earlier than planned, your funeral costs will have been covered from day one. Additionally, should this accident happen within the first 12 months of your funeral insurance policy, you may be eligible to receive extra benefits – sometimes up to three times the original sum.

A funeral insurance policy is easy to apply for, since there isn’t any medical underwiring included in the policy and you are guaranteed to be accepted. If you are unable to qualify for life cover, due to health or age restrictions, this may be a good policy to consider as an alternative.

With the majority of successful claims paid within 24 hours, your loved ones won’t need to front any urgent costs following your passing. They will also not have to pay any tax on the funeral insurance benefit they receive.

Reasons to choose a funeral plan

If you are leaning towards the idea of a funeral plan, here are some reasons that could confirm your decision. A funeral plan will provide you with the additional security of knowing that your loved ones won’t have to find the money to pay for your funeral. Also, there won’t be additional costs to pay since the costs are fixed at the time you take out the plan.

Funeral plans are simple to apply. There are no invasive or health checks required. The payment options are flexible, meaning they can be suited to your personal financial situation. You also won’t end up paying more than the cost of your funeral.

If a funeral plan is the right arrangement for you, take a look at the different funeral plan packages or our funeral plan comparison chart

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