What protection is there when a funeral director or funeral plan company goes out of business?
With normal prepaid funeral plans, there is no direct connection between the funeral director and the funeral plan company (even though it seems there is.) Unless they are acting illegally, the prepaid amount, after expenses, goes into a completely separate fund. This fund is either an Independently managed Trust Fund or a special fund managed by an Independent Insurance Company. In both cases, there are strict controls over how the money is managed. Just occasionally a small local firm may not understand the rules and set up a fund which does not comply with the law, but it is extremely rare in the UK, and one of the reasons we are cautious before recommending new funeral plan providers.
The time to ask questions is if when you are asked to make out the cheque to the undertakers rather than to the funeral plan company. Payments should always be made to the Funeral Plan Trust or to the underlying insurance company fund.
So what happens to protect funeral plan owners when an undertaker closes?
- If the funeral director goes out of business, the funeral plan company simply appoints another firm to do the job.
- If the funeral plan company goes out of business, most trust funds or insurance funds would simply appoint a funeral director to carry out the funeral – quite possibly the same one. Alternatively, they would arrange to transfer that responsibility to another funeral plan company. The only rather peculiar exception to this used to be the Co-op who would give the money back to you, less expenses thus totally destroying the whole purpose of the funeral plan. That was why we used not to recommend Co-op funeral plans. The Co-op is a wide movement so it must be said that we understand that they have removed this somewhat odd (in our opinion) unethical clause from their contracts, but please do read their terms of business extremely carefully before taking out a Co-op plan.
This question was original brought up by a consumers question:
What happens if my Funeral Director goes out of business?
As far as we can see, Hart Funeral Directors are still around, but that is not the point.
“I took out 2 Avalon funeral plans one for me and one for my mam on the 24/5/2016 and 26/5/2016. we paid in full and they said our funerals would be done by Hart funeral directors at Stockton-on-Tees County Durham I noticed that the Heart Funeral company wasn’t there anymore and I don’t know who will do our funerals now getting a bit worried about this now can you help please?”