Life Insurance Funeral Plans (or Over 50 Plans)
Funeral Life Insurance plans (or over 50 plans) are widely advertised on TV, in magazines and direct mail. They look good for older people as a medical or medical evidence is not required before taking one out so your health and age don’t matter.
But if you watch or read carefully you will find that
Over 50s Life Insurance is NOT Suited for Funeral Planning.
Life insurance funeral plan policies accept all comers, which can be a plus or a minus. Clearly, premiums will be higher than for a properly underwritten life insurance policy, and you wouldn’t have the problem that you have to live for two years (generally) after the plan has started before it will pay out.
Since you pay premiums until you reach a certain age (typically 85 or 90 – sometimes until you die), those in good health are effectively subsidising those who are not so fit
If you live too long, life insurance funeral plans can be poor value as it may not pay out as much as you’ve paid in! On the other hand, if you die too soon it may not pay out at all.
There are two other aspects to review with life insurance funeral plans.
- Admin charges can take out a large proportion of small monthly premiums, making them worse value.
- Most life insurance plans pay out a set amount, which may be fine NOW, but could be woefully inadequate in 10 or 20 years time. At current levels of funeral cost inflation, costs will double in around 10 years, and be FOUR times as much in twenty years. If you pay for thirty years, funeral costs could have risen to EIGHT times the current cost. So we strongly recommend considering a proper prepaid funeral plan if you possibly can.
- You will lose everything you have paid in if you no longer pay premiums – perhaps through a bank error, or because you are ill or just can no longer afford the premiums. That could be thirty years worth of savings – gone. Is that fair? Is it a risk you want to take? That doesn’t happen with prepaid funeral plans.
But I already have a Life Insurance Funeral Plan!
We don’t suggest that you should cash it in, as if it is the type of plan we are describing here, you’ll get nothing back, But what you could do is use it to provide the extras that a basic (relatively inexpensive) prepaid funeral plan doesn’t. So contact us to add a proper funeral plan to the life insurance one.
We believe the best safeguard is to choose a pre-paid funeral plan from a company, ideally approved by the Funeral Planning Authority. This has a code of practice that members agree to and ensures that your money is held separately in a trust fund which is absolutely crucial. You can usually add in a choice of extras to cover parties, coach and horses or whatever you wish too as well!
The crucial part of using an approved firm is that your money is kept in a TRUST, which protects it should the undertaker or pre-paid funeral plan firm go out of business, so your hard won savings won’t be lost.
Naturally, if you have a decent amount of savings, you can state in your will that they must be used to pay for your funeral which is one way try to ensure that your money is used as you would wish. But be aware that directions to your executors in your Last Will are only regarded as being WISHES, and the executors can choose to ignore them. A pre-paid funeral plan is a far better bet. The life insurance funeral plans generally give you no real control at all over how your funeral is conducted.
Life Insurance Funeral Plans (Over 50 Plans) – Prepaid Funeral Review