Insurance Funeral Plans Reviewed: The TRUTH

Insurance Funeral Plans Reviewed.

Over 50s funeral insurance

Funeral Insurance

Insurance funeral plans (often called Over 50 plans) are NOT in our opinion usually a wise buy. The flaunt widely that they are GUARANTEED, but all they are guaranteed to do is to pay out the amount agreed right at the start.  We were interviewed on Solent Radio about a lady who had bought a Coop plan 20+ years ago, when you could get a decent funeral for £750. But the guarantee was that she would get £750, not that her funeral would be paid for, which

Funeral Plan Quotes

Funeral Plan Quotes

was what she thought. Please remember that the guarantee generally related to the death benefit NOT going up with inflation.  One could almost say that they are guaranteeing there won’t be enough to pay for your funeral unless you are very quick about it and die after 2 years and a day (but generally not before!)

Here is an extract from one firms terms and conditions, which makes the point better than we can:

“Risks

  • No cash-in value: The policy has no cash-in value at any time.
  • Failure to pay premiums: If two consecutive premium payments are outstanding, your policy will end with no value and cover under this policy will no longer be provided.
  • Effects of inflation: The benefit amount and the premium payable is fixed when your policy starts and does not change. The value of the benefit amount you choose may not keep up with inflation and as such, the value may reduce over time.
  • Inheritance tax*: In the event of the life insured’s death and the policy paying out to the estate, there may be an inheritance tax requirement. You may be able to avoid inheritance tax by using an appropriate trust. Ask your financial adviser for more details. The Government may change the tax position as described.

*The last point rather hides the main issue: unless you pay a financial adviser or solicitor to put the policy into a trust, it will probably pay into the estate of the person who has died.  So it won’t be available to pay for the funeral in most cases for 3 to 12 months.  So the relatives will have to pay up anyway. If you do take one of these plans out, you must ensure that the benefits are actually paid out to the right person withing days of death, or your thoughtfulness may cause rather than solve problems.

Let’s be blunt.  Over 50’s insurance plans are generally RUBBISH if you expect them to pay for your funeral.   Some are better than others, and anything is better than nothing.  But there is no real substitute for a proper job, which means a prepaid funeral plan: they can be paid off over as long as 10 years where some insurance funeral plans may require payments for 40 years or more. So please don’t read on, have a look at some sensible funeral planning.  Or if you are keen to get moving, give us a call on 0800 0588 240.

There are circumstances in which an insurance funeral plan is the right option, but they are rare.  And we’re not giving away our trade secrets here!

Most insurance funeral plans require that you pay premiums for the rest of your life, or at least until age 85.  If you don’t, in most cases you will lose every penny you pay in.

So, generally speaking, insurance funeral plans should be avoided like the plague.

But I’ve got an Insurance Funeral Plan already!

Oh dear!  If you’ve had it a while, then you haven’t much choice – cancel it and you’ll probably lose everything.  But if it does have a cash value, then maybe your plan is one of the better ones.

One of the other troubles with insurance funeral plans is that many folk will pay in far more cash than they will ever get out!  Really, work out the cost of your contributions to the age of 85,   and you would probably save a lot by investing in a normal funeral plan instead.

Another issue is that most insurance based plans give a set benefit.  That means that inflation will eat away at the value, and if funeral inflation continues at 5% above normal inflation, then:

In 20 years a £3,000 funeral will cost  £7,959.89 – and your nice funeral insurance will pay out – £3,000.

Last 30 years and the funeral could cost £12,965.83 leaving your family to find £9,965.83 which the funeral insurance won’t pay..

Last 40 years and the shortfall is £21,119.97 less £3,000 = a staggering £18,119.97 shortfall.

So what do we suggest instead of Over 50’s Plans?

Keep your funeral insurance plan to pay for the wake, or for probate and invest in proper prepaid funeral plan!

The Prepaid Funeral Review welcomes comments, suggestions, new plan s to review and updates on plans we have already reviewed.  We DO recommend insurance funeral plans in certain unusual circumstances.

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